Journal of Business Research 66 (2013) 6066

Contents lists available at ScienceDirect

Journal of Business Research

Analyzing the intensity of private label competition across retailers

John Dawes , Magda Nenycz-Thiel
Ehrenberg-Bass Institute for Marketing Science, University of South Australia, GPO Box 2471 Adelaide SA 5001, Australia

a r t i c l e

i n f o

Article history:
Received 1 June 2010
Received in revised form 1 November 2010
Accepted 1 February 2011
Available online 26 August 2011
Keywords:
Private label
Own label
National brand
Competition
Duplication of purchase
Price promotions

a b s t r a c t
Examining how buyers of one private label (PL) in a product category also cross-purchase the private labels of
competing retailers in the same category is the focus of this study. Understanding consumer cross-purchasing of
PLs is important to retailers, who use PLs as one tactic to differentiate from other retailers; and important to
manufacturers, who compete against PLs. A higher level of PL cross-purchasing indicates heightened competitive
intensity among the PLs of rival retailers. Results across 27 categories indicate that PLs compete against national
brands (NBs) within-store, but also compete against the PLs of other retailers across stores. Heightened
competition among the PLs of different retailers occurs in categories with higher purchase frequency; in which
the average PL price is well below the average NB price; and in categories with higher levels of manufacturer
brand price promotions.
2011 Elsevier Inc. All rights reserved.

1. Introduction
Companies generally brand their products with a national brand
label or a private label. The owner of a national brand (NB) is generally
a producer. Retailers, wholesalers, or distributors own private-label
(PL) brands, which are also known as home brands, store brands or
own label brands (Bushman, 1993; De Wulf, Odekerken-Schrder,
Goedertier, & Van Ossel, 2005). Manufacturers, whom often also
produce the national brands that the PLs compete against, produce
the PLs. From a marketing mix point of view, the main differences
between the two types of brands are advertising support, distribution
and price. NBs tend to obtain more advertising support at the national
level than do PLs. While retailers who own PLs do advertise
extensively, the advertising support is spread over all the products
in the store, rather than being for the retailer's own specic PL. PLs
tend to have restricted distribution compared to NB's because they
sell in one retail chain (Chen, Narasimhan, & Dhar, 2010). By contrast,
NBs sell in multiple retail chains. While some retailers such as Tesco in
the UK have expanded their retail presence such that the availability
of their PL is arguably comparable to NBs, in general PLs are less
widely available than NBs. Finally, the majority of PLs are cheaper than
NBs. Both brand types appear next to each other on retail shelves and
therefore they compete for consumers choice.

The authors thank three anonymous reviewers whose comments greatly improved
the paper.
Corresponding author. Tel.: + 61 8 8302 0592; fax: + 61 8 83020442.
E-mail addresses: John.Dawes@marketingscience.info (J. Dawes),
Magda.Nenycz-Thiel@MarketingScience.info (M. Nenycz-Thiel).
0148-2963/$ see front matter 2011 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2011.07.023

PL brands have witnessed signicant growth in the past two

decades, far outpacing the growth of NBs (Baltas & Argouslidis, 2007;
Lincoln & Thomassen, 2008). PL growth is particularly strong in Europe
(Euromonitor, 2007). In the UK, the focus of this study, grocery market
share of PLs grew from 39% of sales in 2008 to 41% in 2010 (Marian,
2010). PL share is also growing fast in the US (Loechner, 2010).
Retailers usually carry several tiers of PLs to cover the spectrum of
consumer needs: from value products that compete mostly on price,
to premium products that offer the highest quality and unique lines at
prices equal or higher than NBs (Kumar & Steenkamp, 2007). All PLs
compete against NBs and, given that people shop at different stores,
they compete against the PL brands of other retailers. Therefore,
research into how PLs compete is important for NB managers, but also
managers of PL brands and retailers in general.
In order to understand the full picture of PL competition, the study
examines competition between PLs and NBs within a store, as well as
the competition between the PLs of competing stores. The reason for this
dual focus is that consumers distribute their purchases across different
stores over a time period such as six months or a year (Uncles &
Hammond, 1995). The present study analyzes consumer purchase
records to see how, in a given category, PLs and NBs share consumers
with each other. Specically, the study examines which brands the
buyers of one retailer's PL buy, when they re-purchase from the same
category (either at the same retailer, or at another retailer). The study
examines the extent to which buyers of one retailer's PL switch to NBs if
they visit another store, or stick to PLs at the rival chain. The analysis
uses multiple categories to identify category characteristics that
heighten or lessen the tendency to cross-purchase PL brands.
This study provides important contributions to the marketing
literature. Even though PL competition has been an area of research

J. Dawes, M. Nenycz-Thiel / Journal of Business Research 66 (2013) 6066

for many years, the majority of studies focus on shopper behavior at

just one retail chain. A single-chain focus hampers the ability to detect
the full extent of competition between all NBs and all PLs. The present
study considers shopping behavior across many retail chains, which
allows a fuller picture of competition between PLs and NBs. The
implications from this research are important for marketers of PLs and
NBs. First, retailers stock PLs to create a point of differentiation from
other retailers (Ailawadi, Neslin, & Gedenk, 2001; Corstjens & Lal,
2000) and build customer loyalty. If consumers engage in crossretailer PL buyingbuying the PLs of multiple retailers in the same
category in a time periodthis suggests retailers are less successful in
their differentiation strategy. In addition, identifying NB-PL competitive
market structure will show whether PL brands take their sales primarily
from NBs, or from other PLs. The analysis can therefore clarify the real
threat PLs pose to NB manufacturers in a selected category.
Organization of the paper is as follows. The next section discusses
the literature on PL competition and segmentation. Description of the
data and analysis follows the literature review. Results and discussion
come after the analysis. Implications, limitations and areas for future
research conclude the paper.

61

Table 1
Overview of major ndings concerning PL / NB competition.
Main ndings

Source

High price substitutability between NBs

and PLs leads to higher private label
brand shares and retailer prots.
Categories where PLs are most likely to
succeed are those with many NBs, as an
introduction of a PL does not have large
negative impacts on retailer prots from
NBs.
Consumers cross-buy NB's and PL's
approximately in-line with their
respective market shares
PLs compete most effectively when they
target the leading NB.

Raju, Sethuraman, and Dhar (1995),

Morton and Zettelmeyer (2004)

Second tier NBs suffer the most in the

PL / NB competition
PL share is lower in categories with high
NB advertising expenditure
Price cuts on NBs hurt PLs more than PL
price cuts hurt NBs

Raju et al. (1995), Morton and

Zettelmeyer (2004)

Uncles and Ellis (1989), Ellis and

Uncles (1991), Bound and Ehrenberg
(1997)
Sayman, Hoch, and Raju (2002),
Sethuraman and Srinivasan (2002),
Morton and Zettelmeyer (2004),
Pauwels and Srinivasan (2004), Kumar
and Steenkamp (2007)
Hoch and Banerji (1993), Dhar and Hoch
(1997), Morton and Zettelmeyer (2004)
Blattberg and Wisniewski (1989),
Sethuraman (1996), Cotterill and Putsis
(2000)

2. Background
2.1. How do private labels compete?
Consider a consumer in a retailer's store making a purchase. The
consumer can usually choose among a range of NBs and PLs offered by
that specic retailer. Competition within the store is therefore
principally NBs versus PLs. Furthermore, PL brands face restricted
availability. For example, Tesco private label cola is not available in
Sainsbury, but NBs such as Coke and Pepsi are available in almost every
retailerall major chains as well as independents and convenience
stores. Therefore, restricted availability should constrain the tendency of
the PL buyers of one retailer to also buy the PL brands of other retailers.
Indeed, examinations of the competitive environment for PLs generally
focus on the competition between PLs and NBs, not PLs against other PLs
(e.g., Parker & Kim, 1997; Quelch & Harding, 1996; Steiner, 2004).
Table 1 summarizes prominent studies of PL competition.
While PL brands face restricted availability, evidence shows that
shoppers in frequently bought categories shop at multiple stores in a
specied time period (Ellis & Uncles, 1991; Uncles & Ellis, 1989; Uncles &
Hammond, 1995). Therefore, consumers encounter the PLs of different
stores at different times. The result is that consumers buy multiple PL
brands (of various retailers) just as they do for NBs. Three studies
(Bound & Ehrenberg, 1997; Ellis & Uncles, 1991; Uncles & Ellis, 1989)
examined the buying patterns of PL and NB consumers, and found that
PLs share customers with NBs and also with other PLs, approximately
in-line with their respective market shares. However, there are several
reasons why further investigation could enhance the state of knowledge
about PL-NB competition. First, studies such as Bound and Ehrenberg
(1997) reported aggregated results for PL brandssuch aggregation
might mask a tendency for PLs to compete more intensely in some
categories and less so in others. A category-by-category analysis could
therefore reveal specic categories in which PLs compete especially
intensely. Second, PLs have continued to grow and evolve over the past
ten years (Kumar & Steenkamp, 2007), therefore the extent to which
consumers cross-buy various PL labels may have changed. Third, retailer
concentration is now very high in markets such as the UK, with the
ve leading retailers accounting for over 50% of all grocery sales
(Euromonitor, 2007). Higher retail concentration could lead to more
private-label proneness because larger, consolidated retailers can invest
in PLs more than would occur with a fragmented retail sector with many
smaller operators. Finally, the rise of retailer loyalty programs
(Liu, 2007; Meyer-Waarden & Benavent, 2006; Uncles, Dowling, &
Hammond, 2003) could result in more shoppers being private-label
prone because retailers can use those programs to specically promote

their own PLs (Nies & Natter, 2010). The paper now briey discusses
private-label proneness and contextualises research on that topic in
relation to the present study.
2.2. The private-label prone shopper
As the term suggests, a private-label prone shopper buys PL brands
to a greater extent than would be expected given the market share of
those PL brands. Identifying the characteristics of the PL-prone shopper
is one of the oldest research topics in the PL literature, with 26 studies
published between 1965 and 2004 (Sethuraman, 2006). A rationale for
academic interest in this topic is that since PLs tend to be low priced, the
people who buy them comprise a price sensitive segment. As Baltas
(1997, p. 315) states, the most obvious benet to consumers afforded
by own brands is lower prices. Indeed, in the majority of the studies in
this area, consumers who buy PLs exhibit higher price sensitivity (e.g.,
Ailawadi et al., 2001; Baltas, 1997). However, there is also strong
evidence that those who buy PLs are equally quality sensitive (e.g., Batra
& Sinha, 2000). Several studies (Coe, 1971; Fitzell, 1982) posit that low
household income is a likely indicator of PL proneness. However,
empirical results show the counterintuitive oppositethat lower
income customers buy fewer private-label brands. The reason stated
for this result is that consumers with lower income usually have lower
education levels and stronger price-quality associations, leading to
greater trust in national brands and more receptivity to national brand
advertising. Sethuraman and Cole (1999) nd that those with middle
income are most likely to buy PLs. The mixed results about PL
segmentation lead to an opinion in the literature that the direct effect
of demographics and psychographics on PL usage is relatively weak
(Ailawadi et al., 2001; Baltas & Argouslidis, 2007).
The private-label prone shopper concept implies heightened
competition between the PLs of rival retailers. However, the concept
does not distinguish between propensity to buy many private-label
products from the same retailer, versus propensity to buy the PLs of
different retailers in a time period, such as a year. Specic investigation
of shopper propensity to buy the PLs of different retailers will assist in
understanding the broader idea of private-label proneness, as well as PL
competition among retailers.
Therefore, the present study builds on these following points:

Some consumers at least, may be private-label prone;

PL proneness may manifest not only in a heightened tendency to
buy PLs across different categories from one retailer, but to unduly
purchase PLs from any retailer the shopper visits;

62

J. Dawes, M. Nenycz-Thiel / Journal of Business Research 66 (2013) 6066

PL proneness may be more prevalent in certain product categories than

in others, thus there is a need for category-by-category examination.
These points lead to two research questions:

RQ1. Do PL buyers at retailer A have a heightened tendency to also

buy the PL brands of retailers B, C, etc. in a time period such as a year?
RQ2. What category characteristics inuence the intensity of crossretailer PL competition?
3. Method
The method is to analyze the cross-purchasing of PLs and NBs over a
specied time period such as a year. The cross-purchase analysis
identies if buying one PL increases the tendency to buy a different
retailer's PL in the same category. While the focus of the study is PL
brands, the analysis includes NBs as a comparison. The overall approach
is purchase duplication analysis: the extent to which buyers of one
brand also appear as buyers of another brandi.e., are duplicated in the
other brand's customer basein a time period.
Calculated rst is the proportion of consumers who buy a brand in
a time period (i.e., the brand's penetration). Consumers buy multiple
brands in a time period (Ehrenberg & Goodhardt, 1970), therefore a
proportion of the buyers of brand A also buy brand B, C, D and so on.
The proportion of A buyers who also buy brands B, C, D is the purchase
duplication for these respective pairs of brands. A widespread
empirical generalization is that the proportion of A buyers who also
buy brands B, C, D generally falls in-line with the brand size of B, C, D.
That is, a brand will share more of its customers with bigger brands
than with smaller brands (Ehrenberg, Uncles, & Goodhardt, 2004).
Likewise, the average proportion of any brand's buyers who also buy
any particular brand such as B should be similar.
The duplication analysis highlights exceptions to the general
purchase-sharing pattern, identifying groups of brands that compete
more or less intensely against each other than they do with the rest of
the market. A partition is the term given to such groups (e.g., Kalwani
& Morrison, 1977). Recognizing partitions is important, because sales
gains by one brand in a partition will come unduly at the expense of
other brands in the partition. The present study utilizes the purchase
duplication approach to examine how buyers of PLs and NBs also buy
other PLs and NBs in the same category, and to identify if PL brands
form a competitive partition.

A statistic called the duplication coefcient (D-coefcient) identies

the extent of competitive intensity. The duplication coefcient is
calculated as average brand duplication / average brand penetration. A
duplication coefcient of 2, for example, estimates the expected
proportion of A buyers who also buy B, is 2 times the penetration of
brand B. To take the example further, consider four brands A, B, C, and D.
The rst two brands (A, B) are PLs of competing retailers. Brands C and D
represent NBs. Next, consider for illustration that the D-coefcient for
the pair of PL brands (% of A buyers who buy B, and vice versa) is 4.0. The
D-coefcients for PL brand buyers who also buy NBs (% of A buyers who
buy C, & D; the % of B buyers who buy C, & D; and vice versa) is 2.0. The
D-coefcient within the group of PLs is twice that of the gure for PL
buyers who also buy NBs. The higher coefcient for PL indicates
competition between the group of PLs is two times stronger than the
competition between the PLs and the NBsgiven the market shares of
all the respective brands. Note that if a retailer offers multiple PLs in the
form of sub-brands (such as Tesco, Tesco Finest and Tesco Value), the
duplications between the parent PL and its sub-brands are not included
in the analysis here. The reason for not including the PLPL sub-brand
duplications is that they would inate the estimate of PL cross-buying.
The focus of the study is buying PL across retailers, not within a single
retailer.
4. Data, analysis and results
The analysis covers 27 categories over a 52-week time period. The
categories are diverse covering food, cleaning, pet care, over the
counter pharmaceuticals, and personal care. The categories also vary
considerably in terms of purchase frequency, ranging from 50
occasions per year for bread, to three occasions per year for batteries,
pepper and cough liquid. Diversity in buying frequency adds
generalizability to the results. TNS provided the data from its UK
Superpanela 15,000-member panel in which consumers electronically record their purchases. The panel is geographically and
demographically representative of the UK shopper population. All
27 categories in the analysis contain multiple NBs, as well as the PLs of
different retail chains. Using data comprising purchases across
multiple retailers is a major advantage over other data sets used in
private-label research, which usually cover only one retailer (e.g.
Hansen, Singh, & Chintagunta, 2006). Some previous studies focus on
specic geographic areas to enable comparison across retailers with
limited geographic presence (e.g., Ellis & Uncles, 1991). This study
analyzes retailers with national distribution coverage.

Table 2
Purchase duplication table for colas. TNS data, UK, one-year period.
% Who also bought
NB
Pen
NB

PL

Dt Coke (D)
Pepsi (P)
Coca Cola (CC)
Coke Zero (CZ)
Ave. duplication
Ave. penetration
D-coefcient
Tesco (T)
Asda (A)
Sainsbury (S)
Morrisons (M)
FreewayLidl (F)
Tesco value (TV)
Ave. D.
Ave. pen.
D-coefcient

35
33
34
14

9
6
4
3
3
2

D
52
45
70
44.9
29.0
1.5
48
48
48
45
39
41
39.5
29.0
1.4

PL
P

CC

CZ

TV

48

44
47

28
26
21

12
14
10
14
6.3
4.5
1.4

9
11
8
9

5
5
4
6

3
5
3
4

3
5
4
4

3
4
2
4

22

(DNBPL)
14
10

10
12
9

8
12
8
12

45
61

51

50
55
49
59
54
49

(DNBNB)
40
42
41
42
41
34

Pen. = Penetration, D = Average Duplication/Average Penetration.

a
The PLPL result does not include duplications between Tesco and Tesco value.

(DPLNB)

22
20
24
19
18
22

32
36
33
25
a

14a
4.5
3.1

18
28
25
10

12
10
6

(DPLPL)

11
9

10

4
4
8
8

J. Dawes, M. Nenycz-Thiel / Journal of Business Research 66 (2013) 6066

Preparing a duplication table is the rst step of analysis. Table 2 is

an example. Splitting the brands into two groups, NBs and PLs, is the
next step. The purchase duplications within and across each of the
two groups form four quadrants: NB buyers who also buy other NBs;
NB buyers who also buy PLs; PL buyers who also buy other PLs; and PL
buyers who also buy NBs. Brands are ordered by market share within
each group. Using this tabular method identies the competitive
interplay between and within the two brand groups, PL and NB.
To clarify the meaning of the table, consider Diet Coke, the biggest NB
in the cola category. Reading across the row for Diet Coke, the table
shows that over a one-year period 35% of consumers bought Diet Coke.
Of those Diet Coke buyers, 48% also bought Pepsi, 44% also bought Coca
Cola, down to 3% also buying Freeway and 3% also buying Tesco Value.
The gures in that row represent the purchase duplications for Diet
Coke, and they follow a pattern called the Duplication of Purchase Law
(Ehrenberg et al., 2004), namely that brands share their customers with
competing brands in-line with the size (penetration) of those
competing brands.
Turning to the PL brands more specically, of the consumers who
bought Tesco cola, 48% also bought Diet Coke, 50% bought Pepsi, and
smaller proportions bought the other national brands. Tesco cola buyers
also bought other PL brands, for example 22% also bought Asda, 14%
bought Sainsbury and so on. The key point is that the buyer of a focal
brand has an expected probability of buying any other particular brand,
with the size (penetration) of the other brand largely dictating that
purchase probability (Ehrenberg, 2000). However, are shoppers who
buy the PL of one retailer more likely to buy another retailer's PL than
would be expected, given the penetrations of those other PLs? The
purchase duplication analysis outlined below answers that question.
Duplication (D) coefcients for the PL and NB brand groups identify
whether buyers of one PL unduly buy the PLs of another retailer. Table 1
indicates these D-coefcients in bold. There are two D-coefcients for
the purchase duplication within each brand groupone for PL (DPLPL),
and one for NB (DNBNB). There are also two D-coefcients showing the
purchase duplication between the brand groups (DPLNB, DNBPL). For the

63

Cola category, the D-coefcient for PLs is 3.1. The gure of 3.1 indicates
that the proportion of PL brand buyers who buy another PL in a different
store is 3.1 times the average penetration for the group of PLs sold at
different stores. In contrast, the D-coefcient for PL buyers to also buy
NBs is 1.4, in other words 1.4 times the penetration of NBs. The higher
D-coefcient for PLs indicates stronger competition between the group
of PL brands than should occurthe rate at which PL buyers buy other
PLs is 2.2 times (1.4 2.2 = 3.1) higher than expected, given the
respective penetrations of the PLs and the NBs. The study uses a
permutation method to calculate the statistical signicance of partitions
as outlined in Appendix A.
Results across the 27 categories (see Table 3) indicate that
heightened competition between the PL brands is common. In some
other categories the PL brands exhibit lessened competitionthat is, a
buyer of one retailer's PL is less likely to buy the PL of another retailer
than would be expected given the overall market share of the PLs in the
category. These ndings suggest there could be category characteristics
that help explain the intensity of competition seen among the private
labels from different stores.
5. Explaining the variation in PL competitive intensity
Examined next are three factors that could account for some of the
varying intensity of PL competition across retailers. The three factors
are category purchase frequency, the price relativity between PLs and
NBs in the respective category, and the extent of manufacturer brand
promotions.
Firstly, categories with higher purchase frequency are more likely to
show PL partitioning. Examples of more heavily bought categories are
colas and cereal, compared with less frequently bought products such as
toothpaste or mustard. A higher rate of category purchasing corresponds to greater cross-shopping across retailers (e.g., Narasimhan &
Wilcox, 1998) because frequent purchasing affords opportunity to shop
at multiple stores. The second explanatory factor relates to reference
price. The traditional appeal of PL brands is their lower price compared

Table 3
Private label competition in 27 categories. TNS data, UK, one-year period.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
a

Product
category

PL market share
in this category

Extent of PL partitioning
(higher = more intense PL
partitions across retailer)

Category
purchase frequency

Price ratio (PL price as

proportion of NB price)
1 = parity

Proportion of manufacturer
brand volume sold on
promotion

Porridge
Colas
Nappies
Tea bags
Toothpaste
Baked Beans
Whisky
Yoghurt
L'dy Detergent
Bread
Deodorant
RTE cereal
Margarine
Soup
Prem. ice cream
Fromage
Cat food
Mineral water
Analgesics
Toilet tissue
Lollies/treats
Frozen pizza
Liquid bleach
Pepper
Herbs
Batteries
Cough liquid
Average

32
14
30
21
16
47
41
36
21
53
15
28
24
25
36
33
42
58
63
45
15
40
60
63
66
30
30
37

2.7a
2.2a
1.7a
1.6a
1.6a
1.6a
1.5a
1.4a
1.4a
1.4a
1.4a
1.3a
1.3a
1.2a
1.1
1.1
1.1
1.0
1.0
1.0
1.0
1.0
.9a
.9a
.8a
.8a
.8a
1.3

7.0
37.0
17.0
7.0
6.0
19.0
11.0
25.0
11.0
44.0
9.0
24.0
14.0
6.0
5.0
12.0
27.0
13.0
11.0
15.0
7.0
8.9
7.0
3.0
3.6
3.0
2.7
13

.38
.33
.80
.60
.47
.60
.86
.80
.70
.88
.40
.70
.66
1.0
1.0
.77
.40
1.0
.50
.95
1.0
.80
.70
.50
.50
.75
.52
.70

.35
.51
.37
.47
.46
.21
.40
na
.50
.11
.39
.31
.23
.42
.50
.36
.28
.26
na
.53
.23
.59
.14
.09
.10
na
.17
.33

Indicates statistically signicantly higher (if N 1) or lower (if b1) cross-purchasing at the p b .05 level.

64

J. Dawes, M. Nenycz-Thiel / Journal of Business Research 66 (2013) 6066

to NBs (Baltas, 1997). Past prices encountered by the shopper inuence

reference price (e.g., Hardie, Johnson, & Fader, 1993) and cause
resistance to paying prices higher than the referent. If the PL brands
tend to sell at a price ratio that is small compared to the average NB in
the category (for example, if the PL price is 60% of the price of the
average NB), then the shopper who buys PLs at one chain will have a
lower reference price for the category. Therefore, when that shopper
buys from the same category at a rival chain, they will seek a brand in the
acceptable range around their reference price. If the PL of the rival
retailer is in the same range as the shopper's reference level, the rival
retailer's PL has a higher chance of purchase. In summary, categories in
which PL prices are well below NBs will show heightened cross-retailer
PL purchasing. The PL price ratio calculation is:
PL Price Ratio = Average PL price = Average NB price
A price ratio of 1.0 indicates parity between the PLs and NBs. A
price ratio of .7, for example, indicates the average PL price is 70% of
the average NB price.
Finally, the extent of NB price promotions could heighten
private-label partitioning. If NBs are frequently price-promoted,
consumers become more price sensitive (Kaul & Wittink, 1995) and
engage in more deal-to-deal buying (Mela, Gupta, & Lehmann, 1997).
Higher price sensitivity could reinforce preference for PLs. The reason
is that prices for PLs are still generally below NBs, even when the latter
are temporarily reduced. Likewise, more deal-to-deal buying could
result in shoppers choosing among the various NBs for a promoted
item. The outcome is higher rates of purchasing within the group of
PLs and within the group of NBs, but less purchasing across them.
OLS regression tested the explanatory power of these three
variables, namely category purchase frequency, the PL price ratio
and manufacturer brand promotions. Table 4 shows the results of the
regression.
The regression analysis explains 31% of the variance in PL
partitioning. The three independent variables are all statistically
signicant at p .05. The results show that PL brands compete especially
intensely in categories with higher purchase frequency. PL brands also
compete more intensely in categories where the average PL sells at a
smaller proportion of the average NB price. The negative coefcient for
PL price ratio indicates a lower PL ratio equates to higher levels of PL
competition. Third, categories with higher incidence of manufacturer
brand promotions show heightened intensity of competition among PLs
of different chains. By contrast, in product categories with lower
purchase frequency, where the PL brand's prices are more in accordance
with NBs, or where there are fewer NB price promotions, the PLs
compete more against NBs and not as intensely against each other.
6. Summary and implications
This paper examines the competition between PLs and NBs in 27
consumer goods categories in the UK. The ndings indicate there are

Table 4
Second-stage regression.
B

S.E

t-ratio

Dependent variable:
PL partition strength
Independent variables:
Intercept
Purchase frequency
(average purchase occasions in 12 months)
Price ratio of PL to NB
% of NB volume sold on promotion
Adjusted R2

1.28
.014
.82
1.17
.31

.29
.007
.34
.48

4.5
2.1

.00
.05

2.4
2.4

.02
.02

categories in which many buyers of the PL of one retailer are as likely,

or more likely, to also buy the PL of another retailer in the same
categorythan would be expected given the overall popularity of that
other PL. The fact that a shopper must buy the other PL in a different
retailer does not necessarily dampen the probability they will buy that
PL in the course of a year. In categories that are purchased more often,
where the PL brands are typically well below the price of the NB's, and
in which there are frequent NB promotions, competition is heightened
between the PLs of different retailers.
The results provide important managerial and academic implications. First, the ndings imply that competition between PLs and NBs
occurs across multiple stores the shopper buys from in a one-year
period. Therefore, researchers who conduct future studies on PL
competition or PL image should obtain data across stores, and not just
within a store. Looking at competition narrowly by focussing on one
retailer hampers the ability to detect the full extent of competition
between all NBs and all PLs. Yet, the majority of retailers still rely on
narrow one retailer information when they mine their loyalty program
databases. A better comprehension of market structure and buyer
behavior based on PL competition across stores would help managers
consider appropriate competitors while mapping out their own
strategy.
Another implication is that since PLs compete more intensely with
other PLs than with NBs in some categories, PL growth may sometimes
hurt other PLs more so than NBs. This result highlights the importance of
PL marketers looking at competition between the two types of brands
across stores, and regarding PLs from other retailers as close competitors. Likewise, for the manager of a NB worried about the growth of a
particular PL, the results indicate those category characteristics in which
other PLs could bear the brunt of the particular PL's growth, rather than
NBs. A further implication for NB owners concerns the nding that many
consumers conne their purchases to PL brands in categories where
there are frequent NB promotions. Therefore, frequent promotions may
not be a good way for NBs to recover market share from PLs.
The fact that in many of the studied categories, consumers will buy a
PL regardless of the store the PL belongs to implies many PLs do not
create exceptional store loyalty. This nding therefore supports past
literature (e.g., Ailawadi, Pauwels, & Steenkamp, 2008; Kumar &
Steenkamp, 2007) and extends that literature by explaining which
category characteristics impact on PLs ability to differentiate retailers.
PLs in categories with lower purchase frequency, with a larger price ratio
relative to national brands, and with lower levels of NB promotions have
higher potential to differentiate a store from competitors. Therefore,
retailers who want to use PLs as a way to increase their store loyalty
should invest in good quality, higher priced PLs, in less frequently
bought categories such as laundry detergent or shampoo. PLs that are
much cheaper than NBs, especially in frequently bought categories, can
attract value-driven, cherry-picking customers, who will buy a cheap PL
anywhere they can nd it. As Corstjens and Corstjens (1999, p. 204)
note, shoppers are indifferent between low-price PLs in frequently
bought, commodity-like categories. PLs in categories that require
purchases several times a week, such as bread, milk, vegetables or
meat are not likely to build store loyalty because consumers usually buy
those goods on ll-in shopping trips, which are likely to occur in several
stores. However, having PLs in such categories helps to create store
trafc, which is another important retailer objective.
The nding that PLs may fail to create high store loyalty also provides
a recommendation for the PL branding strategy best suited to increase
the link between a PL and its retailer: use the retailer's name explicitly in
the PL brand name. Even though using a store name in the name of a PL
may be risky, such a strategy allows differentiation of the PLs of one
retailer from another. The retailer's name also provides a link for the
consumer to associate a PL to a particular retailer or store (as per Kumar
& Steenkamp, 2007). Furthermore, any advertising activity for the
retailer / store may transfer to the PLs if the retailer uses the same brand
name in its PL name.

J. Dawes, M. Nenycz-Thiel / Journal of Business Research 66 (2013) 6066

7. Limitations and future research

The study used a sizable and diverse set of 27 product categories,
however the categories are all fast-moving consumer goods. The limits
of this sample mean the study is not generalizable to broader market
contexts in which PLs are common, for example clothing, prescription
medicine or home-ware. Another limitation is that the data all come
from one geographic market, namely the UK. Replication across other
sectors and countries will establish sound generalizations. Multi-retailer
shopping similar to the UK is found in China (Uncles & Kwok, 2009) and
Japan (Keng, Uncles, Ehrenberg, & Barnard, 1998) indicating generalizable results about PL competition are possible.
Another limitation is that the study did not examine partitioning
between the very cheap value ranges of PLs such as Tesco value, but
rather focused on the mid-tier PL brands. Given the current
three-tiered PL price/quality strategy in the majority of retailers
(Geyskens, Gielens, & Gijsbrechts, 2010), future research could
investigate if price-quality tiers affect PL partitioning across stores.
Next, analysis of additional categories and variables such as
advertising intensity or quality differences between PL and NB could
account for more of the variation in PL partitioning. Finally, the effect
of complementary purchases on cross-retailer PL buying is an
intriguing avenue for future research. For example, are there shopper
characteristics such as heavy-basket or value-conscious buying that
correspond to higher cross-buying of PLs across retailers? Insights
into shopper or basket characteristics would add to research by
Ailawadi et al. (2008) and Hansen and Singh (2008) that nd heavy
store brand buyers (those who buy private labels for many categories)
are not store loyal. Knowing the composition of shopping baskets
would help identify individual-level factors contributing to higher
cross-buying of PLs across stores.

Appendix A. Statistical testing

Consumers buy multiple NBs and PLs in a time period so the
purchase record data used in the study are multinomial. While the
purchase duplication tables resemble a contingency table, usually
analyzed using log-linear methods, the multinomial characteristic
makes the data unsuitable for log-linear models (e.g., Agresti, 2002).
Therefore, the statistical signicance of partitions is assessed using a
permutation method, building on an approach proposed by Loughin and
Scherer (1998). Specically, a visual basic program repeatedly draws
random samples from an extremely large population. Each draw is of the
same sample size, number of brands, and brand penetrations as the
product categories used in the present study. Purchase duplications
between the PL and NB brands are set as equal to test the null hypothesis
of no difference between the groups of PL and NB brands. The program
records the purchase duplication between PL and NB brands for each
sample. Over a series of 10,000 iterations, the procedure reveals the
probability of observing differences in the purchase duplication
coefcients of a particular magnitude. Where the difference in the
duplication coefcients is less than 5 percent likely to occur due to
random sampling variation, the difference is statistically signicant.

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