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Introduction

Retail brands and the The growth in sales and market share of
theft of identity products whose names are owned by retailers
rather than by their suppliers has been one of
the most important phenomena in both distri-
bution channel theory and practice. The
naming of a product can be just a convenient
way of identifying it or it can be part of the
Gary Davies
“branding” of the product. The distinction
between a name and a brand name is difficult
to define but the main benefits to the owner of
something that can be regarded as a brand are
an insulation from price competition and the
existence of a consumer franchise, in other
words of loyal buyers (Davies, 1992a).
Unbranded items tend to be sold on price, as
The author commodities, and this has been the market
Gary Davies is Professor of Retailing at Manchester position of many retailer named products.
Business School, a post sponsored by Post Office Counters, Inherently this is the only practical difference
Manchester, UK. between products sold under retailer and
supplier designated labels. There are, how-
Abstract ever, many examples of retailer named
The marketing of own brands is a feature of modern products selling at a premium over manu-
multiple retailing. Retailers can create brand image by facturer brands. For example Marks &
advertising their own products or creating brand equity in Spencer food products sell at a premium, so
their own stores and transferring such imagery to their large that a shopping basket there costs 35 per
physical products. The costs of branding to the retailer are cent more than one in Tesco or Asda (AGB,
approximately an order of magnitude lower than that to 1996). Nor are suppliers to retailers averse to
the manufacturers of brands sold via those same retailers. marketing their own named products at price
Despite their inherent advantage in managing brands, points below those of retailers’ premium own-
retailers have often chosen to ape the presentation of labels, as in the case currently of Coca-Cola
established brands. Affronted brand owners can sue under Schweppes Beverages with their Cresta
British law for “passing off”, but the protection offered Lemonade brand.
appears limited to the idea of protecting the shopper from For companies such as Benetton or Body
confusion, rather than the brand owner from unfair Shop, it is difficult to identify whether the
competition. Empirical evidence is presented as to how a brand is a retail or product brand name. Many
“lookalike” brand can acquire the image of the clothing retailers including Next, Gap and
established brand, leading to the challenge of a theft of Kookai are probably better regarded as
identity. Whether changes to British law and the different retailer brands because they do not own the
legal situation in other countries takes account of this factories producing their products. But the
phenomenon is questioned. same could be said of sports brands suppliers
such as Nike and Reebok who do not own
much in the way of retail businesses or
production facilities. Rather than try to distin-
guish between retailer owned brands and
supplier owned brands, as if they are some-
how inherently different, it would be more
rigorous, correct and less confusing if the only
distinctions made by practitioners and
academics alike were merely between brands

The fieldwork on the image of shampoo brands was


International Journal of Retail & Distribution Management
conducted by Panayiotis Agapiou as part of his
Volume 26 · Number 4 · 1998 · pp. 140–146 work for an MBA dissertation at Manchester
© MCB University Press · ISSN 0959-0552 Business School in 1995.
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Retail brands and the theft of identity International Journal of Retail & Distribution Management
Gary Davies Volume 26 · Number 4 · 1998 · 140–146

and non-brands. From the customer’s repositioning was not successful. It would
perspective it matters little who owns the appear that retailers do not have to, indeed
brand. Do shoppers know or even care that may be ill-advised to, use media advertising to
the hi-fi brand name Goodmans is now try to create or position a (service) brand.
owned by Comet, the electrical retailer, or Once the brand has been created, it can be
that the Schreiber furniture brand is owned applied to physical products sold in the stores.
and sold exclusively by retailer MFI? What Alternatively the retailer may still choose to
matters to the shopper are the values brand its physical products using the same
associated with the name itself and not techniques as the manufacturer. In one study
necessarily what kind of company owns the covering ten years of advertising by British
name. grocery retailers, advertising to sales ratios
The growth in sales of retailer named ranged from 0.1 to 0.8 per cent (Davies,
products has been linked to the growth in 1990). Interestingly, the most cost-effective
retailer concentration (Davies, 1991; campaign in the study, from Sainsbury, con-
Economist, 1995). As retailers become larger, centrated on their own brands rather than on
and particularly when they centralise their their stores, while the least effective advertis-
purchasing, they create the economy of scale ing, from Asda, was mainly concerned with
needed to interest a supplier in making a promoting the Asda price offer. Sainsbury
product exclusively for themselves and to were using advertising much in the same way
justify the cost of packaging and other unique as any manufacturer to create an image for its
features of their own product. The decision products, while Asda were using television
facing the retailer on how to position the advertising to promote product and price.
product, as a (premium) brand or as a lower Sainsbury’s average expenditure was about
price (commodity) line will be guided by the 0.15 per cent of sales. Given that their own
retailer’s overall strategy. Where the store brand accounted for about half of all sales,
name is itself a brand name based on a quality this represents an advertising to sales ratio for
appeal, it will be easier to position the own- the Sainsbury product brand of 0.3 per cent
brand as a premium product under the same (assuming that all the advertising was
name. The Harrods name for example could designed to promote product rather than
be used on a premium product but the Aldi retailer), a figure that should be compared
name less so. Where the store name with the much higher figures for many manu-
represents a cost cutting/price fighting image, facturer-brands (see Table I).
it will be more difficult for the retailer to use Advertising to sales ratios for manu-
the same name credibly on both premium facturers may be even higher than those
product and shopfront. Hence MFI’s implied by Table I, in that the category sales
purchase and use of the Schreiber and values would include sales of own-label and
Hygena brand names for their own brand unbranded products. Advertising costs for a
furniture. manufacturer are about one to two orders of
magnitude higher than for a retailer who can
Retailer branding both spread its costs over a wide range of

A retailer can brand a product in the same


way as a manufacturer, by the use of advertis- Table I Advertising/sales ratios
ing, packaging and other forms of marketing Product category 1993 1994
communication. Because the retailer is also a
Beer (total) 0.85 0.65
service business with a physical presence in
Carbonated soft drinks 1.28 1.18
front of the shopper it has other ways open to
Coffee 5.92 4.3
it of branding. Shostack (1977) distinguished
Cereals 9.04 9.27
between services and product marketing,
Margarine 4.67 5.94
emphasising the use of tangibles in the
Biscuits 0.63 0.77
marketing of intangible services and
Washing liquids and powders 11.56 13.37
intangibles (adverts) in the marketing of
Indigestion remedies 12.92 21.14
tangible products. Davies and Liu (1995)
Shampoos 14.4 19.15
identified that two tangibles, staff and store
design, are used successfully in repositioning Source: Advertising Statistics Yearbooks 1995/6, Advertising
retail businesses. The use of advertising in Association, London.
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products and use other ways of building brand imitation and the problem of suing a major
equity. Added to the advertising expenditures retail customer.
of the manufacturer are other marketing In Britain a manufacturer can rely on a
costs. For a company such as Procter & variety of legal protection including patent,
Gamble, marketing costs total 25 per cent of trade mark, copyright and registered design in
turnover (Mitchell, 1977). A retailer’s defending its brand equity. In the case of the
“marketing” costs will include staff training imitation of a manufacturer’s brand image the
and store design. The cost to sales ratio of tort of “passing off ” is the most relevant legal
both of these is difficult to estimate. For perspective. Passing off is “a representation
example, Marks & Spencer’s image appears to that a person’s goods or business are
depend substantially on its staff (Davies, connected with the goods or business of
1992b) but what percentage of their staff costs someone else” and “an implied representation
should be considered to be “marketing” made by the use of a name, mark or some
costs? Given that retailers need some staff to other indicia distinctive of someone else’s
be in business at all, the additional cost of business or goods” (Drysdale and Silverleaf,
having better staff and maintaining their 1995). The tort of passing off is based on case
training is unlikely to exceed 20 per cent of law, not statute. What is taken as unaccept-
staff costs, approximately equal to 1 per cent able practice is then defined by successive
of turnover in the case of this one retailer. judgments made in courts sitting under
Similarly, retailers need premises from which British law. Where one company produces a
to trade and the extra cost of an enhanced near perfect copy of the packaging of another,
design (compared to a functional one) varies the issue is clear cut. Where the name and
from sector to sector. But taking a figure of
packaging are similar, such as in the use of
£100 per square metre as a figure for
similar names, identical packaging shape,
enhanced design costs and assuming such
similar colourings, and similar design
design lasts seven years produces an
elements, the issue is less clear.
additional cost to a retailer such as Marks &
Case law relevant to passing off dates from
Spencer equivalent to 0.2 per cent of annual
1580 (Drysdale and Silverleaf, 1995). Some
sales. The total marketing costs of a retailer to
judgments appear to make it clear that
create and sustain brand image could be some
imitation of product presentation could be
1 to 2 per cent of sales, less than 10 per cent of
evidence of passing off. Drysdale and
those of a manufacturer to brand their offer-
Silverleaf quote from one judgment in 1915,
ings. Even allowing for the difference in value
Lord Park, Spalding v. Gamage, “the more
added between manufacturer and retailer
common case is where the representation as
these cost differences are substantial and
implied in the use or imitation of a mark,
favour the retailer in establishing a brand
image. trade name or get-up with which the goods of
another are associated in the minds of the
public”. The term “get-up” is key. It is
The theft of identity defined as “a capricious addition to the article
Shoppers recognise that retailers are not itself – the colour or shape it may be, of the
normally also manufacturers. The majority wrapper or anything of that kind”. In a judg-
believe that retailer brands are made for them ment by Lord Scarman in 1981 quoted by
by the manufacturers who also produce Drysdale and Silverleaf (1995) further clarifi-
traditional brands (PLMA ,1984). Retailers cation of the term is given:
Other descriptive material such as slogans or
often do little to discourage this perception
visual images . . . can lead the market to
even to the extent of copying the physical associate with a plaintiff ’s product.
appearance of a manufacturer’s product when
developing their own. The issue of retailer Three elements need to exist to sustain a case
“copycat” products has become a major for passing off, damage (e.g. loss of sales),
concern (Rafiq and Collins, 1996). In the past goodwill (the appropriation of the reputation
manufacturers would think little of litigating of the plaintiff’s product) and deception
against a retailer or indeed another manu- (intent to deceive the purchaser) (Howard,
facturer who copied their product. Two 1994). If a retailer’s own-brand imitates an
problems confront manufacturers today, a established supplier’s brand, then it risks an
lack of clarity in the law relevant to product action for passing off on all three key points.
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Getting the agreement of the courts is never- In 1994 modifications were made to the
theless no easy matter. In one judgment the legislation governing trade marks. It became
plaintiff, the manufacturer of Tetrion ready easier for a company to protect its packaging
mixed filler, sued a manufacturer of a similar design but changes in the law did not go as far
product, sold in an identically shaped tub as brand manufacturers wanted. One concern
with near identical diagrams demonstrating for the then Conservative government was
how the product was to be used. If the court whether the customer needed protection
can be shown that a case for passing off exists, against the retailer’s imitation of established
the business position is frozen as at the time brands. Such concern highlights an interest-
prior to the alleged infringement. In other ing point, whether passing off is a tort
words the alleged offending product has to be concerned with consumer protection or unfair
withdrawn or at least relaunched in a new competition. Henderson (1997) points out
form pending the outcome of the eventual that in other European countries, whose legal
hearing. In this case the defendants appealed systems differ from those in Britain,
against the decision that a case existed. In the competition law offers the brand owner
Court of Appeal evidence was heard of protection from imitative products. Even in
market research outside one store selling both countries such as Australia and New Zealand
products. Respondents were asked whether where the system is British law, specific
they had purchased ready mixed filler. If they legislation on competition law has been
said yes they were asked which brand. A enacted that gives better protection than in
number were found who had purchased the Britain itself. Manufacturers have pressed for
similar legislation in the UK but the view
lookalike product but who said they had
taken in 1994 by government was that the
purchased Tetrion. To a marketing person
consumer benefited from retailers’ abilities to
such evidence would have been taken as proof
imitate established brand lines at lower prices
that the lookalike was deliberately intended to
and that this was the dominant issue.
misrepresent itself to the consumer. The use
of similar get-up could not be accidental. The
judges took a different view. Placed side by Empirical evidence
side the two products were in their view
If a different view is taken, that manufacturers
incapable of being confused. They had for
deserve protection from imitative brands, how
example different names and the names were
close should the imitation be before an
clearly marked. The judges concluded that
offence can be judged to exist? Some stan-
there was not a serious case to be tried (Fleet
dardisation of “get-up” and presentation is
Street Reports, 1980). The significance of
inherent in product marketing. Beer is sold in
their decision is that for passing off to be even cans of the same size and shape. Different
considered as an issue, the get-up of the manufacturers of pet food have used the same
alleged offending product has to be very background colours in their labelling to
similar to that of the established line. indicate different “flavours”, green for rabbit,
Such judgment tends to run contrary to golden yellow for chicken. Bread is made in
the evidence as to how consumers make shapes denoting its style, farmhouse, cobs,
judgements about the products they pur- sandwich tin etc.
chase. Evidence suggests that shoppers rely Two different empirical approaches have
heavily on extrinsic cues, in other words a been used to assess the level of confusion
product’s get-up, in evaluating products among shoppers when faced with lookalike
(Richardson et al., 1994). The quickest and products in addition to that mentioned
easiest way for a retailer brand to establish an earlier. In one the respondent is exposed to
image for quality is to ape the get-up of an brief glimpses of competing lines and the
established brand, in other words to steal the minimum time needed to discriminate
identity of the supplier’s brand. To do so it is correctly between them is measured
not necessary to copy the established prod- (Kapferer, 1995). In another respondents
uct’s presentation, merely to ensure that the were asked in a questionnaire study whether
cue pattern the shopper perceives when glanc- they experienced any confusion (Rafiq and
ing along a supermarket shelf is similar Collins, 1996). Both approaches focused on
enough to evoke the imagery created by the the issue of confusion to shoppers rather than
imitated product. on the theft of identity from the
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Gary Davies Volume 26 · Number 4 · 1998 · 140–146

manufacturer. Both found that confusion can As far as is known to the author, neither
exist. However neither study examined the Sainsbury nor Tesco had advertised their
problem from the perspective of unfair products. Both suppliers had spent heavily in
competition, particularly whether promotion and their image profiles reflected
lookalike brands can appropriate the identity the content of their television advertising. It
of the leading brands with which they appears more than likely that the image of the
compete. retailer’s own brands derived from those of
To test the proposition that it is possible to their supplier’s brands. The message to the
appropriate the identity of a brand without customer could be “here is our version at a
near duplication of the product get-up, a cheaper price” or, more damaging, “here is
survey was conducted among users of hair our version made for us by the same supplier
shampoo. Two well known brands, Timotei and at a cheaper price”. British law at present
from Unilever and Vidal Sassoons’ Wash and is unable to provide protection against such
Go were compared with Sainsbury’s “theft of identity”.
“Frequent Use” and Tesco’s “2 in 1”. The
presentation of Frequent Use and Timotei
Discussion and conclusion
were similar. The presentation of Wash and
Go and 2 in 1 were similar. Similarities were The cost to a retailer of branding is inherently
mainly in the shape of each pair of bottles and lower than the cost to its suppliers. A retailer
in the choice of packaging colours. Neither need not invest in media advertising to create
similarity in the author’s opinion would have a brand image as its image as a service brand
been deemed close enough to provide is created within its own stores by tangibles
grounds for a successful action for passing off, such as staff and design. The costs involved
as the presentation was not “confusing”. here are likely to be lower than by using media
However, and again in the author’s opinion, advertising. Even if the retailer chooses to
both retailer products owed much to the build its brand through media advertising of
original manufacturer’s versions in their its own named products, because it can
choice of packaging shapes, colours and spread the cost across a wide range of
artwork. They were clearly derivatives rather products, its branding costs are again likely to
than original creations. be relatively low. Even if the retailer opts for
Adult respondents outside the two super- both routes to create brand image its costs are
markets were approached at random and were likely to be an order of magnitude lower
shown the containers of two products, one relative to those of a supplier. A retailer is then
from each pair. The sample represents there- in an advantageous position to create and
fore a convenience sample of shoppers who market its own brands. It needs no further
would have been exposed to the issue under advantage.
examination. They were asked the question, The position of the supplier is weakened
“If product _________ came to life as a further if the retailer chooses to ape the get-up
cartoon character, what do you think its of the supplier’s brand. Being seen as a copier
personality would be like?” Such a question
was aimed at identifying the symbolic associa-
tions of each “brand” (Friedman, 1986; Szaly Table II Semantic clusters deduced from response data
and Deese, 1978). Responses from 50
Semantic cluster Consumer responses
individuals were recorded and analysed for
each pair. Similar responses were grouped Natural River, natural, healthy, green, “free bird”
into semantic clusters by the author for the Gentle Gentle, soft, easy going, calm, mild, light
purpose of presentation using judgement of Relaxed Relaxed, peaceful
the similarity of the words used by respon- Quiet Quiet, shy, lonely, boring
dents or where the words used appeared to Conservative Conservative, classic
represent differences in construct (see Table Active Active, sporty, dynamic, energetic,
II), and to allow comparison across the four adventurous, athletic
brands (see Table III). Quite clearly the Sociable Sociable
personality of Timotei and Frequent Use Young Young
were very similar and very different from Cheap Cheap
Wash and Go and 2 in 1 which in turn were Happy Happy, alive, smiling
also very similar. Curious Curious

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Table III Frequency of meaning responses

No. of responses Percentage of responses


Sainsbury’s Wash Sainsbury’s Wash
Semantic Frequent & Tesco’s Frequent & Tesco’s
Cluster Timotei Use Go 2 in 1 Timotei Use Go 2 in 1
Natural 15 9 0 2 20.83 16.67 0 3.23
Gentle 25 18 2 4 34.72 33.33 2.44 6.45
Relaxed 9 3 0 0 12.5 5.56 0 0
Quiet 12 17 0 2 16.67 31.48 0 3.23
Conservative 9 7 0 0 12.5 12.96 0 0
Active 0 0 45 30 0 0 54.88 48.39
Sociable 0 0 6 3 0 0 7.32 4.84
Young 0 0 6 6 0 0 7.32 9.68
Cheap 0 0 0 3 0 0 0 4.84
Happy 2 0 21 12 2.78 0 25.61 19.35
Curious 0 0 2 0 0 0 2.44 0
Total 72 54 82 62 100 100 100 100

of another’s initiatives may ultimately harm damaging commercially. Courts need to be


the retailers’ image or, alternatively, unless able to consider the theft of identity as well as
suppliers can convince the public that copying the theft of design, formulation and name.
is to be discouraged, the retailer who adopts Finally there is a moral issue to be
this approach may be seen as acting in the addressed. Some retailers are already con-
interests of the shopper. There was a sidering whether their long-term interests are
perceived reluctance in Government to best served by imitating suppliers’ brands. If
tighten the law on trade marks when this was the public becomes conscious of the concept
revised in 1994 as much as suppliers had of theft of identity (suppliers are not averse to
hoped, and this resistance could well have sensitising them) then retailers who are
been due to a belief that retailer-brands selling currently promoting the cost advantage of
at a discount against supplier brands are their lookalikes may find that their customers
somehow in the consumer’s interest. may wonder about the values of the retailer
The issue of consumer interest is central to and other possible mis-representations that
the tort of passing off. Some sources view may exist. Social values are about where a
society draws a line in the sand on issues as
passing off as part of consumer protection
grey as passing off, indicating that one thing is
law, ensuring that the public are not deceived.
acceptable and another not. There may be a
Others see it as part of competition law, to
financial benefit to the customer due to the
ensure fair competition in the marketplace.
retailers’ theft of identities that manufacturers
There is a conflict of interest between the two
have expensively built, but is this a justifi-
perspectives and one that needs to be
cation for that action? As the power of
resolved.
retailers has grown, legislation to ensure fair
More generally suppliers need to ensure
competition between retailer and supplier
that public opinion does not swing totally
may not have changed enough. In other
behind the retailer. A perception that heavily countries, similar issues exist to those in
advertised (supplier) brands represent poor Britain but often more stringent legislation on
value by comparison with retailer brands competition exists, law that should be
could well exist, and, if so, this needs considered more generally.
addressing.
The application of the tort of passing off by
the courts appears to be out of step with the References
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