The role of store brand positioning for appropriating supply chain profit under shelf space allocation

Chia Wei Kuo, Shu Jung Sunny Yang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We consider a retailer's decision of developing a store brand (SB) version of a national brand (NB) and the role that its positioning strategy plays in appropriating the supply chain profit. Since the business of the retailer can be regarded as selling to NB manufacturers the shelf space at its disposal, we formulate a game-theoretical model of a single-retailer, single-manufacturer supply chain, where the retailer can decide whether to launch its own SB product and sells scarce shelf-space to a competing NB in a consumer good category. As a result, the most likely equilibrium outcome is that the available selling amount of each brand is constrained by the shelf-space available for its products and both brands coexist in the category. In this paper, we conceptualize the SB positioning that involves both product quality and product features. Our analysis shows that when the NB cross-price effect is not too large, the retailer should position its SB's quality closer to the NB, more emphasize its SB's differences in features facing a weaker NB, and less emphasize its SB's differences in features facing a stronger NB. Our results stress the importance of SB positioning under the shelf-space allocation, in order to maximize the retailer's value appropriation across the supply chain.

Original languageEnglish
Pages (from-to)88-97
Number of pages10
JournalEuropean Journal of Operational Research
Volume231
Issue number1
DOIs
Publication statusPublished - 16 Nov 2013

Bibliographical note

Funding Information:
The authors are grateful to Robert Dyson (editor) and three anonymous referees for helpful comments that improved the paper. This research was supported by National Science Council of Taiwan (NSC 98-2410-H-002-007 ), Essex Business School Research Committee Award, and University of Melbourne Faculty Research Grant.

Keywords

  • Competitive strategy
  • Game theory
  • Marketing-operations interface
  • Private label positioning
  • Shelf space management
  • Supply chain management

Cite this