BMGT353 Chapter 14

BMGT353 Chapter 14 - BMGT353 Chapter 14 Buying Merchandise...

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BMGT353 Chapter 14 Buying Merchandise BRAND ALTERNATIVES: National Brands / Manufacturer’s Brands: products designed, produced, and marketed by a vendor and sold to many different retailers Vendor is responsible for developing the merchandise, producing it with consistent quality, and undertaking a marketing program to establish an appealing brand image Options: o Vendors can use an umbrella or family brand for different product categories (ex: Kellogg’s Frosted Flakes) o Vendors can use individual brand names for different product categories and don’t associate the brand with their companies (ex: o Some retailers organize their buying activities around national brand vendors that cut across merchandise categories (ex: Estee Lauder makes Estee Lauder, Origins, Clinique, and Prescriptives) rather than for a product category such as skin care, eye makeup, etc. Private-Label Brands / Store Brands / House Brands / Own Brands: products developed by retailers Retailers develop the design for the product and then contract with manufacturers to produce those products Retailers can use their names to create a private label for merchandise in many different categories (ex: The Gap and Victoria’s Secret) Four categories of private brands: o Premium Brands: offer the consumer a private label that is comparable to, or even superior to, a manufacturer’s brand quality, sometimes with modest price savings (ex: Wal-Mart’s Sam’s Choice) o Generic Brands: target a price-sensitive segment by offering a no-frills product at a discount price o Copycat Brands: imitate the manufacturer’s brand in appearance and packaging, generally are perceived as lower quality, and are offered at lower prices (ex: CVS or Walgreen’s brands are placed next to manufacturer’s brands) o Exclusive Co-Brands: a brand that is developed by a national brand vendor, often in conjunction with a retailer, and is sold exclusively by the retailer (ex: when a national brand manufacturer assigns different model numbers and has different exterior features for the same basic product sold by different retailers) Makes it difficult for consumers to compare prices More sophisticated form- when a manufacturer develops an exclusive product or product category for a retailer NATIONAL BRANDS VS. PRIVATE LABELS National brands help retailers build their image and traffic flow and reduce their selling/promotional expenses Many customers have developed loyalty to specific national brands Customers know what to expect from national brand’s products Retailers need to spend less money selling and promoting national brands Retailers realize lower gross margins for national brands Competition is more intense for national brands Manufacturer’s brands limit a retailer’s flexibility The exclusivity of strong private label brands boost store loyalty Gross margins are higher for private label brands, but you have to make significant investments in designing
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This note was uploaded on 12/06/2010 for the course BMGT 353 taught by Professor Staff during the Fall '08 term at Maryland.

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BMGT353 Chapter 14 - BMGT353 Chapter 14 Buying Merchandise...

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