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National brands in hard discounters: Market expansion and bargaining power effects

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  • Bonnet, Céline
  • Bouamra-Mechemache, Zohra
  • Klein, Gordon

Abstract

In this paper, we analyze the strategic role of the recent introduction of national brand products by hard discounters in the French market and its impact both at the retail and manufacturer levels. We use a structural econometric model of vertical relationships that takes into account the competition between both mainstream retailers and hard discounters, and between national brands and private labels. We apply this model to the French dairy dessert market, which is characterized by a high penetration of private labels and a high concentration at the manufacturer and retail levels. Using a counterfactual analysis, we show that the introduction of national brands by hard discounters does not only act as means to attract different consumer groups and extend their market share. In addition and even maybe more important, we also show that the introduction of national brands by hard discounters serves as a means to improve their bargaining positioning with respect to their private label providers.

Suggested Citation

  • Bonnet, Céline & Bouamra-Mechemache, Zohra & Klein, Gordon, 2020. "National brands in hard discounters: Market expansion and bargaining power effects," CAWM Discussion Papers 113, University of Münster, Münster Center for Economic Policy (MEP).
    • Handle: RePEc:zbw:cawmdp:113
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    References listed on IDEAS

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    1. Michaela Draganska & Daniel Klapper & Sofia B. Villas-Boas, 2010. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Marketing Science, INFORMS, vol. 29(1), pages 57-74, 01-02.
    2. Sergio Meza & K. Sudhir, 2010. "Do private labels increase retailer bargaining power?," Quantitative Marketing and Economics (QME), Springer, vol. 8(3), pages 333-363, September.
    3. Vroegrijk, Mark & Gijsbrechts, Els & Campo, Katia, 2016. "Battling for the Household's Category Buck: Can Economy Private Labels Defend Supermarkets Against the Hard-Discounter Threat?," Journal of Retailing, Elsevier, vol. 92(3), pages 300-318.
    4. Bonnet, Céline & Bouamra-Mechemache, Zohra, 2020. "Empirical methodology for the evaluation of collusive behaviour in vertically-related markets: An application to the “yogurt cartel” in France," International Review of Law and Economics, Elsevier, vol. 61(C).
    5. Narasimhan, Chakravarthi & Wilcox, Ronald T, 1998. "Private Labels and the Channel Relationship: A Cross-Category Analysis," The Journal of Business, University of Chicago Press, vol. 71(4), pages 573-600, October.
    6. Hökelekli, Gizem & Lamey, Lien & Verboven, Frank, 2017. "The battle of traditional retailers versus discounters: The role of PL tiers," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 11-22.
    7. Kathleen Cleeren & Frank Verboven & Marnik G. Dekimpe & Katrijn Gielens, 2010. "Intra- and Interformat Competition Among Discounters and Supermarkets," Marketing Science, INFORMS, vol. 29(3), pages 456-473, 05-06.
    8. Lourenço, Carlos J.S. & Gijsbrechts, Els, 2013. "The impact of national brand introductions on hard-discounter image and share-of-wallet," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 368-382.
    9. ter Braak, Anne & Deleersnyder, Barbara & Geyskens, Inge & Dekimpe, Marnik G., 2013. "Does private-label production by national-brand manufacturers create discounter goodwill?," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 343-357.
    10. Koen Pauwels & Shuba Srinivasan, 2004. "Who Benefits from Store Brand Entry?," Marketing Science, INFORMS, vol. 23(3), pages 364-390, July.
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    Cited by:

    1. Gordon Jochem Klein & Ralph Bernd Siebert & Ralph Siebert, 2024. "Why Do Prices Differ Across Stores? Differential Competition Environments and Their Price Impacts," CESifo Working Paper Series 11344, CESifo.
    2. Keller, Kristopher O. & Dekimpe, Marnik G. & Geyskens, Inge, 2022. "Adding budget and premium private labels to standard private labels: Established empirical generalizations, emerging empirical insights, and future research," Journal of Retailing, Elsevier, vol. 98(1), pages 5-23.

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    More about this item

    Keywords

    Structural Model; Counterfactual Analysis; Hard Discount; The Role of Private Labels and National Brands;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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