How do consumers respond to price gaps in private brand agrifood products?

PurposeThere is a range around reference prices, the so-called latitude of price acceptance, where consumers seem insensitive to changes into prices, with these ranges being wider for buyers of private brands. This paper analyses objective price gap between two product alternatives as a main driver of consumer behaviour. Therefore, the authors shed light on whether the price gap conditions consumer-switching behaviour and at what point the price gap triggers a switching pattern.Design/methodology/approachShopping data on two product alternatives of olive oil were obtained from a household scanner panel of Spanish consumers (607 households) with weekly price tracking, and multilevel regression models were performed.FindingsThe results suggest that the price gap has a fundamental effect on the consumers' choice. In this case, up to 1 euro/litre the demand seems almost inelastic; beyond that price gap, the demand for the finer product plummets.Research limitations/implicationsThis study focussed on olive oil products. The research needs to be extended other food products.Originality/valueThe authors contribute to the literature by documenting how the price context measured in terms of a price gap is a relevant stimulus in consumer choices, with a focus on the change in price sensitivity between product alternatives when competing brands are not involved but private brands are.

Contract Manufacturer’s Encroachment Strategy considering Fairness Concern in Supply Chain

More and more contract manufacturers have started to establish their own brands besides providing manufacturing service for retailers who operate exclusive well-known brands. This paper studies the encroachment strategy of a contract manufacturer in a supply chain and the impact of fairness concern. Four scenarios are investigated by building game models: no fairness concern, the retailer’s fairness concern, the contract manufacturer’s fairness concern, and both members’ fairness concern. The results show that when there is no fairness concern, the contract manufacturer always has motivation to encroach. However, when there exists fairness concern, only when the reservation price is sufficiently high, the contract manufacturer will encroach. Fairness concern has certain strength to stop the contract manufacturer’s encroachment. When the reservation price is sufficiently low, the encroachment of the contract manufacturer benefits the retailer, or else it will harm the benefit of the retailer. The effect of fairness concern on profit margin and wholesale price decisions is opposite under different encroachment strategies. However, the fairness concern has no impact on the retail price of the private brand. Under encroachment strategy, contract manufacturer’s or both members’ fairness concerns have positive effect on the retailer’s profit in certain conditions. However, the fairness concern always decreases the contract manufacturer’s profit no matter what the form it is. Numerical examples show that it is best for the supply chain that both members have fairness concern under no encroachment. However, when the contract manufacturer has a private brand, it is best for the supply chain that no one has fairness concern when the advantageous inequity concern parameter is sufficiently low. When the advantageous inequity concern parameter is sufficiently high, it is best for the supply chain that both members have fairness concern.

Retail Regulation in South Korea: The NoBrand Case

This study examines how NoBrand has faced legal regulations in Korea, and NoBrand’s transition to the franchise system to respond to regulatory changes (examined with a case analysis). In 2015, Emart, a Korean retail giant, launched its private brand (PB), NoBrand, to address stagnant sales. With advantages in price and quality due to supply chain management (SCM), NoBrand not only established a successful foothold, but also gained success in the market. Despite the rapid growth of NoBrand, it has faced government regulations that restrict its operations. To respond to these regulations, NoBrand changed its direct operating system to a franchise system that allows an individual owner to run his or her own NoBrand store. However, the transition triggered conflicts with both local stakeholders and other branches of its parent firm, Emart. By analyzing these conflicts, this study finds that Korean retail policy did not effectively protect small business owners as primarily aimed.