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The Impact of Private Label Introductions on Assortment, Prices, and Profits of Retailers

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  • Ma, Meilin
  • Siebert, Ralph

Abstract

We study how the introduction of private-label brands (PLs) affects retailers’ prices, demand, and profits, explicitly accounting for assortment adjustments of national brands (NBs) in retail stores. Using a detailed dataset on the U.S. beef market, we find that, when PLs are added to the low-priced market segment, stores reposition NBs to further differentiate them from the PL and remove NBs from the same market segment. However, if PLs are introduced into the high-priced segment, NBs are not repositioned or removed from the same segment; this way, the store can compete with other stores in product variety. PL introduction and PL-driven assortment changes of NBs impose a small effect on NB prices. In contrast, PLs strongly cannibalize NB demand, and the assortment changes help steer consumers toward PLs, which imposes large negative effects on NB demands and increases store-level profits.
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Suggested Citation

  • Ma, Meilin & Siebert, Ralph, 2021. "The Impact of Private Label Introductions on Assortment, Prices, and Profits of Retailers," 2021 Annual Meeting, August 1-3, Austin, Texas 312817, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea21:312817
    DOI: 10.22004/ag.econ.312817
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    Cited by:

    1. Aadhaar Chaturvedi, 2023. "Contracting with multiple suppliers: A multi‐item buyer's make versus buy decision," Production and Operations Management, Production and Operations Management Society, vol. 32(2), pages 434-448, February.

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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