Consumption-based cross-brand learning: Are private labels really private?

While some researchers view private labels (PLs) as a key tool for retailer differentiation, others imply that consumers do not distinguish between PLs of different chains. This debate raises the question: Do a retail chain's PL investments subsidize rival PLs? In addition, how does this affect their choice share vis-à-vis national brands? The authors investigate whether consumers generalize knowledge from product experience across PLs of different retail chains and whether such crossbrand learning depends on the PL brands' link with the chain name or on their quality differences. The proposed brand choice model captures cross-brand learning through quality perception spillovers (consumers adjust beliefs about PL quality on the basis of consumption experience) and familiarity spillovers (uncertainty about a PL diminishes with rival PL consumption). Household scanner panel data on dish soap and breakfast cereals yield clear evidence of cross-retailer learning among standard PLs, regardless of their name or quality differences. The results also reveal that familiarity spillovers dominate quality-level spillovers, implying that the presence of cross-learning benefits PLs and enhances their market position relative to national brands. The authors conclude with a discussion of managerial implications.

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