Innovation Cloning:The Introduction and Performance of Private Label Innovation Copycats

A controversial trend in grocery is the practice by retailers to quickly copy innovative national brands (NBs) launched by manufacturers with their own private label (PL). In a sample of 1,100+ NB pioneers launched in The Netherlands between 2005 and 2009, 11.7% faced a PL copycat by at least one of the seven leading grocery retailers. These copycats obtained an impressive 5.8% category share at the retailer in the year after launch, thereby outperforming the NB pioneers they copy (2.1%) as well as non-copycat PLs launched in the same period (4.4%). Using a two-step selection model, we identify what motivates retailers to copy NB innovations, and what factors drive subsequent copycat performance, thereby taking into account retailers' innovation assortment decisions. As expected, retailers are more likely to copy successful NB innovations, and these copycats indeed perform well in their stores. However, retailers do not only take into account financial considerations. They are especially hesitant to copy heavily promoted NB innovations and those launched by manufacturers with a strong reputation. To enhance copycat performance, retailers should keep prices of the copycat sufficiently below those of the NB pioneer and limit its promotions. Apart from guiding retailers in their copycat decisions, also NB manufacturers can learn from this study how to discourage retailers from imitating their innovations. (C) 2018 New York University. Published by Elsevier Inc. All rights reserved.