THE INTRODUCTION AND PERFORMANCE OF STORE BRANDS

We present an analytical framework for understanding what makes a prod uct category more conducive for store brand introduction. We also inve stigate market characteristics that help explain differences in store brand market share across product categories. Our findings suggest tha t the introduction of a store brand is likely to increase retailer's p rofits in a product category if the cross-price sensitivity among nati onal brands is low and the cross-price sensitivity between the nationa l brands and the store brand is high. Our model predicts that the stor e brand share would also be greater under these conditions. In additio n, we find that the introduction of a store brand is more likely to le ad to an increase in category profits if the category consists of a la rge number of national brands-even though the store brand market share is expected to be lower when there are a large number of national bra nds. We compare the key predictions of our model with data on 426 groc ery product categories. The data are consistent with the predictions o f the model.