Retailer Branded Products

Topics: Retailing, Online shopping, Product Pages: 7 (1927 words) Published: May 13, 2011
1. Introduction
In the 21 century, thanks to the developments of technology and economy, world retail receives a new opportunity for developing. To understand and predict the situation and developments of world retail industry in 21 century, firstly, this report will evaluate the major situation of retail within the first decade of 21 century by evaluating the development of retailers branded products; then, the article will predict the future changes of retail industry.

2 .Development of retailer branded products
The development of retailer branded products can be evaluated from three aspects: the reasons for retailers to develop it; the achievements over last ten years; the changes of relationship between manufactures and retailers. 2.1The reasons and motivations

Within last decade, most of world businesses centralized on limited number of retailers. Due to the similar high capacities and scales of these retailers, the traditional ways such as price discount and high quality could not help one retailer to beat other retailers (Mullenders, 2008). Therefore, more retailers pursue the further developments by developing their own brands (Kumar, Benedict and Steenkamp, 2007). 2.1.1 Increase profit

The profit will increase if the retail sale its own branded products. First, due to the simple distribution channels and lower promotion cost and other factors, the cost of the retailer branded products are lower than national branded products (Mullenders, 2008). Furthermore, retailers branded products have lower price. A research indicated that the prices for some retailers branded products are 52% lower than the prices of national branded products (Kumar, Benedict and Steenkamp, 2007). Moreover, for some retailers branded products, the sales are relatively higher due to the high qualities and lower prices. As a survey shown, on average, the retailer’s gross profit on its own branded products is 20% to 30% higher than gross margin from manufacturers’ brands(Kumar, Benedict and Steenkamp, 2007). See Table1. Table 1. Profitability analysis of retailer brands versus manufacturer brands

Retailer brandsManufacturers brands
Gross margin30.1%21.7%
Net margin23.2%15.9%
Price$ 1$ 1.45
(Sources: Kumar, Benedict and Steenkamp, 2007)
2.1.2 Increase loyalty of customers
Retailer‘s private brand can help the retailer strengthen its customer loyalty. Currently, brands are considered as one of the firms’ most valuable assets. Many consumers are label-driven, and tend to purchase their favorite brands. Retailer can attract more customers by its private label (Parametric Technology Corporation, 2009). One retailer can differentiate from other retailers and manufacturers by its own brand. The private label of this retailer can build a specific image which help customer to distinguish this retailer. If the retailer’s branded products have high added value for customers, consumers will prefer this retailer when they purchasing products. Therefore, not only the sales of retailer branded products increase, but also the sales of manufacturers branded products which are sold by this retailer will increase. One study of US households found that a 1% point increase in store brand purchasing is associated with 0.3% point increase in store loyalty (Kumar, Benedict and Steenkamp, 2007).

2.2 Developments of retailers branded products
Over last ten years, retailer branded products became more mature in the market. These could be evaluated based on two major elements. Firstly, the market share of retailers branded products kept increasing within last decade. From Figure1, it could be found that the retailer brands share (both unit share and dollar share) of consumer packaged goods increased more than 5% within 10 year. From Figure2, it could be found the retailer brands have high market share in Europe after the ten years’ development. Figure 1. Retailer brands share of CPG spending (%)...
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