Retailer Branded Products Essay Example

net margin is 23.2%. However, the gross margin of manufacturer brands stands at 21.7%, while their net margin is 15%.

According to Kumar, Benedict and Steenkamp's 2007 report, the price increased by 9% to $1.45. It is believed that using a retailer's private brand can enhance customer loyalty as brands are typically considered valuable assets by companies. Customers who have a preference for certain labels tend to exhibit brand loyalty towards those particular brands.

According to Parametric Technology Corporation (2009), retailers can broaden their customer base by creating private labels. By developing a unique brand, retailers can differentiate themselves from other retailers and manufacturers, making it easier for customers to identify them and their products. Offering high-quality items under the private label is likely to attract more consumers, leading to increased sales of both private label products and branded goods from other manufacturers.

A study conducted by Kumar, Benedict, and Steenkamp in 2007 discovered that purchasing store brands is linked to loyalty towards the store. The research revealed that when there is a 1% increase in buying store brand products, households in the US experience a corresponding rise of 0.3% in their loyalty to the store. In recent years, retailer-branded items have made noteworthy advances in the market as they continue to gain market share consistently.

Over the course of a decade, retailer brands in consumer packaged goods saw an increase of more than 5% in both unit and dollar share, as shown in Figure1. Furthermore, Figure2 illustrates that these retailer brands have established a significant presence within the European market following this period of growth.

Figure 1 reveals the percentage of CPG spending on retailer brands (%) based on

data from IRI Customer Network (2009) and Ailawadi and Keller (2004).

Figure2.

Throughout Europe, the market share of retailer brands varied in 2009 and their popularity has grown over the past decade. In the last ten years, there has been an increase in the percentage of U.S. customers who prefer retail brands from 45% to 48%, as shown by Figure3 from Customer Research North America (2009) and Kumar, Benedict and Steenkamp (2007).

The relationship between manufacturers and retailers has undergone several changes due to the emergence of retailers branded products. This has led to a more complex relationship compared to the traditional cooperation of suppliers and distributors. The new relationship between manufacturers and retailers can be classified into two categories: win-win and competition relationships (Ailawadi and Keller, 2004). Retailers branded products have particularly contributed to the emergence of a win-win relationship between manufacturers and retailers.

Both parties can benefit from retailers branding their own products. Retailers can gain differentiation, which they traditionally lack as they all sell the same products provided by manufacturers. By requiring manufacturers to produce specific products based on their own requirements, retailers can stand out and differentiate themselves from others (Kumar, Benedict and Steenkamp, 2007).

Retailers gain greater control over their products, including types, prices, and quality, as they can determine their preferred selection. Furthermore, retailers can regulate their shelf space allocation, which is typically difficult due to the high demands set by manufacturers. However, by introducing more own-brand products, retailers have the freedom to decide their shelf space without manufacturer pressure (Mullenders, 2008).

Moreover, retailers have the potential to gain benefits such as improved store image, increased customer loyalty, and a more efficient distribution channel.

Additionally, manufacturers can benefit from producing retailer-branded products which can serve as a significant source of income for small businesses (Mullenders, 2008). For larger manufacturers, such production can also lead to increased profits for the company.

By producing retailer branded products, companies can utilize their excess productive capacity which can lead to an increase in resource utilization and productivity. This strategy can also help to lower research and development costs. As retailers have direct contact with customers, they have a better understanding of market trends and consumer needs. Therefore, retailer branded products are often better suited to customers and are more satisfying. Manufacturers can leverage the development of their other products based on these retailer branded products, resulting in further cost reductions for R;D.

Manufacturers can benefit from expanding and diversifying their products as well as accessing more distribution channels (Kumar, Benedict and Steenkamp, 2007). However, retailers selling their own branded products have become competitors with manufacturers. Even though retailers sell both their own branded products and manufacturers' brands, consumers tend to have higher loyalty and perceive higher quality in the manufacturers' products, as described in Figure 4.

Thus, both national brands and retailer branded products present significant competition for retailers, as they both vie for the limited consumer base. Additionally, retailer branded products pose a formidable threat to manufacturers, due to their lower price and consequent domination of major market shares.

According to Nielsen wire in 2010, the retailers' share of CPG in Switzerland was 54%, as illustrated in Figure 4. Retailers are currently focusing on improving the quality of their branded products (Kumar, Benedict, and Steenkamp, 2007) in order to increase their profits and customer loyalty. However,

competition between the parties cannot be avoided as each strives to achieve these goals. Figure 4 is provided.

According to Mullenders (2008), the competition model between Manufacturers' brands and Retailers' brands has been reviewed, and predictions about the future of retail can be made based on current trends. One such trend is that retailers branded products will continue to hold a significant position. However, there are three potential major changes for the next decade. The first of these is the rise of Green retail, which could become a prominent trend in the global retail industry.

The trend towards a greener retail industry involves an increasing focus on providing customers with more environmentally-friendly products and processes. Consumer demand for green products has grown, with over 31% favoring completely natural products in 2009 according to Figure5. To meet this demand, more retailers are expanding their selection of organic and natural products. For example, in 2010, retail giant Wal-Mart added over 300 natural products to its inventory and expanded its search for organic sources around the world (Wal-Mart corporate, 2010).

According to Anone in 2009, consumers are demonstrating a preference for green products. Additionally, more retailers are expected to adopt green retail processes in the future. In fact, many suppliers and retailers are beginning to develop environmentally friendly businesses, as environmentally conscious production and distribution has become a trend since Accenture's report in 2008.

Table2 displays how the top four global retailers exert significant influence in the retail industry. In the past few years, these retailers have focused on enhancing environmental sustainability in retail. For instance, Wal-Mart has deployed wind turbines to generate up to 5% of the store's energy.

Carrefour, Tesco, Metro,

and Wal-Mart are all implementing various strategies to address sustainability concerns. These include increasing fleet utilization, opening low-carbon stores, finding creative ways to incorporate land use and transportation, and embracing technology in retail, such as online and mobile shopping. According to Accenture (2008), surveys indicate that consumers are seeking more efficient purchasing options, making high-tech retail an important aspect in the next decade.

The United States saw a rise in on-line consumer sales to $225 billion in 2007, and there has also been an increase in the number of customers using mobile shopping (Wachowicz and Drygas, 2008). In the coming decade, younger generations are expected to surpass baby boomers as the primary purchasing power worldwide. This group values convenience and efficiency when it comes to shopping, making it essential for retailers to utilize technology in order to satisfy their demands. Leading retailers are already working on developing new technologies, such as Tesco's improvement of its information system and Wal-Mart's use of New Internet-ready HDTVs and LED technology to enhance on-line sales (Wal-Mart corporate, 2010 (B)).

In the coming decade, the dominant trend in the global retail industry is expected to be continuing globalization. There have been recent changes in the geography and demography of some regions, with some third world countries experiencing rapid economic growth while markets in Europe are approaching saturation. E. .

According to Anone (2008), Italy's population has already reached its peak in 2006 resulting in a shift in market structures. Some retailers are facing saturation in domestic markets while new potential markets are emerging. In order to progress further, retailers will need to develop new markets and expand their operations. This strategy has

been successfully implemented by many retailers, including Tesco who opened a market in SU in 2007 (Tesco, 2008), as well as Carrefour and Wal-Mart who have global plans. The report concludes by highlighting the developments in the retail industry which can be divided into two major parts.

The first analysis indicates that retailers have made notable advancements in creating their own branded products within the past decade, leading to profitable outcomes and transforming their interactions with manufacturers into multi-dimensional win-win and competitive relationships. Additionally, there are three significant changes anticipated for the global retail industry in the coming decade, signifying that retailers will encounter both obstacles and prospects in the years ahead.