Impacts of Store-Brand Introduction on a Multiple-Echelon Supply Chain

Abstract Observing that store brands are often introduced in multiple-echelon supply chains, however, the common wisdom from analytical models on store brands has been obtained from two-echelon supply chains, we investigate the strategic interaction in a three-echelon supply chain (manufacturer-distributer-retailer) with a store brand and its corresponding impacts. This research reveals the ways in which store brand affects the interaction and performance of the three-echelon supply chain, as it is significantly different from the two-echelon case. In particular, when the store brand is moderately competitive, the nature of the interaction between the national-brand manufacturer and the distributer can change from dependence to independence, enabling the national-brand manufacturer to manipulate its price leadership to increase its wholesale price instead, leaving the distributer itself to deter the SB introduction. Consequently, the distributer plays a special role as a buffer between the national-brand manufacturer and the retailer. When the store brand is competitive enough and finally introduced, all channel members may benefit from the store brand introduction, but this phenomenon never occurs in the two-echelon case under the same conditions. Therefore, this study increases our understanding of how store brand affects the multiple-echelon supply chain and provides another important theoretical explanation for why executive managers of national brand products need not overreact to the introduction of their retailers’ store brands.