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How does this work for B&M companies? Think Walgreens or Target. They have plenty of in-house brands and also major 3rd party brands. Are they allowed to contin

How does this work for B&M companies? Think Walgreens or Target. They have plenty of in-house brands and also major 3rd party brands. Are they allowed to continue having in-house brands?

ocdtrekkie 6y ago
I don't think anything good would be lost if store brands went away as an anti-monopoly measure. They're usually just rebranded from some other company anyways. No need for the retail store to be double-dipping.
- AdmiralAsshat 6y ago
  You'd lose Costco's Kirkland brand, which is one of those rare instances of the store brand often being better than the name-brand.
  - codegladiator 6y ago
    Why can't they still sell it at stores which they don't owe?
    - Miraste 6y ago
      Better to cancel the line than supply competitors with better cheaper products than your own store.
      - codegladiator 6y ago
        Sorry I don't get the point. Costco's competitors selling Costo's cheaper product would still harm costco ? Does costco get some extra benefit if the consumer buys Kirkland from costco ?
        Miraste 6y ago
        > Does costco get some extra benefit if the consumer buys Kirkland from costco ? Yes. Costco positions their store brand as a major part of their appeal. This attracts more consumers to their stores, which A. Increases membership, for which there's an annual fee, and B. Increases traffic, increasing sales of high margin items as well as the low margin store brand.
        B_ryJenkins 6y ago
        If Costco sells their products at other stores they are effectively shooting themselves in the foot: It is providing the lower price of their products to be accesed without paying for a membership; which is how Costco makes money.
        lotsofpulp 6y ago
        Costco's value proposition is that they make (on average) no net income from sales of their products, and that you will find no other competitor who can sell the same quality products at a cheaper price (because costco's already selling them as cheap as possible). In exchange, they ask you to pay a membership fee, which is their net income. If they were to give away their reputation to other sellers by letting them sell their QC'd products, they would be lowering the value of their memberships.
      - indymike 6y ago
        That's not always the case. Sometimes the white label results in a small decrease to the name brand and captures sales to a different market.
    - AdmiralAsshat 6y ago
      Bear in mind, I have no idea how wholesalers work in this day and age. But once upon a time, a wholesaler like Costco sold stuff at cost (e.g. they charge what they paid the supplier for the product), and their revenue derived from the annual membership fees. So it's not in Costco's interest to start selling Kirkland Brand Extra Virgin Olive Oil at Safeway, because it wasn't a profit center to begin with. The whole point of selling their own branded product was: a) To reduce costs by controlling the entire means-of-production b) To ensure quality control on the product and build faith in the brand, which in turn c) Pulls people into the store, forcing them to buy a Costco membership if they want the product.
      - gamblor956 6y ago
        With regards to (a), Costco doesn't do that. Their entire Kirkland line is white-label products, excepting their pizzas which use dough made by regionally locally bakeries. They do have employees oversee (b), but they don't oversee the actual production; they conduct random inspections of shipped products. For example, Kirkland coconut water is simply white-label Vita Coco, and the made by label indicates it is packaged for them by the same company that produces Vita Coco.
      - e_y_ 6y ago
        I'm not sure about the old days, but I believe Costco has stated they cap their markup at 15% -- which along with membership fees pays for employee salary, operations, and profit. I'm guessing that's overall and some products are more profitable while others (like their rotisserie chicken) are subsidized.
    - triceratops 6y ago
      One of the reasons I keep a Costco membership is for access to Kirkland products. And I think they know that a lot of their customers feel this way.
  - mtgx 6y ago
    > one of those rare instances You said it, not me. We can't have policy revolving around a single company. The net positive would be greater in the market if platforms wouldn't be able to double-tip.
  - gamblor956 6y ago
    Most of the Kirkland brand products are white-label products made for them by companies that sell competing name-brand products. Costco has employees that oversee the QC of these white-label products.
    - true_religion 6y ago
      Quality control is basically the differentiator in modern manufacturing. Intels high price chips, and low price chips are often the same chip except the low priced one failed quality control and had some of its circuits turned off.
      - LordDragonfang 6y ago
        This common process is called binning, in case anyone wants to read more on it. Wikipedia article, as a primer: https://en.wikipedia.org/wiki/Product_binning https://en.wikipedia.org/wiki/Product_binning
      - e_y_ 6y ago
        Chip binning is something of a special case. Most of the time, when part of a product fails, you have a useless/unsellable product that needs to be reworked or scrapped.
- bradstewart 6y ago
  The inhouse brands are quite often cheaper for the consumer. That's worth something.
  - ocdtrekkie 6y ago
    They're cheaper because they're not "brand name". That doesn't mean the not brand name option needs to be owned by the retail store.
    - scarface74 6y ago
      And then they would be more expensive because they have to advertise and have their own supply chain. How does that help consumers?
      - p49k 6y ago
        There are grocery stores which sell cheaper off-label products that aren’t their own. The makers of those products don’t advertise and thus pass those savings to the consumer. It’s a system that’s already proven to work.
        scarface74 6y ago
        Are we trying to protect consumers?
    - Cerium 6y ago
      I'm not sure about this. I think a lot of why store brands work is because you trust the store not to cheat you. If the product is bad you know who to blame. The store wants the product to be good because they will loose customers of they make bad house brand products.
      - p49k 6y ago
        A store that sells third party off-label products can still do quality control on those products and can take responsibility for what they sell, just as they would remove faulty brand-name products to protect their reputation.
- scarface74 6y ago
  So now we are going to pass laws that disallow cheaper house brands to “help” consumers?
  - yourapostasy 6y ago
    With the rare exception like Costco, cheaper house brands often imply they're equivalent to brand name goods, but take unadvertised shortcuts in process and/or feedstock, misleading consumers who don't take the time to carefully compare to weigh whether the shortcut is worth the value to them. I wouldn't mind house brands as much if supply chain information and process information was transparent across all companies, but that supply chain information is a pseudo-trade secret (and for real-time supply chain information, definitely a trade secret) [1], and you can forget about obtaining process information. I do use house brands for some goods personally, but this is the result of many years of a lot of careful vetting and monitoring ingredient lists that I know is not commonplace nor even feasible with many retail consumers. House brands can be a useful tool in the market, but they can be abused in too many ways for me to relax my vigilance as a consumer. They also can be abused in too many ways in their distribution channel role to obtain highly-granular, time-sensitive competitive information that normally wouldn't be available in the open market, for me to completely accept their unregulated deployment. I wouldn't go as far as to say ban house brands by law. But I wouldn't want to keep them completely unregulated in all contexts like we are currently doing, either. Happy to change my mind with any new information anyone cares to share though, as this isn't an area I keep a close eye upon. [1] https://www.importyeti.com/ https://www.importyeti.com/
    - scarface74 6y ago
      Housebrand OTC drugs in particular are the same as the name brand equivalent. There was a Freakonomics episode where they said pharmacists overwhelmingly choose house brand OTC products. House brands of any product have to pass the same relevant regulations.
      - yourapostasy 6y ago
        Yep, likely because OTC pharma is a tightly-regulated market? However, there are still gaps I haven't found explanations for yet, so I must be misunderstanding how house branding works. For example, house brands have not materially impacted the insulin market [1] even though it is quite regulated to my best understanding. Even when insulin patents expire, there haven't been house brands introduced on more modern formulations [2] [3]. Nor have house brands moved into vaccine production. There is probably much, much more than meets the consumer retail eye to house branding, and I'd love to get an insider's look at the factors and considerations around the decision to roll out a house brand product. [1] https://insulinnation.com/treatment/why-walmart-insulins-arent-the-answer-to-high-insulin-prices/ https://insulinnation.com/treatment/why-walmart-insulins-are... [2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4955122/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4955122/ [3] https://www.pbs.org/newshour/health/insulin-market-shakeup-patients https://www.pbs.org/newshour/health/insulin-market-shakeup-p...
- JackFr 6y ago
  > I don't think anything good would be lost if store brands went away A cheaper alternative for consumers? Consider some consumer good made overseas produced at the same factory for both the name brand and store brand. As a consumer why should I have to pay for the huge marketing spend the name brand needs to recoup? I don't see how harming consumers is a useful end of anti-monopoly laws.
  - srtjstjsj 6y ago
    No-name brands don't have to be store brands, and aren't always.
- reaperducer 6y ago
  They're usually just rebranded from some other company anyways This is a common belief, and also mostly false. I think it's common because it used to be true, but isn't anymore. With the economies of scale that a company like a Target or a Wal-Mart have these days, plus the ever-declining cost to manufacture goods, most store brands are actually run for those stores, and not re-labeled big brand goods, or seconds that were rejected by the primary contractor.
  - delfinom 6y ago
    Depends on the product really. Some name brands don't even formulate the product themselves but rather just stamp their name on it just like the stores would. The result is the true manufacturer is able to manufacture the same good under multiple brands rather easily.
pcdoodle 6y ago
Considering Walgreens and Target don't own 50% of the offline marketplace, Perhaps that could be a factor.
- scarface74 6y ago
  Amazon has 5% of retail. Walmart is still larger. https://www.mediapost.com/publications/article/331054/report-walmart-continues-to-gain-market-share-in.html https://www.mediapost.com/publications/article/331054/report... Geeks have been complaining for decades that companies shouldn’t be able to patent stuff because “it’s on the internet”. Why limit the relevant market to “on the internet”?
- deleted 6y ago
  [deleted]
CarVac 6y ago
I don't think brick-and-mortar stores are operating a marketplace the way Amazon is, though.
- notyourwork 6y ago
  How are they different?
  - spockz 6y ago
    They still source their products from the same manufacturers as the brand products. It is just the label or the fragrance that is slightly different. In Amazon’s case it sources it’s copied product from different manufacturers. So once you get a successful product you cloned by a powerful Amazon. And Amazon can always do it cheaper than you.
  - rrobukef 6y ago
    As long as I remember there have been no complaints about restricting advertisements. (Although plenty of other anti-competitive behaviour) Amazon touts a 'free' marketplace where anybody can sell and advertise their product. Yet it uses its monopoly on ads within their domain against others.
  - CarVac 6y ago
    Brick and mortar stores buy from wholesalers and resell. Amazon facilitates direct transactions between buyers and sellers. It also participates as a seller.
    - deleted 6y ago
      [deleted]
  - darksaints 6y ago
    They own the inventory and therefore take the risk of selling it. Amazon doesn't own the inventory of its marketplace sellers, and they can do anything they want to put them out of business at no financial risk to themselves.
jedberg 6y ago
Those aren’t marketplaces. They have to buy the products they sell.
- baskire 6y ago
  They actually don’t buy all the products they sell. They often only pay the manufacturers after its sold. And sometimes don’t return the units which don’t sell
  - jedberg 6y ago
    > They actually don’t buy all the products they sell. This is not true at all. Costco buys everything they sell. > They often only pay the manufacturers after its sold. This is true, and may be where your confusion lies. They buy on net 30/60/90 terms from their vendors. This means they have 30/60/90 days to pay them. Because they move inventory so quickly, they have often sold an item before they have to pay for it. But they are still buying it and still taking the risk that it won't sell. > And sometimes don’t return the units which don’t sell This is only true because as I said before, they own the items.
    - sib 6y ago
      Perhaps, but Walmart (and many other retailers) do not pre-buy all the products that they sell.
      - notatoad 6y ago
        do you have a source for that? because my understanding (from my time working in that industry) is that everything is sold in exactly the fashion that the parent describes - wal-mart purchases from suppliers and sells to customers. they purchase a lot on credit, but no supplier is giving wal-mart terms like "just hold this in inventory for as long as you want and pay us whenever it sells"
        HenryBemis 6y ago

How does this work for B&M companies? Think Walgreens or Target. They have plenty of in-house brands and also major 3rd party brands. Are they allowed to continue having in-house brands?

ocdtrekkie 6y ago

I don't think anything good would be lost if store brands went away as an anti-monopoly measure. They're usually just rebranded from some other company anyways. No need for the retail store to be double-dipping.

AdmiralAsshat 6y ago
You'd lose Costco's Kirkland brand, which is one of those rare instances of the store brand often being better than the name-brand.
- codegladiator 6y ago
  Why can't they still sell it at stores which they don't owe?
  - Miraste 6y ago
    Better to cancel the line than supply competitors with better cheaper products than your own store.
    - codegladiator 6y ago
      Sorry I don't get the point. Costco's competitors selling Costo's cheaper product would still harm costco ? Does costco get some extra benefit if the consumer buys Kirkland from costco ?
      - Miraste 6y ago
        > Does costco get some extra benefit if the consumer buys Kirkland from costco ? Yes. Costco positions their store brand as a major part of their appeal. This attracts more consumers to their stores, which A. Increases membership, for which there's an annual fee, and B. Increases traffic, increasing sales of high margin items as well as the low margin store brand.
      - B_ryJenkins 6y ago
        If Costco sells their products at other stores they are effectively shooting themselves in the foot: It is providing the lower price of their products to be accesed without paying for a membership; which is how Costco makes money.
      - lotsofpulp 6y ago
        Costco's value proposition is that they make (on average) no net income from sales of their products, and that you will find no other competitor who can sell the same quality products at a cheaper price (because costco's already selling them as cheap as possible). In exchange, they ask you to pay a membership fee, which is their net income. If they were to give away their reputation to other sellers by letting them sell their QC'd products, they would be lowering the value of their memberships.
    - indymike 6y ago
      That's not always the case. Sometimes the white label results in a small decrease to the name brand and captures sales to a different market.
  - AdmiralAsshat 6y ago
    Bear in mind, I have no idea how wholesalers work in this day and age. But once upon a time, a wholesaler like Costco sold stuff at cost (e.g. they charge what they paid the supplier for the product), and their revenue derived from the annual membership fees. So it's not in Costco's interest to start selling Kirkland Brand Extra Virgin Olive Oil at Safeway, because it wasn't a profit center to begin with. The whole point of selling their own branded product was: a) To reduce costs by controlling the entire means-of-production b) To ensure quality control on the product and build faith in the brand, which in turn c) Pulls people into the store, forcing them to buy a Costco membership if they want the product.
    - gamblor956 6y ago
      With regards to (a), Costco doesn't do that. Their entire Kirkland line is white-label products, excepting their pizzas which use dough made by regionally locally bakeries. They do have employees oversee (b), but they don't oversee the actual production; they conduct random inspections of shipped products. For example, Kirkland coconut water is simply white-label Vita Coco, and the made by label indicates it is packaged for them by the same company that produces Vita Coco.
    - e_y_ 6y ago
      I'm not sure about the old days, but I believe Costco has stated they cap their markup at 15% -- which along with membership fees pays for employee salary, operations, and profit. I'm guessing that's overall and some products are more profitable while others (like their rotisserie chicken) are subsidized.
  - triceratops 6y ago
    One of the reasons I keep a Costco membership is for access to Kirkland products. And I think they know that a lot of their customers feel this way.
- mtgx 6y ago
  > one of those rare instances You said it, not me. We can't have policy revolving around a single company. The net positive would be greater in the market if platforms wouldn't be able to double-tip.
- gamblor956 6y ago
  Most of the Kirkland brand products are white-label products made for them by companies that sell competing name-brand products. Costco has employees that oversee the QC of these white-label products.
  - true_religion 6y ago
    Quality control is basically the differentiator in modern manufacturing. Intels high price chips, and low price chips are often the same chip except the low priced one failed quality control and had some of its circuits turned off.
    - LordDragonfang 6y ago
      This common process is called binning, in case anyone wants to read more on it. Wikipedia article, as a primer: https://en.wikipedia.org/wiki/Product_binning https://en.wikipedia.org/wiki/Product_binning
    - e_y_ 6y ago
      Chip binning is something of a special case. Most of the time, when part of a product fails, you have a useless/unsellable product that needs to be reworked or scrapped.
bradstewart 6y ago
The inhouse brands are quite often cheaper for the consumer. That's worth something.
- ocdtrekkie 6y ago
  They're cheaper because they're not "brand name". That doesn't mean the not brand name option needs to be owned by the retail store.
  - scarface74 6y ago
    And then they would be more expensive because they have to advertise and have their own supply chain. How does that help consumers?
    - p49k 6y ago
      There are grocery stores which sell cheaper off-label products that aren’t their own. The makers of those products don’t advertise and thus pass those savings to the consumer. It’s a system that’s already proven to work.
      - scarface74 6y ago
        Are we trying to protect consumers?
  - Cerium 6y ago
    I'm not sure about this. I think a lot of why store brands work is because you trust the store not to cheat you. If the product is bad you know who to blame. The store wants the product to be good because they will loose customers of they make bad house brand products.
    - p49k 6y ago
      A store that sells third party off-label products can still do quality control on those products and can take responsibility for what they sell, just as they would remove faulty brand-name products to protect their reputation.
scarface74 6y ago
So now we are going to pass laws that disallow cheaper house brands to “help” consumers?
- yourapostasy 6y ago
  With the rare exception like Costco, cheaper house brands often imply they're equivalent to brand name goods, but take unadvertised shortcuts in process and/or feedstock, misleading consumers who don't take the time to carefully compare to weigh whether the shortcut is worth the value to them. I wouldn't mind house brands as much if supply chain information and process information was transparent across all companies, but that supply chain information is a pseudo-trade secret (and for real-time supply chain information, definitely a trade secret) [1], and you can forget about obtaining process information. I do use house brands for some goods personally, but this is the result of many years of a lot of careful vetting and monitoring ingredient lists that I know is not commonplace nor even feasible with many retail consumers. House brands can be a useful tool in the market, but they can be abused in too many ways for me to relax my vigilance as a consumer. They also can be abused in too many ways in their distribution channel role to obtain highly-granular, time-sensitive competitive information that normally wouldn't be available in the open market, for me to completely accept their unregulated deployment. I wouldn't go as far as to say ban house brands by law. But I wouldn't want to keep them completely unregulated in all contexts like we are currently doing, either. Happy to change my mind with any new information anyone cares to share though, as this isn't an area I keep a close eye upon. [1] https://www.importyeti.com/ https://www.importyeti.com/
  - scarface74 6y ago
    Housebrand OTC drugs in particular are the same as the name brand equivalent. There was a Freakonomics episode where they said pharmacists overwhelmingly choose house brand OTC products. House brands of any product have to pass the same relevant regulations.
    - yourapostasy 6y ago
      Yep, likely because OTC pharma is a tightly-regulated market? However, there are still gaps I haven't found explanations for yet, so I must be misunderstanding how house branding works. For example, house brands have not materially impacted the insulin market [1] even though it is quite regulated to my best understanding. Even when insulin patents expire, there haven't been house brands introduced on more modern formulations [2] [3]. Nor have house brands moved into vaccine production. There is probably much, much more than meets the consumer retail eye to house branding, and I'd love to get an insider's look at the factors and considerations around the decision to roll out a house brand product. [1] https://insulinnation.com/treatment/why-walmart-insulins-arent-the-answer-to-high-insulin-prices/ https://insulinnation.com/treatment/why-walmart-insulins-are... [2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4955122/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4955122/ [3] https://www.pbs.org/newshour/health/insulin-market-shakeup-patients https://www.pbs.org/newshour/health/insulin-market-shakeup-p...
JackFr 6y ago
> I don't think anything good would be lost if store brands went away A cheaper alternative for consumers? Consider some consumer good made overseas produced at the same factory for both the name brand and store brand. As a consumer why should I have to pay for the huge marketing spend the name brand needs to recoup? I don't see how harming consumers is a useful end of anti-monopoly laws.
- srtjstjsj 6y ago
  No-name brands don't have to be store brands, and aren't always.
reaperducer 6y ago
They're usually just rebranded from some other company anyways This is a common belief, and also mostly false. I think it's common because it used to be true, but isn't anymore. With the economies of scale that a company like a Target or a Wal-Mart have these days, plus the ever-declining cost to manufacture goods, most store brands are actually run for those stores, and not re-labeled big brand goods, or seconds that were rejected by the primary contractor.
- delfinom 6y ago
  Depends on the product really. Some name brands don't even formulate the product themselves but rather just stamp their name on it just like the stores would. The result is the true manufacturer is able to manufacture the same good under multiple brands rather easily.

pcdoodle 6y ago

Considering Walgreens and Target don't own 50% of the offline marketplace, Perhaps that could be a factor.

scarface74 6y ago
Amazon has 5% of retail. Walmart is still larger. https://www.mediapost.com/publications/article/331054/report-walmart-continues-to-gain-market-share-in.html https://www.mediapost.com/publications/article/331054/report... Geeks have been complaining for decades that companies shouldn’t be able to patent stuff because “it’s on the internet”. Why limit the relevant market to “on the internet”?
deleted 6y ago
[deleted]

CarVac 6y ago

I don't think brick-and-mortar stores are operating a marketplace the way Amazon is, though.

notyourwork 6y ago
How are they different?
- spockz 6y ago
  They still source their products from the same manufacturers as the brand products. It is just the label or the fragrance that is slightly different. In Amazon’s case it sources it’s copied product from different manufacturers. So once you get a successful product you cloned by a powerful Amazon. And Amazon can always do it cheaper than you.
- rrobukef 6y ago
  As long as I remember there have been no complaints about restricting advertisements. (Although plenty of other anti-competitive behaviour) Amazon touts a 'free' marketplace where anybody can sell and advertise their product. Yet it uses its monopoly on ads within their domain against others.
- CarVac 6y ago
  Brick and mortar stores buy from wholesalers and resell. Amazon facilitates direct transactions between buyers and sellers. It also participates as a seller.
  - deleted 6y ago
    [deleted]
- darksaints 6y ago
  They own the inventory and therefore take the risk of selling it. Amazon doesn't own the inventory of its marketplace sellers, and they can do anything they want to put them out of business at no financial risk to themselves.

jedberg 6y ago

Those aren’t marketplaces. They have to buy the products they sell.

baskire 6y ago
They actually don’t buy all the products they sell. They often only pay the manufacturers after its sold. And sometimes don’t return the units which don’t sell
- jedberg 6y ago
  > They actually don’t buy all the products they sell. This is not true at all. Costco buys everything they sell. > They often only pay the manufacturers after its sold. This is true, and may be where your confusion lies. They buy on net 30/60/90 terms from their vendors. This means they have 30/60/90 days to pay them. Because they move inventory so quickly, they have often sold an item before they have to pay for it. But they are still buying it and still taking the risk that it won't sell. > And sometimes don’t return the units which don’t sell This is only true because as I said before, they own the items.
  - sib 6y ago
    Perhaps, but Walmart (and many other retailers) do not pre-buy all the products that they sell.
    - notatoad 6y ago
      do you have a source for that? because my understanding (from my time working in that industry) is that everything is sold in exactly the fashion that the parent describes - wal-mart purchases from suppliers and sells to customers. they purchase a lot on credit, but no supplier is giving wal-mart terms like "just hold this in inventory for as long as you want and pay us whenever it sells"
      - HenryBemis 6y ago