123 / 2024-04-21 11:54:24

The Role of Dual Purpose in Store Brand Introduction and Quality Strategies

store brand,dual purpose,quality,corporate social responsibility

To address stakeholders' interests, firms increasingly adopt a dual-purpose agenda, typically involving the pursuit of profits and consumer surplus. This study examines a supply chain dynamic involving a retailer and a national brand (NB) manufacturer, both potentially pursuing dual purposes, to investigate how their dual-purpose nature influences the introduction and quality strategies of the retailer's store brand (SB). Our findings reveal that only the retailer caring about consumer surplus has no impact on SB quality. However, if the NB manufacturer cares about consumer surplus, SB quality declines irrespective of the retailer's stance. Interestingly, the for-profit retailer experiences reduced profits from SB introduction when also caring about consumer surplus and expressing a high interest in it. Conversely, SB introduction enhances the dual-purpose manufacturer's utility when its interest in consumer surplus is relatively high. The introduction of SB may lead to unintended price and payoff implications, with the wholesale price and the manufacturer's profit exhibiting non-monotonic relationships with its interest in consumer surplus. Consequently, compared to the forprofit scenario, this may result in a higher wholesale price, exacerbating the double marginalization effect. Additionally, when the retailer cares about consumer surplus, supply chain profit may increase due to the mitigated double marginalization effect, resulting from an unconventional reduction in retail markup rather than wholesale price. Our findings suggest that manufacturers caring about consumer surplus could strategically alleviate profit losses stemming from retailers' SB introduction. However, retailers should exercise caution when simultaneously introducing an SB and pursuing consumer surplus from a profitability standpoint.