PRIVATE LABELS AND THE CHANNEL RELATIONSHIP - A CROSS-CATEGORY ANALYSIS

Retailers introduce private labels in a category not only to gain prof its directly from the private label but also to use as a strategic wea pon to elicit concessions from the national brand manufacturers. We sh ow that, in certain categories, the retailer can gain better terms of trade by introducing a private label. The ability of the retailer to u se the private label for this purpose is hypothesized to be inversely related to the risks consumers associate with purchasing in that categ ory. The implications of our model are supported by data from a cross section of grocery categories.