Review of Industrial Organization 24: 103–104, 2004.
© 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Introduction to RIO Symposium Issue on Store
The papers that follow explore the use of store brands in competition among
retailers and between retailers and manufactures. The work is positioned at the
intersection of Industrial Organization and Marketing, as store brands have long
been of interest in Marketing, while models of competition and differentiation have
long been of interest to IO Economists.
The issue begins with an overview of research on store brands (The Nature and
Beneﬁts of National Brand/Private Label Competition) by Robert L. Steiner. He
traces the path of academic thinking on the topic of store brands and pursues it to
the present with a discussion of current issues and their policy implications. He
argues that consumers are best served in a market with strong store brands at large
retailers; these keep margins on national brands low and allows for economies of
scale in both manufacturing and retailing.
Next is the paper by Serdar Sayman and Jagmohan S. Raju (Investigating the
Cross-category Effects of Store Brands). In it, they show that adding a store brand
to the shelves of the retailer increases sales of existing store brands: there is a pos-
itive externality across store brands or what might be termed an “umbrella brand”
effect. In addition, they ﬁnd that more store brands at a retailer reduces the share of
leading national brands. Their ﬁndings provide evidence that the retailer may want
to design its store brand strategy to take advantage of linkages among products.
Further evidence along these lines is provided by K. Sudhir and Debabrata
Talukdar (Does Store Brand Patronage Improve Store Patronage?). These authors
show that consumers who buy more store brands and store brands in many cat-
egories are more proﬁtable for the store than consumers who buy relatively more
national brands. Thus, selling more store brands does not appear to increase price
sensitivity of consumers and cause lower revenues or proﬁts. Rather, it allows the
store to differentiate itself relative to other stores, thereby raising proﬁts.
The fourth paper in the symposium, by Scott Morton and Zettelmeyer (The
Strategic Positioning of Store Brands in Retailer-Manufacturer Bargaining), takes
a slightly different approach. The two previous studies show direct ﬁnancial gains
to the retailer from selling the store brand. This paper describes an additional,
different beneﬁt to a retailer from carrying a store brand. The retailer can choose to