Purpose
Recently, the popularity of store brands has resulted in some manufacturer brands being removed from shelves. The current literature lacks empirical work on the effect of manufacturer brand erosion on consumer assortment perception and repatronage intention. Based on signalling theory, the purpose of this paper is to manufacturer brands play a signalling role and contend that manufacturer brand erosion has detrimental effects on the assortment perception due to reduced signalling efficacy.
Design/methodology/approach
A 3 (low manufacturer brand erosion vs high manufacturer brand erosion vs manufacturer brand dominance) ×2 (assortment size: small vs large) between-subject experiment was conducted.
Findings
Manufacturer brand erosion exerts a negative effect on assortment attractiveness and consumers’ repatronage intention; the greater the erosion, the larger the negative effect. These negative effects are mediated by reduced consumer perceptions of assortment quality and variety. A large (vs small) assortment size attenuates the negative effect of manufacturer brand erosion by improving perceived assortment quality.
Practical implications
To engage in strategic positioning through efficient assortment management, retailers should cooperate with brand manufacturers, instead of promoting their own private labels. Nevertheless, a large assortment dominated by store brands signals that the retailer has built a strong private brand, which in turn gains a differentiation advantage.
Originality/value
This paper is among the first to take the signalling perspective and explicitly investigate whether and how manufacturer brand erosion exerts a significant impact on assortment perception.
The Strategic Positioning of Store Brands in Retailer - Manufacturer Bargaining