Store Brand Quality and Retailer's Product Line Design

Hwan Chung, Eunkyu Lee

Research output: Contribution to journalArticlepeer-review

59 Scopus citations


This study analyzes a retailer's store brand quality decision in vertically differentiated product categories. We analyze a game theoretic model composed of one or two national brand manufacturers and a retailer, who strategically chooses the quality level(s) of its store brand(s) relative to the well-established national brand position(s) to maximize its category profit. Our analysis reveals that the nature of a retailer's store brand quality positioning is quite different from the manufacturer's national brand positioning decision, and that the best position for a store brand is not “as close to a national brand as possible” as previous studies suggest. Instead, the optimal quality position of each store brand is remarkably sensitive to the distribution of consumers’ willingness-to-pay. In particular, the relative proportions of quality sensitive consumers and price sensitive consumers determine the balance of three key strategic forces — the market expansion force, the retail margin force, and the consumer profitability force, leading to different optimal product line designs for store brands across different category environments. Interestingly, against multiple incumbent national brands, the retailer's optimal product line design includes a store brand positioned at the highest quality level in the category only if most consumers are moderately quality conscious. We also analyze the implications of national brands’ brand equity for retailers’ store brand strategy.

Original languageEnglish (US)
Pages (from-to)527-540
Number of pages14
JournalJournal of Retailing
Issue number4
StatePublished - Dec 2017


  • Distribution channels
  • Game theory
  • Product positioning
  • Store brands

ASJC Scopus subject areas

  • Marketing


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