Store Brands and Retail Grocery Competition

16 Pages Posted: 29 Oct 2018

See all articles by Rong Luo

Rong Luo

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: Winter 2018

Abstract

Grocery retailers rank store brands as the most important factor that differentiates them from their competitors. Retailer competition should have a stronger impact on the more substitutable national brands than the more differentiated store brands. However, the literature has not studied the impacts empirically. In this paper, I quantify the different impacts of retailer competition on national brands and store brands using the scanner data of a U.S. chain retailer. I estimate a structural demand and supply model that incorporates the differentiation effect and retailer competition. The results show that national brand consumers are more likely to switch stores than store brands consumers. By analyzing two counterfactual cases, I find that 1) if the retailer did not sell store brands, its profit would decrease, and the loss would be greater in markets with more competitors; and 2) if the retailer competition had increased, then the national brands' retail prices would decrease more than the store brands' prices.

Suggested Citation

Luo, Rong, Store Brands and Retail Grocery Competition (Winter 2018). Journal of Economics & Management Strategy, Vol. 27, Issue 4, pp. 653-668, 2018. Available at SSRN: https://ssrn.com/abstract=3273541 or http://dx.doi.org/10.1111/jems.12254

Rong Luo (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States

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