On equal terms? Marketing private label products next to leading national brand products – exploring the phenomena of shielding

Abstract

Private labels (PL) have gone from being a marginal and rather odd phenomenon in the gro-cery sector 20 years ago, to having a prominent role in the grocery retailing landscape, ac-counting for approximately 25-30% of what is sold in Swedish food stores today. Given the enormous turnover of the grocery trade, amounting to 326 billion SEK in 2023 according to Statistics Sweden (SCB), this is a remarkable development. The development of PL’s can be traced back a couple of decades and was initially focused on the development of low-priced products. However, the growth we see today encompasses a broadening of the scope of the use of PL in grocery retailing, which besides low prices also includes products that corre-spond to both standard and premium quality. In this development, Sweden follows pioneer-ing countries like the United Kingdom (e.g., Laaksonen & Reynolds, 1994). The phenome-non of PL creates a situation where retailers play both the role of customer and competitor to their suppliers. This dual role, and the fact that retailers take the initiative in consumer interactions, is an important starting point for understanding PL as a concept and strategy in the grocery retail sector and the growth that PL has experienced. A concept used perhaps primarily by practitioners to describe the retailer's strategy to get the customer to choose PL’s over supplier brands on the store shelf is "shielding". Through a comprehensive em-pirical study, we aim to explore and analyze how shielding is used in grocery retailing. Our study is based on qualitative data and covers the perspective of various actors in the grocery retail chain, with about 30 interviews in 2023-2024 both at the central level and at the store level, as well as suppliers. The interviews lasted between 45 minutes to 90 minutes and were recorded and transcribed. The interviews were structured based on an interview guide, from which we then asked follow-up questions based on the responses received. To get an under-standing of how PL’s are marketed, we also collected data in stores and weekly store leaf-lets. Here, we selected stores with different formats (larger stores and smaller stores) within three major chains in Sweden (ICA, Coop and Willys), using a convenience sample and se-lecting stores in our local area.

PL is undoubtedly a powerful tool for the grocery retail sector. From a strategic perspective, one can see that retailers have shifted from viewing the development of PL as procurement-focused to becoming more category-focused. In the early stages, retailers used PL to ensure the availability of affordable grocery items, including through the production of PL in their own factories. In recent times, PL’s seem to have contributed with alternatives in various categories, considering quality, price, and other attributes. In research on retail strategy, PL has further broadened, and current discussions on the matter use the term "smart private label strategy" to describe how retailers work more sophisticatedly with a portfolio of PLs to create differentiation in the assortment compared to competitors (e.g., Gielens et al., 2023). We can conclude that it is the retailers who determine what should be sold (assortment), where it should be sold (different store formats with different assortment breadth and depth), how it should be sold (product presentation in the store and placement on the shelf), and what prices should be set for the products on the shelf. In their strategy to orchestrate a customer encounter that is advantageous for themselves, retailers initially aim to get the cus-tomer to the store and then to make choices that result in profitability by choosing a product with a good margin. Based on this, one hardly needs to question whether PL’s and supplier brands compete on equal terms, but that does not make it any less interesting to study how the grocery trade markets PL’s alongside supplier brands on store shelves.

Previous research has empirically treated shielding but often in a highly anecdotal manner (e.g., Walford & Edwards, 1997), and without a clear definition. In our study, we explore shielding as a strategy for grocery retailers to gain advantages when PL’s are marketed alongside with supplier brands. We identify four different types of shielding, which are dis-cussed and analyzed. We can conclude that shielding is significantly more prevalent in in-store marketing than in marketing aimed at driving customers to the store - one explanation here is that supplier brands are important for the customer's perception of the store's as-sortment breadth, but also that supplier brands are important in financing various types of marketing. In most cases - when it comes to supplier brands - it is the suppliers who pro-vide price reductions in campaigns and who also pay to have their products included in the chains' flyers and other channels/media. For a grocery retail chain, the development of an PL strategy certainly leads to increased independence and changes the bargaining position of the retailer over supplier brands (e.g., Draganska et al., 2010), but research also shows that the grocery trade is dependent on supplier brands to offer customers a wide range and to remain competitive (e.g., Ailawadi et al, 2008). To what extent retailers use their initiative in cus-tomer interactions and create better conditions for PL’s in the store is something we get dif-ferent views on, depending on who we address. The supplier side believes that retailers ex-ploit the dual role they have and that retailers give their PLs competitive advantages over supplier brands. The supplier side seems largely in agreement that retailers copy successful supplier brands when launching a new PL product. Retailers have a different view of how they launch and expose PLs and argue that they work customer-oriented, and that it is the customer who dictates the offering.

References

Ailawadi, K L, Pauwels, K & Steenkamp, J-B.,(2008), “Private label use and store loyalty”. Journal of Marketing, 72, 19-30.

Draganska, M, Klapper, D, och Villas-Boas, S. B., (2010), “A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel”. Marketing Science, 29 (1), 57-74.

Gielens, K., Dekimpe, M.G., Mukherjee, A. & Tuli, K., (2023), “The future of private-label markets: A global convergence approach”, International Journal of Research in Marketing, 40(1), 248-267.

Laaksonen, H. & Reynolds, J., (1994), “Own Brands in Food Retailing Across Europe”, Journal of Brand Management, 2 (1), 37–46.

Walford, J., Edwards, T. (1997), Where own label is heading: A recommendation. Journal of Brand Management, 4, 320–326.

• author: Hultman, Jens and Johansson, Ulf
• organization: Marketing; Centre for Retail Research at Lund University
• publishing date: 2024
• type: Contribution to conference
• publication status: unpublished
• subject: Business Administration
• conference name: Nordic Retail and Wholesale Conference
• conference location: Helsingborg, Sweden
• conference dates: 2024-11-05 - 2024-11-07
• language: English
• LU publication?: yes
• id: 375e5e8f-d3fd-462c-b5b4-93701ec8b55e
• date added to LUP: 2025-03-31 13:16:00
• date last changed: 2025-04-04 14:10:17