The influence of conflict with suppliers on retailers’ private label performance
| Date | 06 November 2020 |
| Published date | 06 November 2020 |
| Pages | 301-318 |
| DOI | https://doi.org/10.1108/JABS-12-2019-0359 |
| Subject Matter | Strategy,International business |
| Author | Katsuyoshi Takashima,Changju Kim |
The influence of conflict with suppliers on
retailers’private label performance
Katsuyoshi Takashima and Changju Kim
Abstract
Purpose –The purpose of this study is to develop and empirically test a model investigating the
relationship between conflictwith private label (PL) suppliers and retailers’ PL performance. The study
also examines differences in the relationship based on two PL types, namely, price-oriented and
differentiation-oriented PLs.
Design/methodology/approach –Hypotheses were tested using structural equation modeling and
data obtainedfrom a survey of general merchandisemanagers in 190 supermarket chains in Japan.
Findings –The results indicate that conflictwith PL suppliers can have negative effects on retailers’PL
performance. Moreover,the use of price-oriented PLs leads to higher levels of conflictwith PL suppliers
than the use of differentiation-oriented PLs.
Practical implications –This study offers managerial insights into the importance of sophisticated
conflict managementin relation to PL suppliers and the efficacy of premium PLs, which may cost less in
terms of conflictmanagement than price-orientedPLs.
Originality/value –Consideringthe influence of conflict with suppliers on retailers’ PL performance,this
study suggestsa novel approach to examining conflict between PL suppliersand retailers by classifying
PLs intotwo types, namely, price-oriented anddifferentiation-oriented PLs.
Keywords Retailer, Private label, Conflict, Relationship management
Paper type Research paper
1. Introduction
The worldwide market share of private labels (PLs) has grown considerably in recent years
(Johansson and Burt, 2004;Miranda and Joshi, 2003;Sarkar et al.,2016;Sethuraman and
Gielens, 2014). Since major retailers expect to increase their profit margins through greater
investment in PLs and are able to invest more in PLs, a higher level of retail concentration
has led to an increased market share for PLs. In particular, premium PLs have been
growing rapidly. This has led many retailers, including smaller firms, to attempt to enhance
their corporate image by introducing premium PLs (Johansson and Burt, 2004;Nenycz-
Thiel and Romaniuk, 2016). A survey by the National Supermarket Association of Japan in
2019 revealed that Japanese consumershad been strongly attracted to economy PLs in the
past. It also revealed that Japanese supermarkets were now prioritizing premium PLs in
response to consumer concerns aboutquality and safety.
As PLs have become an important strategy for retailers, many studies have examined PLs
from various perspectives. While most studies in the field of retailing have focused on
consumer behavior in relation to PLs, including the proneness to adopt PLs in the early
stage (Ailawadi and Keller, 2004;Batraand Sinha, 2000;Garretsona et al., 2002;Sinha and
Batra, 1999), some studies have examined other factors such as competition between PLs
and national brands (NBs) within a store (Dawes and Nenycz-Thiel, 2013), retail margins on
PLs (Ailawadi and Harlam, 2004;Ailawadi et al., 2008) and vendor selection of PLs (Kumar
et al.,2010
). However, previous studies have rarely examined the management of
Katsuyoshi Takashima is
based at the Graduate
School of Business
Administration, Kobe
University, Kobe, Japan.
Changju Kim is based at
the College of Business
Administration,
Ritsumeikan University,
Osaka, Japan.
Received 11 December 2019
Revised 8 July 2020
Accepted 18 August 2020
DOI 10.1108/JABS-12-2019-0359 VOL. 15 NO. 2 2021, pp. 301-318, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 301
relationships with PL suppliers by retailers in terms of the development and merchandising
of PLs (Collins and Burt, 2003;Pache
´,2007).
Today, the management of relationships with PLs is becoming increasingly important for
retailers (Goworek, 2014). Merchandise managers of retail companies are struggling with
the challenge of developing and merchandising PLs to make their firms more competitive.
In particular, they face challenges in managing conflict with PL suppliers. A retailer that
successfully manages conflict with PL suppliers can enjoy the cooperation of PL partners
who can supply various PLs that contribute to securecompetitive advantages (Corsten and
Kumar, 2005;Johansson and Burt,2004).
Moreover, because the relationship between a retailer and a PL supplier differs depending
on PL type, retailers should manage conflict with PL suppliers accordingly. Although recent
previous studies present three types of PLs –standard, economy and premium PLs –
based on consumers’ choice behavior (Geyskens et al.,2010;Ter Braak et al.,2013;Ter
Braak et al., 2014), this study hypothesizes two types of PLs –price-oriented and
differentiation-oriented PLs –from the perspective of retailers’ bargaining behavior toward
PL suppliers as described later.
Price-oriented PLs, which encompass economy PLs and standard PLs as defined in
previous studies, are lower-priced thanNBs and either homogeneous with or inferior to NBs
in terms of quality (Ailawadi and Keller, 2004). Differentiation-oriented PLs, which
correspond to premium PLs, are categorized as high-quality PLs (Ailawadi and Keller,
2004;Geyskens et al., 2010).
In line with the classifications, we expect that a retailer’s perceived levels of conflict with PL
suppliers differ between PL types. Conflict is defined as a situation in which one perceives
another to be engaged in behavior that prevents or impedes it from achieving its goals
(Ishii, 2020;Stern and El-Ansary, 1988). Hence, a retailer can enhance PL performance,
defined as the contribution of PLs to sales volume and profit in a store for purpose of our
study, when a retailer perceives less conflict with a PL supplier. This effect may result from
lower conflict reducing a retailer’s task cost for managing conflict with PL suppliers, as well
as improved performance through collaborative development and manufacturing of PLs
(Bobot, 2011;Carr and Pearson,1999;Collins and Burt, 2003;Paulraj et al.,2008).
There is considerable interest among retailers and suppliers, and previous studies on
conflict in Japanese retailer –supplier relationships have contributed to our understanding
of how these relationships operate from the perspective of power and dependence (Chung
et al., 2008;Kim et al.,2018;Takashima and Kim, 2016). However, they provide little
guidance on the link between PL types and retailer–supplier conflict. Thus, this study seeks
to address this gap in the literature.
This study investigates the influence of retailers’ management of conflict with PL suppliers
on the effectiveness of PLs. In particular, we find that price-oriented PLs complicate the
management of conflict withPL suppliers and can have a negative effect on the contribution
of PLs to retail store performance.
This issue is examined in the context of the spread of premium PLs in response to the ever-
widening spectrum of consumerdemand. In particular, one motivation for the introduction of
premium PLs might be the desire to reduce management costs, in addition to the sales
potential of premium PLs.
2. Proliferating private lab portfolios and relationship management
Retailers usually introduce several tiers of PLs, ranging from economy to premium lines, to
accommodate an ever-increasing range of consumer preferences (Dawes and Nenycz-
Thiel, 2013;Ter Braak et al.,2013). Although the majority of PLs were originally low-priced,
undifferentiated product types aimed at attracting price-sensitive consumers who were
PAGE 302 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 15 NO. 2 2021
To continue reading
Request your trial