The New World of Private Brands

by Louis Stern



Consumer goods manufacturers with heavy financial investments in branded investments in branded items have become increasingly concerned about the channel power that retailers have been able to gain by selling merchandise under their own labels. Major department stores, food chains, and variety stores have long used private brands effectively to promote patronage, as opposed to manufacturer loyalty. Recently, private label competition has intensified and developed into a major threat to the economic potential of many manufacturers seeking to differentiate their products through consumer advertising. Private labels are being sought after and accepted by many retailers capable of generating high turnover for generically used products; these retailers appear to be gaining leverage through pricing and merchandising independence. If the companies wish to manufacture products in the same industry, there may be some inherent advantage in having the smaller company concentrate on the production of undifferentiated products for private label sales while the larger company concentrates on achieving differentiation through innovation and marketing of branded items.

California Management Review

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Published at Berkeley Haas for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

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