Retailers Own-Brands Assignment Help
8.13. Retailers’ Own-Brands
Retailer power has grown considerably since 1980, with a proliferation of own brand products. In the past, the retailer’s own-brand products were usually of poorer quality than manufacturers’ brands, but they are now often of equal or even superior quality. These brands now account for up to 60% of the sales in some major retail stores such as Tesco and Sainsbury in the United Kingdom, and Carrefour in France (slogan: ‘Carrefour – c’est aussi une marque’, which translates as ‘Carrefour – it’s also a brand’). For manufacturers this creates a problem of response: should the manufacturer try to invest in the firm’s brands more heavily in order to overcome the retailer’s brand, or should he or she capitulate entirely and produce on behalf of the retailer?37 Often manufacturers will become suppliers of retailer-brand products which compete with their own branded goods. Reasons for doing this are as follows:
- Economies of scale. The manufacturer may be able to buy raw materials in greater quantities, or may be able to invest in more efficient production methods, if the throughput of product is increased.
- Utilise excess capacity. Seasonality or production synergies may make production of own-brand products attractive in some cases.
- Base for expansion. Supplying a retailer with own-brand goods may lead to other opportunities to supply the retailer with other products in future.
- No promotion costs. The retailer bears all the investment in the brand (which is, of course, a brand extension of the retailer’s trading name in any case).
- No choice. Some retailers (the UK’s Marks and Spencer being an example) only trade in their own-brands. Manufacturers who wish to trade with these retailers have no choice but to produce under the retailer’s brand name.
- To shut out the competition. If the manufacturer does not produce goods under the retailer’s brand name, another manufacturer will and will thus gain ground.
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Manufacturers with very strong branding often refuse to produce own-brand goods, If the brand is strong enough this allows the firm to promote on an ‘accept no substitutes’ platform. In the past, own-brand products were cheap versions of the leading brands, but in more and more cases the retailers now have enough financial strength to fund the development of entirely new versions of products, some of which are superior to the proprietary brands and have achieved substantial market shares.
In many cases this is achieved by producing ‘look alike’ branding, where the product looks very similar to the brand leader. In the United Kingdom this led to the formation of the British Producers and Brand Owners Group, which lobbied Parliament to regulate the visual and physical simulation of successful brands. In fact, research showed that few if any consumers accidentally pick up the wrong brand, but some confusion is engendered. Retailers (perhaps disingenuously) claim that using similar packaging helps consumers identify products, whereas manufacturers claim that lookalikes give the impression that the products are identical. In other words, the confusion arises not at the level of picking up the wrong pack, but at the more subtle level of forming inaccurate beliefs about the lookalike’s attributes based on the attributes of the leading brand. A further argument advanced by retailers is that the strong manufacturers’ brands have created generic product categories of their own – ‘Gold Blend-type’ instant coffees, for example. The retailers argue that products with similar quality and specifications should look as similar as possible to the brand that first created those values – an argument that is particularly galling to manufacturers who have invested large sums of money in creating those brand values in the first place.
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