Multi-tier store brand strategies: a case study

Pages364-375
Published date13 May 2019
Date13 May 2019
DOIhttps://doi.org/10.1108/JPBM-11-2017-1681
AuthorMaria Teresa Gorgitano,Valeria Sodano
Subject MatterMarketing
Multi-tier store brand strategies: a case study
Maria Teresa Gorgitano
Department of Agriculture, University of Naples Federico II, Naples, Italy, and
Valeria Sodano
Department of Political Science, University of Naples Federico II, Naples, Italy
Abstract
Purpose This paper aims to describe and understand the offer of premium private labels (PPLs) in Italy, with a case study on the extra virgin oliv e
oil (EVOO).
Design/methodology/approach The empirical study on EVOO in Italy was aimed to investigate the drivers of the offer of PPLs and its effec ts on
assortment policies. The study was carried out in three Italian provinces, using a cross-sectional design with data collected through direct
observation. A two-step data analysis was performed. First, descriptive statistics were used to preliminary appraise hypotheses on the rationale
underlying the offer of PPL, and then, the drivers of PPL policy were studied using a logistic regression model.
Findings The estimated modelindicates that in the case of EVOO the probability of offeringa PPL is higher for stronger with a strongercompetitive
position (with respect to other stores), and increases with the size of the category assortment (Total Assortment Width) and with the share of the PL
products offered by the store (PL Assortment Index). It also increases if the average price (Total Average Price) and the average price of the standard
private label(SPL Average Price) improve;by contrast, it decreases if the nationalbrand (NB) share in the assortment(NB Assortment Index) augments.
Research limitations/implications Overall, the study conrms that the multi-tiered PL strategy is one of the current competitive strategies of top
retailers, centred more on a differentiation than on a low cost/price policy. Such a differentiation policy may have various effects in terms of channel
structure and social welfare depending on the underlying corporate and consumer goals and beliefs and on the existing institutional framework.
Originality/value This is the rst study to investigate the PPL market in Italy using original data and taking into account policie s actually carried
out at the individual store level. A further element of novelty is the attention given to the welfare effects of multi-tier strategies. This paper suggests
that these latter may have various effects in terms of channel structure and social welfare depending on the unde rlying corporate and consumer
goals and beliefs and on the existing institutional framework.
Keywords Italy, Regression analysis, Food retailing, Consumers preference for variety, Extra-virgin olive oil, Multi-tier private label portfolio,
Premium private label, Retail differentiation strategy, Store format and assortment choice
Paper type Research paper
1. Introduction
Over the years, private labels (PLs) have become an obvious
choice in the assortment policies of the food retail sector
worldwide (Kumar et al., 2017;Cuneo et al., 2015). A large
body of literature (amongst others, Olbrichet al., 2016;Foscht
and Brandstaetter, 2014;Manikandan, 2012;Hyman et al.,
2010) has investigated the causes and effects of the
proliferation of PLs in the food retail sector and consumer
acceptability of PLs compared to national brands (NBs). The
concentration of retail companies has been indicated as the
main cause of PL proliferation (Rubio andJesús Yagüe, 2009),
stemming from the evidence that everywhere the growthof the
PL (Sethuraman and Gielens, 2014;Sethuraman and Raju,
2012) market share has been roughly proportional to the
growth of the degree of retail sectorconcentration. Indeed, PLs
are among the best competitive weapons whichhelp retailers to
increase their market share (Hoskins, 2016;do Vale et al.,
2016;Ngobo, 2011),providing them with at least three types of
benets: competitive advantage over other retailers (intra-
brand competition); competitive advantages vs NBs (inter-
brand competition), whose bargainingpower is reduced by PL
competition; and higher margins, becauseof the generally high
buyer power exercised by retailers vs. PL manufacturers
(Chambolle and Villas-Boas, 2015). Onceits market share has
increased, a retailer can more successfully manage the other
retail marketing levers, such as price, promotion, assortment
and shelf space. With regard to the effects of PL proliferation,
besides the observed positive effects (benets) in terms of
competitive advantage, two risks have been highlighted. The
rst is a possible crowding-out of NBs, which might leave
consumers with a reduced purchasing choice and trigger price
wars among retailers, with consequent prot losses, in a still
quite competitive retail sector. The second risk consists in the
possible anticompetitive effects of a growing retail sector
concentration. Over time, the retail sector has undoubtedly
become the leading actor along the food supply chain, mainly
because of the higher concentration ratio with respect to those
further upstream (manufacturing and agricultural sectors) and
their pricing autonomy (Olbrichet al.,2016), which gives them
the opportunity to exerciseboth market and buying power. The
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
28/3 (2019) 364375
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-11-2017-1681]
Received 21 November 2017
Revised 7 October 2018
Accepted 20 November 2018
364

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