Does private label quality influence consumers' decision on where to shop?

Abstract

This article empirically studies consumer choice behavior with respect to store brands in the United States, the United Kingdom, and Spain. Store-brand market shares differ by country and are usually much higher in Europe than in the United States. The authors study the notion that the differential success of store brands in the United States and Europe is the higher brand equity that store brands command in Europe than in the United States. They use a framework based on consumer brand choice under uncertainty and brands as signals of product positions to conduct their analysis. More specifically, they examine whether uncertainty about quality (or the positioning of the brand in the product space); perceived quality of store brands versus national brands; consistency in store-brand offerings over time; and consumer attitudes toward risk, quality, and price underlie the differential success of store brands at least partially in the United States and Europe. The authors’ model is estimated on scanner-panel data on laundry detergent in the U.S., U.K., and Spanish markets and on toilet paper and margarine data in the U.S. and Spanish markets. The authors find that consumer learning and perceived risk (and associated brand equity), as well as consumer attitude toward risk, quality, and price, play an important role in consumers’ store-brand and national-brand choices and contribute to the differences in relative success of store brands across the countries studied.