Store loyalty probably precedes brand loyalty by decades. Before Harley Proctor began advertising Ivory in 1881, most consumers depended on their merchants to ensure quality and value in what later became known as "packaged goods." Yet, the ability to establish a true brand identity with store brands has often proven problematic. Following are some examples:
Major Appliances: When Sears was the dominant retailer in America, it built customer loyalty with a strong, quality store brand -- the Kenmore line of appliances. Eventually, however, the marketplace found a way to leverage national brand advertising and promotion. Outlets like Circuit City began selling national brands for less. Sears countered with its "Brand Central" concept.
Apparel: In the 1980s, Macy's developed the Club Room store brand and began downplaying designer and branded apparel (like Levi and Reebok). They reasoned that store loyalty would outweigh brand loyalty. The result? The rise of specialty stores and discounters featuring (you guessed it) branded apparel.
Computers: As personal computer sales gained steam in the 1980s, Tandy Corp. began manufacturing high-quality personal computers for the home user and hobbyist to be sold through its Radio Shack retail stores. After some initial success, Tandy found itself unable to match the marketing might of IBM, Apple, Compaq and other national brands. The company sold its manufacturing facilities.
Food Service: Before the Golden Arches, orange-roofed Howard Johnson's dotted the U.S. highway system in the 1950s and '60s. To ensure quality and profitability, HoJo franchisees were required to purchase all provisions from the parent company -- including a syrupy concoction known as HoJo Cola, a poor substitute for Coke and Pepsi. "Upstart" competitors leveraged the power of national brands through aggressive promotion and generous beverage company co-op advertising and contributed to the unseating of the "vertically integrated" market leader.
Automotive Electronics: U.S. automakers improved profits in the '50s and '60s by acquiring car stereo companies and "branding" the devices with their automobile nameplates. European competitors, meanwhile, offered upscale, independent brand names like Blaupunkt, Alpine and Bose. Luxury car owners and audiophiles suddenly found a Ford radio unacceptable.
By some estimates, food stores lose upwards of 25% of their primary (heaviest spending) patrons every year. The increased switching behavior that plagues national marketers also extends to retailers. While a private label program can improve store loyalty, it must be executed flawlessly. Quality, distribution, stocking and packaging problems in the private label business reflect directly on the store -- unlike national brands. Given the wide choices available to the American consumer, the risks of retailer brands should be carefully considered.
