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Thursday, February 20, 2020

Misconceptions About Store Brands by Selima Ben Mrad * [21]

National or manufacturer brands have been for a while the choice of consumers and a signal for quality. Consumers usually trust manufacturers’ brands and associate them with a certain level of quality. However, this is not the case for store brands. US consumers still lack the knowledge about private label and avoid buying them unless the product does not generate any risk. Private-label brand success is strongest in commodity driven, high-purchase categories and products where consumers perceive very little differentiation (Nielsen 2014) . While store brands or private label market share keeps growing in many European countries, this is not the case in the United States. Indeed, the market share in several European countries is more than 30% with UK , Spain, and Switzerland having the highest market share among European countries. (PLMA’s International Private Label, 2017). The United States private label market share has been lower than its counterparts in Europe and it is only lately that this trend has been changing.  Today, the market share of store brands has reached nearly 25% of unit sales in the U.S. and is expanding faster than national brands (PLMA 2017).
So What is Private Brand or Store Brand?

Private brand is any brand that comprises the retailers’ name or any name created by the retailer (PLMA 2017). Target, Walmart, CVS Pharmacy, and Walgreens market their own brands. For instance, Target has a store brand “Up & Up” in their household product line that is much diversified. Some retailers, such as Walmart, see private label as part of the road to their future success. Indeed, Doug McMillon, president and CEO of Walmart, when speaking at the Bank of America Merrill Lynch 2017 Consumer & Retail Technology Conference in New York, stated that “The widespread availability of name-brand products online will compress the margins of private brands over time.” He also added that "having a private brand from a margin mix point of view has always been important, but it is even more important now.”  Therefore, it is important to educate customers about private brands. Indeed there are some misconceptions about store brands:

1. They are of  lower quality than manufacturer brands
2. They are manufactured by the retailer
3. There is only one category of store brands
4. They have low prices
5. They generate high risk
The truth about store brands is that they are indeed similar to manufacturers’ brands and sometimes even of better quality. Here are some clarifications about store brands:
Who Manufactures Store Brands?

According to PLMA (2017), there are different ways that store brands are manufactured. They can be produced by:

• Large manufacturers who produce both their own brands and private label products.
• Small and medium size manufacturers that specialize in particular product lines and concentrate on producing private label almost exclusively.
• Major retailers and wholesalers that operate their own manufacturing plants and provide private label products for their own stores.
Categories of Store Brands

Private label brands are classified into generic brands, standard brands or copycat brands or flagship brands, premium brands, and value innovators.

1. Generic brands are usually cheap, inferior products. Usually they do not carry the name of the retailer on the package , but simply the name of the product, such as ‘milk’ or ‘butter’, in plain script . They usually use very cheap packaging .
2. Copycats or flagship brands or standard brands. They usually carry the name of the retailer and tend to copy the main manufacturer within that category, they have packaging and price points very similar to the main manufacturer.
3. Premium store brands are usually of higher quality than the manufacturer brand  and compete directly against the manufacturer’s  brand. Kumar and Steenkamp (2007) define two types of premium brands: the premium private label which is exclusive, higher in price, and superior in quality to competing brands; and the premium-lite store brand which is promoted as being equal or better in quality to the competing brands, while being cheaper.
4. The fourth category is value innovators which consists mainly of retailers reducing costs and processes to simplify the production and marketing of product ranges, so that a good quality product can be offered at very low prices. They are usually limited in number.
Benefits of Store Brands

Store brands provide retailers with several key benefits. It gives them exclusivity to offer their customers special products, which make consumers loyal to them. In addition, store brands create a unique brand image and generate more retailer brand recall and recognition. Finally, store brands increase retailers’ revenues and have higher profit margins.
Attitude Towards Store Brands

The positive or negative attitude towards store brands has been attributed to several causes. Consumers evaluate store brands based on price/value of those brands, the products’ attributes, on the perceived risk and on their own self-perception (smart shopper). Consumers who buy store brands realize that when they are indeed purchasing store brands they are paying for certain “marketing” practices for  manufacturers’ brands, which is not the case of retailers' brands.
References:

Hamstra M (20017) “Walmart CEO cites growing importance of private label Store brands seen as driver of margins, loyalty” www://www.supermarketnews.com/walmart/walmart-ceo-cites-growing-importance-private-label
Kumar, N  and J.B  E.M. Steenkamp, ‘Private Label Strategy’, Harvard Business School Press, 2007.
Nielsen (2014) https://www.nielsen.com/content/dam/nielsenglobal/kr/docs/global-report/2014/Nielsen%20Global%20Private%20Label%20Report%20November%202014.pdf
PLMA (2017) ; http://www.plmainternational.com/in

* Selima Ben Mrad, Ph.D., is an Associate Professor of Marketing at Nova Southeastern University. She can be reached at: sbenmrad@nova.edu


47 comments:

  1. Interesting read. I know that some private brands are actually manufactured at the same location/factory as brand names. For example, I had a friend who interned at a garbage bag manufacturing plant where they made both "Glad" and the generic Publix version. Is it a misconception that the private labels are inferior quality.

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  2. By Silvia Hernandez: I became familiar with private brands not long ago. This is an impressive concept that has changed the way we shop. I used to buy only manufacturer brands because I associated these brands with poor quality, leaving little or no room for any other option in my shopping cart. I had the belief that retailers were trying to make more revenue by introducing low quality products on their shelves.

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  3. I did not know that some manufacturers that produce private brands also produce store brands. That is interesting and it shows that both types of products would be of similar quality. This proves some of the misconceptions of store brands being of lower quality and high-risk wrong. In the past couple of years, I have seen the popularity of store brand products grow, especially from stores like Publix and Whole Foods, whose store brand products ensure quality and are more affordable compared to their private brand counterparts.

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  4. When I was in middle and high school I remember being embarrassed about being seen in stores while purchasing store brand products. The people that I went to school with viewed them as low quality products that only those who struggled financially purchased. The negative attitudes and inaccurate assumptions about store brand products are so interesting to think back on after reading this article. There is so much variance in the different qualities, prices, and names/labels on the products. I had no idea about all of the benefits of store brands, but it makes perfect sense now that I reflect on this article. 

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  5. Before reading this I was under the impressoin that store brands were indeed of lower quality than name brands, although I now know that in some cases its just the opposite. I think its an important thing to know as a consumer, since I am usually buying things based on the lowest price, and know now that Im not neccessarily sacrificing quality for a lower price when buying a store brand.

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  6. It is interesting that the Europe has a bigger percentage than the United States with the market for private label market share. 

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  7. This was a very interesting read; I think that the perception of store brands has changed over time, but because in some cases they are, they are still viewed as inferior. Those who use store brands are occasionally ostracized, especially in elementary and middle school.

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  8. When I go out shopping I buy a lot store brand and its interesting to learn that the store brands are not inferior quality to the name brand products. I was buying these products with the misconception that they are a cheaper alternative with only a slightly lowered quality compared to the other brands, it is reassuring to learn that the store brands are often of higher quality and still cheaper that the other brands.

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  9. When I go out shopping I buy a lot store brand and its interesting to learn that the store brands are not inferior quality to the name brand products. I was buying these products with the misconception that they are a cheaper alternative with only a slightly lowered quality compared to the other brands, it is reassuring to learn that the store brands are often of higher quality and still cheaper that the other brands.

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  10. Misconceptions are very common when it comes to branding and advertising. There are things companies will do to change or influence the way you think and act which is very interesting. These examples in this article really make you think about what else is out there.

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  11. I am so glad that I came across this blog. I always thought of store brands as cheap and low quality, however I now know that this is just a misconception of store brands. Since I am a college student and I am on a "college student" budget I always purchase store brand items, but it is nice to know that the things that I purchase are not low quality just because they are store brand.

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  12. As someone who usually purchases name brand I do have to say that store brand is often times just a good if not better than name brand. This is because it is owned by the store itself instead of one giant parent company that focuses on quantity vs quality. Store brand items normally focus on quality to bring in more consumers since it is not investing in advertising they can focus on quality.

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  13. Growing up my mom always bought name brand products from the grocery store. Now that I am living on my own and buy my own groceries I've realized that most name brand and off brand products are the same thing. Certain things the quality difference is noticeable but for the most part the packaging is just a bit cheaper.

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  14. This article effectively dispelled the "myth" that store brands and off-brand products are different. We are all conditioned as children to choose the brands that we are familiar with or that have been marketed to us since we were very little. Even the placement of cereal boxes at children's eye level in stores is an illustration of this. If you read the ingredients list on skin care products, they all contain the same substances. The pricing disparity is absurd. Every time I see a brand, I wonder how they get away with it.

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  15. This article dispelled the "myth" that products from name brands or off brands are different. Since we were very young, we have been conditioned to seek or prefer name brands. viewing commercials or our favorite daily cartoons all the time. One instance of this is how retailers will display brand-name cereal at children's eye level on shelves. Even if you read the ingredients list on skin care products, they all contain the same substances. The pricing disparity is absurd. Every time I see a brand, I wonder how they get away with it.

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  16. I have noticed most people that do shop at private owned brands stick to that brand. For instance those who shop at Target do not typically go to Walmart.

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  17. I have noticed that most people who shop at privately owned store brands like Target/Walmart barely ever shop at the competition. For instance, those who shop at Target never go to Walmart, and vice versa. Additionally, as the article mentioned private brands have smaller brands within the store like how Target has "Up&Up" however no one really is aware that it is under a different brand, I feel as though consumers group it under the "Target Brand".

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  18. This was a very insightful read.
    Since youth, I was conditioned that products produced by companies such as bounty, kraft, unilever, etc. were usually better quality than the store brand or generic brand, however that has greatly changed in the recent years.
    I will admit that I do believe that in the past, store brands and generic brands were lower quality sold at Walmart for example. But given the influx of stores like Costco, Aldi's, and Trader Joe's starting to sell their own brands, other companies now have to step up their game, and that is causing a change of mindset in today's society. As for me, I purchase store brands more often than before given its price and better quality control.

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  19. As I am looking through these comments I am noticing how many people felt the same way about store brands being inferior to other brand name products. I too, felt this way about store brand products not realizing many are created in the same facilities. Would this not go back to the way marketing is done for these brands? Should companies reconsider the way they are marketing these products? Or is there a lack of marketing for the store brands and that is why they are perceived to be inferior?

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  20. There was a lot of interesting information in this article. Most privately labeled brands are placed directly beside the store brands, yet the store brands are often plainly labeled and designed while the private brands are more colorful and stand out. Store brands are more appealing to consumers because they are more affordable. Off-brand products are stigmatized because they are regarded as inferior to regular brands of those products, even though they can be just as good or even better.

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  21. I always found it fascinating just how many private brand exist in a place like Target. It's not something most people think about unless the name makes it super obvious. Target has over 45 private brands alone, and the quality and pricing of the products varies from brand to brand.

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  22. This is a very intresting read! I never really knew what private brands were and how they can impact the way we shop. I am also now realizing that the quality has been shifted between name and private brands.

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  23. As a designer, this was an interesting read. I always wondered why generic and store brands decided on lacking in their packaging. It's understandable to try to keep cost down but if they really want to affect the sales of the manufacturer's brand they need to create something that would genuinely catch consumer's eye. I believe products that are appealing design wise and also priced fairly would be the key to achieving their goals.

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  24. This article was very insightful regarding the categorizations for different types of store brands. I believe that the majority of consumers who avoid store brand products do so under the false conception that these products are of lesser quality because they are cheaper than manufacturer brands. However in the article, it states than in some cases that store brand products are of equal or higher quality.

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  25. This article was very insightful regarding the categorizations for different types of store brands. I believe that the majority of consumers who avoid store brand products do so under the false conception that these products are of lesser quality because they are cheaper than manufacturer brands. However in the article, it states than in some cases that store brand products are of equal or higher quality.

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  26. This was an interesting read. I have always thought if a product was not a name brand, then it lacked some quality. I was given the impression that a cheaper product meant a lower quality. I just started shopping at a BJ's Wholesale Club and I noticed they have their own brand called Wellesley Farms. The Wellesley products tend to be less expensive but ingredients are similar to name brand products. My wife and I pay to shop at this big box retailer and naturally trust their brand just like the other customers who shop there.

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  27. Hey, I found this article to be very interesting! I am a first generation student and my parents have always been the type to buy store branded items to save money. It's something that I followed and continued as I went to college, as it made sense to get similar items for lower costs. It's refreshing however to hear that the store brand is actually not as bad as the misconceptions say. I understand that it is not always the case with every store brand item, but it makes it easier on the mind to know that the store brands may be the better option.

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  28. This was a very interesting article! I agree that store brands are not always inferior compared to name-brand items. Some products that I purchase every week are store-brand and I find that they perform just as good as name-brand products. This article has opened my eyes to understand that although there are a myriad of brands available to the consumer, there are probably a small number of manufacturers for the same products.

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  29. This topic was very interesting to me because I see myself guilty of this sometimes! This one time, I wanted to go to the store to buy Theraflu. When I got to the store, I was trying to decide if I should spend more money on the name brand and for a second I thought.. well the brand name should be better right? However, I took a change to give the store brand a chance and compared the ingredients of it to the name brand version and they were exactly the same! This serves as a reminder that the store brand option is often a cheaper solution with the same quality.

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  30. I found this post very interesting! I feel like we can all be guilty of this sometimes. It feels like a lot of us were conditioned to believe the name brand product is always better. However, oftentimes when the name brand is compared to the store brand, they're exactly the same in terms of components. I believe slowly, more and more of us learn that the store brand version can often be a better option!

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  31. This post was a great read! If I'm being honest, I am the customer that doesn't purchase store brand value for any of the products I buy in the grocery store. I perceive store brands to be cheap in value and not of a good quality. Part of that is from personal experience but most of the reasoning behind that thinking is due to assumptions. It's nice to know that although that might be the case for some store brands, it doesn't pertain to all of the products. I will now make a more conscious decision to purchase store brands in the future.

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  32. Stores tend to place the off brand products next to the name brands. In my opinion it is a great tactic, that way the customer could compare the prices and make decisions depending on their budget. Personally, I prefer to buy store brands depending on my budget. If a price of the name brand is outrageous, I tend to choose the store brand that is significantly cheaper and has the same quality. It was great reading this post and learning more on the manufacturing process of the store named brands.

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  33. This was very interesting. I learned a decent bit about these products that most people would not even realize. I will definitely be keeping an eye on these products in the future.

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  34. I believe "name-brand" grocery items have been so commercialized as the "top" of that specific item, and overtime made people focus less on what they're actually putting into their bodies. This article recognizes the benefits for store and private labels, not only for the consumers but for the brand itself.

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  35. Before I read this post I was also under the very popular impression that these brands that are store named brands were lower quality than the brand name products and therefore made cheaper as a result. From the packaging looking less appetizing to a consumer as well as no advertising being done for these products they get way outperformed by the big name brand products.This article works well to help us recognize the quality and place for these store brand products and remove the negative stigma involved.

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  36. This article worked very well to help eliminate the negative views that are often placed on these store brand products. Personally I was under the impression that these were products that are lower quality than your name brand products and therefore made cheaper as a result. After reading I realize that this is not the case and often these products may even be a name brand product in a store brand package. The lack of advertisements and effort put into these store brand products I feel definitely hurts the reputation.

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  37. Informative read. I hope the misconception is erased soon because I appreciate store brand products. I find store brand products to be more affordable hence why I choose them over the private brand alternatives. Places like CVS Pharmacy offer incentives and sales for their store brand products. This is in the hope of increasing awareness of the store brand products. I do believe the private brands receive more credibility because there are oftentimes television advertisements which increase likability and awareness.

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  38. After reading this article I realized where I see stores indeed have their off-shoot brand but I that of it as an inferior good that helps others with a smaller budget. The inferior good is a way that the store can make addition funds. It also makes the company look better based off the variety of products and this make the store get more loyal customers this way.

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  39. Very knowledgeable topic. I did not know about that manufactures use private brands to be put in stores such as Publix, Walmart, etc. Sometimes the more known brand does not mean the best. One thing that caught my attention is that store brands are similar to manufacturers’ brands and sometimes even of better quality

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  40. The explanation of private label or store brands is comprehensive and insightful. It sheds light on the evolving dynamics of consumer perceptions, especially in the U.S. market, where private label market share has traditionally lagged behind Europe but is now on the rise. The clarification about misconceptions surrounding store brands, such as presumed lower quality and that retailers manufacture them directly, is important.

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  41. This was a very educational post. It was interesting to learn why companies create their own products to compete with the brands they carry. I am often tempted to purchase a store brand compared to the generic because of a difference in price. It was a highlight to learn that implementing new products that only these retail stores sell, creates customer loyalty as well. Thank you!

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  42. With the ever-increasing rates and changes in consumer socioeconomic behavior, more are opting for store-brand products over private-label items to maximize their spending power. I believe that the pandemic in 2020 taught us that scarcity breeds creativity and that being able to adapt to the changing marketplace was a necessity. The availability of store-branded items over many of the private-label items still gave us the option to enjoy our favorite snacks or create the same flavorful meals while staying under budget. Customers began to do their research and discovered that many of the private label items they used to purchase were identical in value to the store brand items. Sometimes you do not have to break the bank to get good quality things, and today many businesses are creating more store-brand items to highlight this concept to their customers. Along the way, of course, they are looking to increase brand recognition and gain customer loyalty- a win-win for everyone! Thank you for sharing your insight on this topic Dr. Mrad, and for challenging the preconceived notion that store-brand items can’t rival, and at times beat private-label products.

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  43. The idea that store brands are always of poorer quality is debunked by Selima Ben Mrad's article, which offers a comprehensive analysis of store brands into categories like generic, premium, and value innovation. The article challenges previous beliefs and improves our opinion of the trustworthiness of store brands by exploring the production processes, which include both huge manufacturers and stores. In my opinion, this article's ideas are informative and should inspire readers to reconsider their preconceptions and appreciate store brands for their potential quality and variety of products. It supports a more knowledgeable and open attitude to purchasing, which is in line with the evolving retail environment.

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  44. This is a rather fascinating post, as I am someone who, for the most part, primarily buys store brands to save money. For example, I have target branded mouthwash in my bathroom as we speak and a good number of the seasonings in my cabinet are Walmart-branded. However, I think now, thanks to online reviews, social media and word-of-mouth, the perception of store-branded items are changing. People can hear from a friend or a trusted one about the effectiveness of a store-branded item. For example, on TikTok, I saw a review of a burger sauce from Walmart. The person in the video and all the comments agreed that the condiment was good quality and tasted good. I went out and tried it myself and now it is a staple in my pantry, and it's cheaper than any sauce that Heinz or Kraft makes. Overall, I definitely think people are starting to learn about the value in store brands.

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  45. Really nice post! I feel like it's a really common misconception that we believe that buying the "name brand" of a product is better compared to the store brand being sold. Additionally, because the price of the store brand is so much cheaper compared to the name brand I feel like people always assumed what they were eating was made with cheaper ingredients, thus the reduced price.

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  46. The article highlights the evolving landscape of private or store brands in the United States, shedding light on the historical consumer perceptions and misconceptions surrounding them. It emphasizes the importance of educating consumers about the diverse nature and quality of store brands, which, despite past reservations, are gaining market share, offering retailers a strategic advantage and presenting consumers with a broader array of choices beyond traditional national brands. The transformation in consumer attitudes towards store brands signifies a shift in the market dynamics and emphasizes the need for continued awareness and education to fully appreciate the value and quality these brands can provide.

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  47. I was not aware that manufacturers use private brands in stores like Publix and Walmart. I also agree with how store brands are not always better than named brands, however the former is always a good option.

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