Advances in Theory and Practice in Store Brand Operations Advances in Theory and Practice in Store Brand Operations Jiazhen Huo
Total Page：16
File Type：pdf, Size：1020Kb
Jiazhen Huo Advances in Theory and Practice in Store Brand Operations Advances in Theory and Practice in Store Brand Operations Jiazhen Huo Advances in Theory and Practice in Store Brand Operations Jiazhen Huo School of Economics and Management Tongji University Shanghai, China ISBN 978-981-15-9876-0 ISBN 978-981-15-9877-7 (eBook) https://doi.org/10.1007/978-981-15-9877-7 Jointly published with Tongji University Press The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: Tongji University Press. © Tongji University Press 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Preface Private brand (PB), also known as private label (PL) or store brand (SB), refers to a brand created and controlled by a retailer. In the 1960s and 1970s, private labels began to emerge in France and England. Although private labels have grown rapidly worldwide, their market share varies greatly from region to region. According to Nielsen’s 2018 Global Private Label Report, the largest markets for private-label products are found primarily in the more mature European retail markets. With the growth of e-commerce, some online retailers have also launched private-label goods, but the market share for China’s private labels is only 1–3%, which represents a significant gap in comparison with Europe and America. This research monograph project considers: (1) product strategy for private branding; (2) pricing strategy for private brands; (3) channel strategy for private brand introduction; and (4) supply chain coordination for private brand introduction. We focus on the main challenges for Chinese retail companies in developing their private brands and use the practices of the Chinese Lianhua supermarket’s private brand management as a case study. This research includes the results of both empirical and theoretical insights. The empirical study aspect is focused on factors that influence purchasing intentions related to retailer’s private branding. We identify the main factors that influence consumers’ purchasing intentions for private brand products, including the psycho- logical characteristics of consumers; the attributes of private brand products; retailer image; the perceived quality of private brand products; the influence of information value and the influence of manufacturers upon PB decisions. The theoretical study largely relates to introduction strategies for store brands when considering product cost and shelf space opportunity cost and other technical parameters. In relation to the pricing of private brand products we find that the stable price and stable reference price will increase with memory factor, perceived quality of PB and the sharing rate of NB’s revenue, but decrease with the reference effect param- eter and the weight coefficient of PB’s history price. Our study of the dynamic assortment planning problem in the presence of heterogeneous brands indicates that ignoring brand heterogeneity will overestimate the retailer’s expected revenues significantly, and that the potential revenue overestimation will depend on initial v vi Preface inventories and prices. We note that the theory behind introducing store brands to combat showrooming is effective. Using game theory, we examine strategic coordination mechanism design and competition and cooperation between retailers and manufacturers by focusing on advertising decisions that consider the competition of retailer and manufacturer, and the Competition of National and Store Brands with advertisement intervention. Our results show that for both manufacturer and retailer, Stackelberg’s leader-follower game strategy is more effective than the Nash non-cooperative proposal. Our findings are able to optimize the supply chain and indicate the best pricing and advertising investment decisions. This manuscript is funded by National Natural Science Foundation of China (71532015). As the leader of this key project, I acknowledge the financial support from the National Science Foundation of China. I extend my thanks to the members of my research team for their excellent contributions and hard work. Acknowledgments This research is supported by the National Natural Science Foundation of China (Grant No. 71532015). I sincerely thank the members of my research team for their contributions. Shanghai, China Jiazhen Huo August 2020 Contents 1 Introduction ................................................... 1 1.1 The Development of Store Brands . 2 1.2 The Market for Store Brands in China . 4 1.2.1 The Development of Store Brands in China . 4 1.2.2 Reasons for the Low Market Share of China Store Brands . 6 1.2.3 Challenges for China Store Brands . 8 1.2.4 Lianhua’s Practice in Respect of Store Branding . 9 1.3 The Outline of This Work . 11 1.4 Summary.................................................. 11 References . 12 2 Product Strategy for Store Branding ............................. 15 2.1 Factors That Affect the Success of Store Brands . 16 2.1.1 Retailers Profit(s) from Store Brands . 16 2.1.2 Manufacturers Profit from Store Brands . 17 2.1.3 National Brands Profit from Store Brands . 18 2.1.4 Customers Benefit from Store Brands . 18 2.1.5 StrategiesinTimesofCrisis ........................... 19 2.2 Motivation for Introducing Store Brands . 19 2.2.1 Increasing Market Share Through Additional Product Categories .......................................... 20 2.2.2 Improve Bargaining Power to Compete with National Brand Manufacturers . 21 2.2.3 Strengthen Consumers’ Loyalty and Influence . 21 2.2.4 Control of Product Positioning . 23 2.2.5 OtherMotivations.................................... 23 2.3 Factors That Affect Consumers’ Choice of Store Brands . 24 2.3.1 PriceandPromotion.................................. 24 2.3.2 Customers’ Perception of Risk in Buying Store Brands . 26 2.3.3 Customers’StoreImage .............................. 28 2.3.4 Familiarity of Store Brands . 30 vii viii Contents 2.3.5 Customers’ Perceived Quality of Store Brands . 31 2.3.6 Customers’ Perception of Value for Money . 32 2.3.7 Customers’ Brand-Loyalty Towards Store Brands . 32 2.3.8 OtherFactors........................................ 33 2.4 Strategy for Introducing Store Brands . 34 2.4.1 The Strategy of Product Quality . 34 2.4.2 Strategies for Product Brands . 36 2.4.3 StrategiesRelatedtoTargetMarket ..................... 38 2.4.4 The Strategy for Product Positioning . 39 2.4.5 Strategies for Retailer Advertising of Store Brands . 42 2.5 Empirical Study of the Factors Influencing Purchasing Intention for Retailer Store Brands . 43 2.5.1 Research Hypothesis . 44 2.5.2 ResearchDesign ..................................... 49 2.5.3 EmpiricalAnalysis ................................... 50 2.5.4 Research Conclusions and Management Significance . 57 2.5.5 Deficiencies in the Research . 66 2.6 Introduction of store brands considering product cost and shelf space opportunity cost . 67 2.6.1 Introduction . 68 2.6.2 The Model . 71 2.6.3 Stackelberg Equilibrium . 72 2.6.4 NumericalStudies ................................... 81 2.6.5 Conclusion . 91 2.7 Summary.................................................. 92 References . 93 3 Pricing Strategy for Store Brands ................................ 101 3.1 Pricing Strategy Based on Marketing Factors . 101 3.1.1 Multi-brand Pricing Strategy Based on Advertising . 102 3.1.2 Multi-brand Pricing Strategy Based on Sales Channel . 105 3.1.3 Multi-brand Pricing Strategy Based on Brand Positioning.......................................... 107 3.1.4 Multi-brand Pricing Strategy Based on Layout . 112 3.2 Pricing Strategy for Competitive Brands Considering ConsumerConsciousness.................................... 115 3.2.1 Pricing Strategy for Competitive Brands Considering ValueConsciousness ................................. 115 3.2.2 Pricing Strategy for Competitive Brands Considering PriceConsciousness.................................. 117 3.2.3 Pricing Strategy for Store Brands Considering Discount Consciousness . 119 3.3 Pricing Strategy Considering Different Sales Structures . 121 3.4 Pricing Strategy Under Different Classifications of Store Brand Manufacturers . 124