Private Label Merchandise Research Articles

The distribution of retail gross margin: analysis and implications

ABSTRACT Prior research on retail sales distributions finds both product concentration and long tails. However, gross margin dollars (rather than sales dollars) are critical drivers of retail financial performance, especially in sectors characterized by short product cycles and declining average selling prices. The paper is the first to use sku level data to estimate both sales and margin distributions for an office supply/technology retailer. We calculate Lorenz curves, Gini coefficients, and Pareto curves for in-store, on-line, and omni-channels. The estimated distribution of gross margin dollars is less skewed than the sales distribution; that is, more of the margin dollars are in the middle of the distribution. Significant differences in sales and margin distributions are found in store, online, and omnichannel products. These differences are only partially explained by price architecture and by private label merchandise. We analyze the decile distributions of sales and margin across channels and develop a classification matrix with implications for merchandise planning. Because merchandise strategies often focus on best sellers and managing long tails, the paper highlights opportunities for increasing profitability by emphasizing the middle of the margin distribution.

The development of a consumer value proposition of private label brands and the application thereof in a South African retail context

Private Label Brands are of strategic importance to retailers worldwide. However, there is a dearth of knowledge, particularly in emerging markets, as to the manner in which consumers cognitively assess these brands. At the heart of the issue is a gap in knowledge as to how consumers formulate a value proposition in their minds and the effect of loyalty to existing brands. This paper assumes a positivist, hypothetico-deductive approach by attempting to address the question: What are the key drivers of perceived value of private label branded breakfast cereals, taking price, perceived risk and perceived quality into account? Moreover, the study considers how various attributes of brand image contribute to the perception of brands and the extent to which loyalty to established national brands inhibits purchasing intent of private label merchandise. A conceptual model was developed, and tested by means of Partial Least Squares path analysis, using a sample of 482 respondents. The outcome reflects that consumers take cognisance of value through price, risk and quality cues, but that loyalty to existing brands has a minimal effect in the final stage of the model. Moreover, both in- and out-of-store influences were found to play a significant role in the determination of product quality. Retailers therefore possess a number of levers at their disposal to influence perceived value, most notably price, product quality and the perceived risk portfolio, as well as packaging, shelf placement, store environmental factors, etcetera.

The might of the brand

Purpose – This study examined the influence of supermarket brand name on the perceived quality of its private label merchandise. The purpose of this paper is to determine whether the fascia brand of a retail chain has the power to positively or negatively skew prevailing opinions concerning the quality of its own merchandise range, beyond the set of product-specific intrinsic benefits. Design/methodology/approach – A within-subject two-phase research design was adopted, intially using an experimental approach and thereafter modeling the cognitive effect with the inclusion of a moderator variable (brand interaction). Paired sample t-tests were used to assess differences in mean ratings and partial least squares analysis was implemented in order to test the hypothesized relationships. Findings – In the experiment phase, both products were rated equally at the outset in unsighted conditions, however, ratings diverged when brand name was introduced. Here, the high-end private label brand was scored considerably better than in its unsighted condition, while the low-end brand suffered a marginal decline in rating. In the modeling phase, two iterations of the conceptual model were run, considering the high-end and low-end brands seperately. The results were mutually reinforcing. A strong relationship, significant at the one percent level, was found to exist between brand name and perceived quality for both the lower- and higher-end brands, whereas no moderation effect was found to exist. This suggests that entrenched views of the brand strongly determine the perceived quality thereof, with operational and day-to-day fluctuations having little bearing on this. Research limitations/implications – This study focusses solely on South Africa, an emerging market within the BRICS consortium. To this end, the results are not transferable to other markets. The context of the study pitted a top tier retail brand against a mid tier retail brand. In accordance with this eventuality, lower income consumers, and retail chains catering to this market segment, do not constitute components of this particular study. Originality/value – While the relationship between store image and perceived quality of private label merchandise is well documented, this study considers the effect through an experimental design. Here, perceived quality was measured both with and without brand cues evident. Thus, the results are likely to be more accurate than those acquired through strictly survey research. As a defining feature, the study points to the brand name as being a supremely powerful extrinsic cue, and hinting at the fact that it is long term influences that create a distinct brand aura, with these being largely undisturbed by short term fluctuations.

Propensity to buy private label merchandise

Purpose– Establishing and/or developing a portfolio of private label brands (PLBs) is a strategic imperative for most retail chains. The purpose of this paper is to construct, and validate, a holistic conceptual model to investigate the effect of perceived product quality, relative price and risk on perceived product value and, ultimately, willingness to buy these brands. In addition to this, the study seeks to investigate the potential role of store image as an antecedent within the model.Design/methodology/approach– A survey of middle to upper income shoppers was administered in order to determine the magnitude of the above-mentioned effects. The study focused on the market segment of private label breakfast cereal consumers within South Africa.Findings– All relationships in the model were found to be significant at the 5 per cent level, except for store image on perceived risk. The strongest relationship, by some margin, was that between perceived value and willingness to buy PLBs.Practical implications– The myth that a powerful store image can necessarily mitigate high levels of consumer risk was dispelled. In general, the results may be used to glean further insight into the consumer’s approach to buying PLBs and shape brand managers’ actions in building these brands.Originality/value– This study draws on the collective works of Benekeet al. (2013), Snojet al.(2004) and Sweeneyet al.(1999) in exploring this issue. However, the research advances the discussion by considering a low-involvement product category and the inclusion of an additional antecedent – store image.

Beyond private label panache: the effect of store image and perceived price on brand prestige

Purpose – The purpose of this study is to explore the effect of store image and perceived price on the consumer’s perception of private label brands (PLBs) that have grown in stature in recent decades and are increasingly viewed as a strategic asset of retailers. In particular, the tenets of perceived quality, loyalty and awareness/associations, are argued to underpin the construct of brand prestige, which is used as a vehicle to assess consumers’ affinity toward the brand. Design/methodology/approach – A consumer survey was conducted with a specific focus on purchasers of private label branded breakfast cereal in Cape Town, South Africa. The data from 205 respondents were scrutinized through partial least squares path modeling, which empirically tested the eight hypotheses embedded within the conceptual model. Findings – The results suggest that perceived price is a powerful influencer in this process; however, the role of store image was seen to be less obvious. At a granular level, a relationship between store image and perceived quality was found to exist, but not so for loyalty and awareness/associations. In this respect, store image was seen as subordinate to the perceived price of the merchandise, bringing into question the assumed stature of store image as a key decision influencer in an emerging market context. Research limitations/implications – This study was confined to a single product category, within a particular retail segment, as the study focused on PLB breakfast cereal products sold within mainstream South African supermarket stores. This was desirable so as not to infuse varying merchandise category profiles into the model. Furthermore, as data were collected exclusively in the city of Cape Town, the results cannot necessarily be extrapolated to South Africa as a nation. Finally, it should be noted that the study was conducted in an emerging market setting. Developed markets, where consumers are considerably more au fait with PLBs and have increased purchasing power, may therefore produce a different set of results. Thus, our findings are not necessarily generalizable to all branches of the retail sector, nor are they necessarily applicable throughout, and across, different countries. It is hoped that subsequent studies will probe these areas and provide comparative viewpoints. Practical implications – This study upholds the view that price is a key driver in building PLBs, but interrogates the popular belief that store image automatically adds value in fostering goodwill toward the brand. Originality/value – This study is one of the first to investigate the notion of private label prestige (grounded in that of brand equity theory) in an emerging market context. In doing so, the study postulates that the “halo effect” of store image on the comprehensive evaluation of the brand might not be as prominent as maintained in existing literature. The study, therefore, questions the role of store image and perceived price of the merchandise, finding that – in actual fact – these do not fare equally in consumers’ cognitive assessment of the private label merchandise.

The influence of perceived product quality, relative price and risk on customer value and willingness to buy: a study of private label merchandise

PurposeThis study endeavours to examine the influence of perceived product quality, relative price and risk, respectively, on perceived product value and, ultimately, consumers' willingness to buy private label household cleaning products.Design/methodology/approachRespondents (157) were recruited through an in‐store survey and the data analysed using partial least squares path modelling.FindingsThe results are similar to those proposed by Sweeney, Soutar and Johnson. Strong relationships between perceived relative price and perceived product value, as well as between perceived product value and willingness‐to‐buy, were found to exist. A negative relationship was observed between perceived product quality and perceived risk. The results indicate that establishing a value perception is critical in the buying process. Tangible cues exhibiting high quality (e.g. packaging, shelf space, media placement) need profound attention. Furthermore, it is suggested that risk (which plays an important part in the consumer decision process) is minimised through optimal retail service quality and customer reassurances.Research limitations/implicationsThis study is limited in that respondents are consumers of a specific geographic region and demographic grouping. Findings may therefore not be generalisable, particularly with respect to other countries.Originality/valueThis is one of the first studies investigating consumers' perceptions of value, using the attributes of quality, risk and price, in an emerging market setting.

An exploratory study of sustainable apparel retailers on the internet

The purpose of this exploratory study was to identify the general characteristics of online retailers selling sustainable apparel and examine their sustainability initiatives throughout the supply chain. Hart’s (1995) natural resource-based view (N-RBV) was used in this study as a foundational framework. A content analysis of 156 websites revealed that many sustainable apparel retailers on the internet are small/family businesses offering their own private label merchandise. Garments sold on the websites were mostly women’s and children’s clothing and offered in a variety of colours and product categories. The majority of sustainable efforts were addressed in the fabric and manufacturing stages of the apparel supply chain by utilising garments made of organic materials and the absence of pesticides used in fibre growth. However, few websites addressed sustainability issues in design and production, transportation and logistics, store and warehouse efficiency or post-consumer and beyond.

Retailers' use of niche marketing in product development

PurposeThe purpose of this research is to investigate the growing trend of the use of private labeling as a competitive strategy among fashion retailers. Specifically, how retailers differentiate and create niche markets within their own private label merchandise is examined. The study focuses on how retailers develop and expand their private label portfolios, while minimizing the risk of cannibalization.Design/methodology/approachThe research methodology is an in‐depth case study design that is used to gather information from a selected sample of those retailers that participate in apparel private label product development.FindingsResults indicate a strong use of a niche marketing strategy by retailers in the development and implementation phase of private labels. The strategy resulted in increased profits and market share.Practical implicationsThe study is significant because it provides a framework for a globally competitive strategy that retailers can utilize in order to develop specialized, niche markets within their private label merchandise, while minimizing the risk of cannibalization.Originality/valueThere is a void in the current research literature relative to the use of a niche market strategy as a competitive strategy by the fashion retail industry, particularly when related to the development and marketing of private label merchandise.

Nordstrom, Inc.

AbstractRetail ‐ Apparel and Accessory Stores (MIC: SIC: 5651 NAIC: 448140)Nordstrom is a fashion specialty retailer of clothing, shoes and accessories for men, women and children. Co. provides several brand name and private label merchandise through multiple retail channels, including 103 Full‐Line Nordstrom stores, 50 discount Nordstrom Rack stores, two Jeffrey boutiques, two Last Chance clearance stores, its catalogs and through its online store. Co.'s stores are located throughout the U.S., in addition to 37 Façonnable boutiques located in France, Portugal, and Belgium. Through its wholly owned federal savings bank, Nordstrom fsb, Co. also provides a private label card, two co‐branded Nordstrom VISA credit cards and a debit card for Nordstrom purchases.

Nordstrom, Inc.

AbstractRetail ‐ Apparel and Accessory Stores (MIC: SIC: 5651 NAIC: 448140)Nordstrom is a fashion specialty retailer of clothing, shoes and accessories for men, women and children. Co. provides several brand name and private label merchandise through multiple retail channels, including 103 Full‐Line Nordstrom stores, 50 discount Nordstrom Rack stores, two Jeffrey boutiques, two Last Chance clearance stores, its catalogs and through its online store. Co.'s stores are located throughout the U.S., in addition to 37 Fa®nnable boutiques located in France, Portugal, and Belgium. Through its wholly owned federal savings bank, Nordstrom fsb, Co. also provides a private label card, two co‐branded Nordstrom VISA credit cards and a debit card for Nordstrom purchases.

Nordstrom, Inc.

AbstractRetail ‐ Apparel and Accessory Stores (MIC: 5.8 SIC: 5651 NAIC: 448140)Nordstrom is a fashion specialty retailer of clothing, shoes and accessories for men, women and children. Co. provides several brand name and private label merchandise through multiple retail channels, including 103 Full‐Line Nordstrom stores, 50 discount Nordstrom Rack stores, two Jeffrey boutiques, two Last Chance clearance stores, its catalogs and through its online store. Co.'s stores are located throughout the U.S., in addition to 37 Faconnable boutiques located in France, Portugal, and Belgium. Through its wholly owned federal savings bank, Nordstrom fsb, Co. also provides a private label card, two co‐branded Nordstrom VISA credit cards and a debit card for Nordstrom purchases.

Nordstrom, Inc.

AbstractRetail ‐ Apparel and Accessory Stores (MIC: 5.8 SIC: 5651 NAIC: 448140)Nordstrom is a fashion specialty retailer of apparel, shoes, cosmetics and accessories for women, men and children. Co. provides a range of brand name and private label merchandise through multiple retail channels, including 98 Full‐Line Nordstrom stores, 50 discount Nordstrom Rack stores, four Fa?nnable boutiques, its catalogs and through its online store at www.nordstrom.com. Co.'s stores are located throughout the U.S., in addition to 36 Fa?nnable boutiques located in France, Portugal, and Belgium. Co. also provides a variety of payment products and services, including its loyalty program, a Nordstrom private label card, two co‐branded Nordstrom VISA credit cards and a debit card.

Innovation Without Borders

the pack and “thinks different.” Quite surely, that famous advertising byline helped win the computer maker, Apple, ultimate iconic status of innovator as the ultimate iconoclast. Equally famously, Apple Computer made its system incompatible with the prevailing standard: you were either with the nearly 90% of users whose PCs ran on Microsoft Windows or aligned with Apple’s unique system. Apple’s chief, Steve Jobs, had declared his objective to “put a ding in the universe”; he certainly did so by banging into the sides of much bigger competitors: Microsoft, IBM, HP, Dell, among many others. The Us vs. Them image of the innovator is not limited to Apple alone. The popular idea of the innovator as the “disruptor”—and the many examples of companies on the Web or from emerging markets that have, indeed, disrupted long standing incumbents—has reinforced the competitive facet of innovation. And the metaphors keep coming: making the competiton irrelevant; innovate—or die. In fact, it is often remarked that some of the best-known innovative companies hire attorneys with as much zest as in their hiring of scientists and engineers. In the midst of all of these images of zero-sum innovation, the critical role of consensus, cooperation and coordination in most successful innovations may have been overlooked. Last year, the percentage of successful innovative products that were developed or commercialized with others was as high as 79%. The total return to shareholders for companies that adopted a collaborative approach to innovation was on average 1.6 times that of more insular innovators. Collaboration also led to better outcomes for users of the innovative products: the clinical survival rates of patients who use products from externally sourced programs in pharmaceuticals are twice the survival rates of patients served by products of internally sourced programs. The importance of outsiders in the innovation process often begins with the very idea that ultimately becomes a winning innovation. The office supplies retailing giant, Staples, had aspirations to boost its sales from highly appealing private label merchandise. One of its hottest recent products is the Wordlock, predicated on the simplest of ideas: people remember combinations of letters that spell familBhaskar Chakravorti

A Comparison of Apparel Garment Prices By National, Retail, And Private Labels

Although it is generally acknowledged that brand name merchandise costs consumers more than private label merchandise, the reason for this difference is unclear. Are brand name items priced higher because they have different characteristics than private labels? Also, if items have similar characteristics, how much more do consumers pay for brand name merchandise? The purpose of this research was to examine the effect of brand name on the price of apparel while accounting for variations in product attributes. Based on the characteristics model of demand, a hedonic price equation was estimated using data collected on a sample of sweaters from moderately priced stores in a midwestern town. The results indicated that, while holding fiber content, styling, and country of origin constant, both national name brands and retail-store brands were priced higher, on average, than private labels. These results have implications for consumers and retailers. In particular, it may behoove private label retailers to augment their efforts to inform consumers about the attributes of their product relative to brand or retail-store names, given the price differential.

Size Variation in Women’s Pants

The U.S. sizing system involves the use of a size code to direct customers to garments most likely to fit their body. The popular press reports expensive clothes tend to run large and there is inconsistency within each size category. The purpose of this study was to determine how much inconsistency there is within size categories, the difference in size of two different price points (inexpensive and expensive), and two different types of label (national and private) of women’s pants. To this end, the waist, crotch, and inseam of 1011 pairs of pants were measured. Inconsistency was found in each size category, expensive pants generally were larger in measurement, and little significant difference was found between national and private label merchandise except for sizes 4 and 6.

When product designers use perceptually based color tools

Palette synthesis and analysis tools have been built based upon a model of color experience. This model adjusts formal compositional elements such as hue, value, chroma, and their contrasts, as well as size and proportion. Clothing and household product designers were given these tools to guide their selection of seasonal palettes in the production of the private-label merchandise in a large retail chain. The designers chose base palettes. Accents to these palettes were generated with and without the aid of the color tools. These palettes are compared by using perceptual metrics and interviews. The results are presented.

Apparel Retail Product Development: Model Testing and Expansion

The objectives of the study were to a) test the validity of Gaskill's (1992) Retail Product Development Model across a broader range of specialty stores and b) expand the model beyond line presentation to include events and considerations in post-adoption product development. Twenty-one men's, women's, and children's specialty store retailers deriving 70% to 100% of their sales from private label merchandise through in-house product development were compiled from current retail directories to serve as the sample. Data were collected with a qualitative telephone interview schedule and analyzed using descriptive analysis. Stages in the original model were confirmed; however, modifications were made based on new data. Expansion of the model to include post-adoption product development stages was also carried out. The end result was the development of a revised Retail Apparel Product Development Model.

Vertical market relations in the UK grocery trade: analysis and Government policy

The article examines trends in the market power relationship between UK grocery manufacturers and retailers over the past 10‐15 years. It identifies the underlying causes of trends in this area, the implications for consumer welfare, and the legislative framework relating to these relations. Contributory factors to the changed market‐power relationship are relative manufacturer and retailer firm size and market share, individual manufacturing firm market dependence upon particular retailers, information technology, private label merchandise and product development activities, logistics arrangements and other vertical links between manufacturers and retailers. Aspects of welfare economics are examined as a basis for assessing consumer outcomes in this area, and past and present government legislation in the matter is considered, together with some reference to international comparisons. A case is made for some further strengthening of the relevant legislation in the UK.