Multi-tier store brand strategies: a case study

Purpose: This paper aims to describe and understand the offer of premium private labels (PPLs) in Italy, with a case study on the extra virgin olive oil (EVOO). Design/methodology/approach: The empirical study on EVOO in Italy was aimed to investigate the drivers of the offer of PPLs and its effects on assortment policies. The study was carried out in three Italian provinces, using a cross-sectional design with data collected through direct observation. A two-step data analysis was performed. First, descriptive statistics were used to preliminary appraise hypotheses on the rationale underlying the offer of PPL, and then, the drivers of PPL policy were studied using a logistic regression model. Findings: The estimated model indicates that in the case of EVOO the probability of offering a PPL is higher for stronger with a stronger competitive position (with respect to other stores), and increases with the size of the category assortment (Total Assortment Width) and with the share of the PL products offered by the store (PL Assortment Index). It also increases if the average price (Total Average Price) and the average price of the standard private label (SPL Average Price) improve; by contrast, it decreases if the national brand (NB) share in the assortment (NB Assortment Index) augments. Research limitations/implications: Overall, the study confirms that the multi-tiered PL strategy is one of the current competitive strategies of top retailers, centred more on a differentiation than on a low cost/price policy. Such a differentiation policy may have various effects in terms of channel structure and social welfare depending on the underlying corporate and consumer goals and beliefs and on the existing institutional framework. Originality/value: This is the first study to investigate the PPL market in Italy using original data and taking into account policies actually carried out at the individual store level. A further element of novelty is the attention given to the welfare effects of multi-tier strategies. This paper suggests that these latter may have various effects in terms of channel structure and social welfare depending on the underlying corporate and consumer goals and beliefs and on the existing institutional framework.