Sourcing, quality and pricing decisions for store brand product introduction

The store brand phenomenon has become popular among stores in recent years. A few well-known examples are Costco’s Kirkland Signature, Great Value’s Walmart, or Ama- zonBasic brands. The vital reason for this successful practice of store brands is that it may benefit both manufacturers and retailers. When the retailer launches its own store brand with the collaboration of the national brand manufacturer, the supply chain can diversify its product portfolio and serve more consumers from different segments while better utilizing the manufacturer’s capacity. Several studies demonstrate that retailers and manufacturers can collaborate to introduce store brands and eventually find a win-win partnership. Con- versely, these norms are shifting, with many retailers opting to outsource to a third-party manufacturer or produce them in-house. Although some research sheds light on store brand practices, no identified study has incorporated brand images and consumers’ willingness- to-pay for quality simultaneously. This research, different from the previous studies, fo- cuses on how brand images of the retailer can motivate the manufacturer’s willingness-to- collaborate when the retailer wants to introduce the store brand product into the supply chain. In addition, the research focus is then to explore the interactions between sourcing decisions, product quality, and pricing decisions from the retailer’s perspective. We argue that there are significant benefits associated with producing the store brand in-house rather than outsourcing to the national brand manufacturer. Interestingly, we find that under the in-house production option for the store brand product, the store brand product quality may be higher than that of the national brand product, though this will never happen under the outsourcing setting to the national manufacturer. Moreover, we address some tangible examples of how those benefits might play out in a real-world setting.Ph.D.Includes bibliographical reference