Study: 'Generic' brands save you money, even if you don't buy them

May 26, 2010

(PhysOrg.com) -- A new study from the W. P. Carey School of Business suggests the simple presence of the store brand can save you money at the grocery store, even if you don't buy it.

People are especially interested in at the now, due to the rough economy. Most know that buying the store brand or private label, also known as the “generic brand,” can save you cash. However, a new study from the W. P. Carey School of Business at Arizona State University suggests the simple presence of the store brand can save you money, even if you don’t buy it.

“Consumers benefit because the whole idea is for retailers to provide a value option to customers,” says Professor Timothy Richards, the Marvin and June Morrison Chair of Agribusiness and Resource Management at the W. P. Carey School of Business. “Also, when grocery stores offer these competitive store-brand products, it forces the brand-name companies to lower the wholesale prices they charge the grocery stores. Part of the savings is then passed on to the customers who buy the brand names.”

The new research by Richards and his colleagues is being published in the Journal of Agricultural and Resource Economics. The study notes that private labels now account for almost one quarter of all on food, beverages and personal care items. It also explains that the more similar the “generic” product is to the brand-name offering and the closer it is on the shelf, the more profitable the sales are.

The study also says private labels are becoming a more common way for grocery stores to differentiate themselves in a crowded industry. If they offer really great store brands, they may keep customers coming back. Richards says Safeway grocery stores, for example, have done an excellent job creating and promoting store-brand products, which now account for about 25 percent of the stores’ total sales.

“Many stores also offer good, better and best labels, like a super-premium brand, to help cater to a wider variety of consumers,” says Richards. “All store brands offer the grocery chain a higher profit margin than the brand-name products.”

Richards explains that often the private label products are identical to the brand-name versions, even created in the same manufacturing plants when brand companies have spare capacity to cheaply rent out.

While the new study focuses on private label ice cream as one type of very successful store-brand product, Richards says his findings translate to all types of items, including cereal, dairy products, condiments and soda, that are also popular store-brand segments.

Explore further: Asia's billionaires see fastest wealth growth: report

add to favorites email to friend print save as pdf

Related Stories

Amazon widens private labels with electronics gear

Sep 20, 2009

(AP) -- Consumers visit Amazon.com for deals on products from companies ranging from Apple Inc. to Zenith Electronics Corp. Now, the online retailer wants shoppers to check out stuff that carries Amazon's own brand name, ...

Grocery Retailers Need Not Fear 'Cherry Pickers'

Sep 19, 2007

"Extreme cherry pickers," grocery shoppers who buy only sale items and nothing else, do not harm retailer profits significantly as generally is believed, according to a forthcoming study in the Journal of ...

Women want bargains but men prefer brand names

May 15, 2008

Women are better bargain hunters than men, with male shoppers seeking known brand names when deciding which store to go to, a Massey University study of consumers has found.

As prices rise, find ways to trim grocery bills

May 05, 2008

The rising cost of gas, diesel fuel and other forms of energy can affect the price of many other things that we purchase, from milk and bread to coffee and sugar. It can be a real challenge to keep family food costs manageable ...

Recommended for you

Entrepreneurs aren't overconfident gamblers

10 hours ago

Leaving one's job to become an entrepreneur is inarguably risky. But it may not be the fear of risk that makes entrepreneurs more determined to succeed. A new study finds entrepreneurs are also concerned about what they might ...

User comments : 0