Sunday, May 18, 2008

Impact of generic Branding

The late 1990s and 2000s saw the emergence of the generic branding where retailers started selling generic goods under a store created brand. Some examples include the generics in grocery stores like Kroger brand, or the clothing lines by JC Penny called “Arizona” and “St. John’s Bay”. These brands are given better shelf place and more advertisement since they potentially generate higher margins for the retailers. In recent years, the quality of such generics has also improved, especially in clothing, to match designer brands.

This potentially drives the price down for the designers since they have to negotiate harder with the retailers for shelf space, and do more promotions. Ultimately, economics dictates that the pricing between branded goods and generics will get close enough to not be significant. Therefore, people can then choose to purchase designer brand goods again since they are cheaper. This will end up eventually hurting the retailer since sales of generic brands could decrease. So, is this strategy of generic branding good and viable?