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Indiana University Bloomington

Operations & Decision Technologies

Kelley Advantage

Our Operations, Analytics and Information Systems faculty have written many of the definitive textbooks in the areas of operations, data analysis, database management, networking, and Excel modeling.

Recent Publications

Journal Articles

Competing with Channel Partners: Supply Chain Conflict when Retailers Introduce Store Brands

2010, Naval Research Logistics

Hans Sebastian Heese

Abstract

Private-label products are of increasing importance in many retail categories. While national-brand products are designed by the manufacturer and sold by the retailer, the positioning of store-brand products is under the complete control of the retailer. We consider a scenario where products differ on a performance quality dimension and we analyze how retailer–manufacturer interactions in product positioning are affected by the introduction of a private-label product. Specifically, we consider a national-brand manufacturer who determines the quality of its product as well the product's wholesale price charged to the retailer. Given the national-brand quality and wholesale price, the retailer then decides the quality level of its store brand and sets the retail prices for both products. We find that a manufacturer can derive substantial benefits from considering a retailer's store-brand introduction when determining the national brand's quality and wholesale price. If the retailer has a significant cost disadvantage in producing high-quality products, the manufacturer does not need to adjust the quality of the national-brand product, but he should offer a wholesale price discount to ensure its distribution through the retailer. If the retailer is competitive in providing products of high-quality, the manufacturer should reduce this wholesale price discount and increase the national-brand quality to mitigate competition. Interestingly, we find the retailer has incentive to announce a store-brand introduction to induce the manufacturer's consideration of these plans in determining the national-brand product quality and wholesale price.

Citation

Heese, H. S. (2010), “Competing with Channel Partners: Supply Chain Conflict when Retailers Introduce Store Brands,” Naval Research Logistics, Vol. 57, No. 5, pp. 441-459.