Review of Industrial Organization 24: 143–160, 2004.
© 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Does Store Brand Patronage Improve Store
and DEBABRATA TALUKDAR
School of Management, Yale University 135 Prospect Street, PO Box 208200, CT 06520-8200,
U.S.A., E-mail: firstname.lastname@example.org
School of Management, State University of New York at Buffalo, 243 Jacobs Management Center,
Buffalo 14260 E-mail: email@example.com
Abstract. We investigate the relationship between a household’s store brand patronage and store
patronage through its impact on store revenues and proﬁts. The nature of the relationship will help
answer the question: Do store brands contribute to greater store differentiation or to greater price
sensitivity in the market? Our results show support for the store differentiation argument.
Key words: Differentiation, loyalty, retail competition, store brands, store loyalty, store patronage
Over the past decade, retail grocery markets in the U.S. and Europe have experi-
enced signiﬁcant growth of store brands (also commonly referred to as private label
brands), which are owned and marketed by retailers themselves. Between 1996 and
2000, the dollar sales of store brands in the U.S grew at twice the rate of national
brands to reach a 15% dollar sales share by the end of 2000 (Sethuraman, 2003).
The current unit volume share of store brands in the U.S. is about 20% and it is even
higher in several European countries such as the United Kingdom (Private Label
Manufacturers Association’s website: www.plma.org
). Business press reports and
surveys continue to show that store brands are consistently a top priority for grocery
retailers (Alaimo, 2003; Wellman, 1997).
Not surprisingly, the impressive growth and penetration of store brands in gro-
cery retail markets have attracted attention and triggered discussion in both the
business and academic press. The discussion at the practitioner level in the business
press has predominantly focused on sales or market share (Sethuraman, 2003). A
casual online subject search reveals scores of practitioner articles, mostly discuss-
ing how well store brands are doing or what retailers can do to increase sales of
their store brands (e.g., Alaimo, 2003; Karolefski, 2003). On the academic research
front, the predominant focus of initial studies was on “proﬁling” the characteristics
of store brand consumers (e.g., Dick et al., 1995). The focus of recent studies in
this area – consistent with that in the business press – has shifted to estimating the