Research On Retailer’s Private Label Introduction Strategy From The Perspective Of Supply Chain

With the increasing competition in the retail industry,more and more retailers begin to pay attention to the development and introduction of Private labels.Private labels started late in China,but are growing rapidly.During the outbreak of COVID-19 in 2020,China’s Fast Moving Consumer Goods market grew by only 1.8 percent,while the Private Labelmarket grew by 22.7 percent.Private labels build trust with consumers by associating with lower price,quality commitment and differentiated service,so as to create competitive advantages for retailers.The retailer-manufacturer relationship will become complicated as the retailer introduces a private label.On the one hand,the retailer cooperates with the manufacturer to sell national brands.On the other hand,the retailer takes part in market demand from national brands and competes with the manufacturer.Thus,some strategies in traditional supply chain management,such as pricing,quantitative,sales model and quality positioning,will be changed due to the introduction of a private label,resulting in a series of new scientific problems.When consumers are faced with various brand choices,they often consider factors such as willingness to pay,price,advertising,quality,and preference,then choose brands to maximize their utility.Therefore,starting from the introduction of private labels and consumer utility functions,the introduction of private labels under different circumstances is studied.The main research contents are as follows:Firstly,this paper studies the introduction of private label under two sales modes.Given the certain demand environment,consider a supply chain consisting of a manufacturer and a retailer,the retailer can introduce a private label to compete with manufacturer brands.An agency selling or a reselling model can be used in the supply chain.Then compare the retailer’s and the manufacturer’s decisions and find that for the retailer,it is advantageous to introduce a private label when the product cost is small under wholesale price contracts.While under the agency contract,when consumers’ perceived value for the private label is high,and the product cost is low,the retailer will not introduce the private label.For the manufacturer,the private label introduction strategy always works against him with either contract.For the supply chain,under the agency contract,introducing a private label reduces the overall profit of the supply chain.The retailer is more likely to introduce a private label under the wholesale contract.However,it can achieve Pareto improvements under the agency contract,where the retailer charges an appropriate commission fee.In addition,the retailer is more likely to introduce an economy private label.Secondly,this thesis addresses the manufacturer’s coping strategy problems for the retailer to introduce a private label.Given the certain demand environment,considering advertising in the national brand can increase consumers’ willingness to purchase the national brand,increase the differentiation between the national brand and the private label,and reduce the price competition.The manufacturer’s advertising investment has a curbing effect on the retailer’s private label introduction.Specifically,when the perceived value of the private label is high,the retailer should not introduce a private label when the manufacturer advertises the national brand.The manufacturer’s advertising investment can increase the retailer’s profit,which also allows the retailer to cooperate with the manufacturer.Whether the manufacturer’s optimal advertising investment changes as the retailer introduces a private label depends on advertising efficiency,which increases when its advertising efficiency correlates with the perceived value of the private label.Otherwise,the manufacturer will reduce the optimal advertising investment.Thirdly,this thesis explores the issue of private label introduction when demand is uncertain.Consider a manufacturer in the market,and a retailer sells the national brand to consumers.The retailer obtains market demand information at a specific cost and decides whether to share the market demand information with the manufacturer.In addition,the retailer can also introduce a private label.The main results are as follows:the retailer should introduce a private label only when the cost coefficient is moderate.When the cost coefficient is small,the retailer’s private label quality positioning is gradually higher.When the quality of the private label is comparable to the quality of the national brand,the manufacturer will crowd out of the market.When the cost coefficient is large,the manufacturer’s profitability is low and squeezed out of the market.When the retailer does not introduce a private label,the retailer shares demand information,which reduces the expected profit of the retailer and the supply chain and increases the manufacturer’s expected profit.If the retailer introduces a private label,the manufacturer’s profit will increase when the retailer shares demand information.Nevertheless,unlike the case of introducing a private label,when the cost coefficient is small,the retailer’s sharing of demand information increases its expected profit.The retailer is more willing to share information on high market demand conditions.Finally,this thesis focuses on the problem of private label introduction when the retailer has personalized customization capability.Then analyze the retailer’s introduction strategy and the value of customization.Consider a supply chain consisting of a manufacturer and a retailer.While selling the national brand to consumers,the retailer can also introduce a private label,with the option to implement a bespoke strategy for the private label.The introduction of a private label is always detrimental to the manufacturer.Under some specific conditions,the manufacturer can accept a higher commission fee to allow the retailer to sell the single national brand,thus preventing the private label introduction.The combined use of demand forecasting and preference matching in the customization is not always beneficial.Specifically,when the perceived value of the private label is low,or the product cost is high,and the customization cost is high,the two utilities of demand prediction and preference matching in the customization mode are mutually inhibited.It can also make sound recommendations for product line design.