The Evolution of Private Label Products in Turkey: What to Do Next?

The Evolution of Private Label Products in Turkey: What to Do Next?

Yusuf Arslan (Sakarya University, Turkey)
Copyright: © 2020 |Pages: 16
DOI: 10.4018/978-1-7998-0257-0.ch001

Abstract

The purpose of this chapter is to reveal the recent situation in Turkey for private label products in detail and to create some insights for marketing professionals in terms of which marketing strategy to use for private labels to become more successful in the market. To reach this aim, a literature review has been made to understand the success of developed markets and to reveal the marketing strategies that would be proper to implement also in the Turkish market. Then, certain marketing strategies were proposed to the professionals in the Turkish market. One of the main solutions revealed in this study was the importance of creating premium private labels for the Turkish market. It was also understood that Turkish professionals can benefit from the successful marketing activities implemented by developed markets earlier.
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Introduction

Private label (PL) products have been quite successful in recent years globally. The market share of PLs has increased significantly across the world over the last decades (Sethuraman & Gielens, 2014). Nielsen information across more than 60 countries also shows that PL products continue to gain share across all major geographies (Nielsen, 2018). The main aim of these products was to provide cheap alternatives over national brands (NB) at an acceptable quality when they were first launched to the market. However, the quality of PLs has evolved into products that comparable to NBs for certain markets. Some PL products are even considered to have a higher quality than NBs (Dekimpe & Deleersnyder, 2018). But this situation is not valid for all markets.

PL brands have a multi-tiered offering in the most developed markets. They mainly make use of a “good-better-best” approach. According to this approach, the quality of PLs is divided into three PL tiers which are economy, standard and premium. Standard PLs are older and widely available ones which have been in the market for quite a long time (Geyskens et al., 2010). However, economy PLs are positioned at the bottom of the market with the strategy reducing the costs by using cheaper ingredients. And standard PLs mainly imitate the main national brands and they are considered as medium quality alternatives. The best alternatives are premium PLs which have a similar or higher quality then the NBs with similar prices (Vroegrijk et al, 2016). Over the last two decades, although PLs have almost caught up with the NBs in terms of quality, they are still considered mainly as value for money alternatives in the eyes of most consumers (Steenkamp et al., 2010).

With the development of PL products, the instruments of the competition in the market have also been changed as retailers develop and market their own products. This is an important development due to the fact that PL products have benefits for all its stakeholders. Retailers use PLs as a tool to gain bargaining power and a competitive advantage over other retailers. PLs also help retailers to increase profit margin and store loyalty (Sarantidou, 2017). They also provide benefits for manufacturers by increasing revenues and also for customers by giving them the opportunity to find cheaper alternatives with similar level of quality (Hyaman et al., 2010). However, PLs do not share the same destiny for all countries and apparently a quite many of them still do not have the chance to take advantage of those benefits considering the low PL shares in their domestic markets. While it has been much successful for Europe than US or Asia-Pacific, yet it is not homogenous for all European countries. For example, volume share of PLs for Italy is 20%, for the Netherlands is 26% while it is 50% for Switzerland and 52% for Spain (plmainternational.com, 2018). In the case of Turkey, although PL market is growing rapidly, there is still much way to go compared to the developed markets like the UK and Switzerland. In spite of the big increase in recent years, the value share for PLs is only 25% for Turkey which means there is still too much way to go for Turkey to reach the level of the developed markets. But, what can be done for Turkish PL market to increase the value share of PLs? What is missing? Will the increase for the PL market continue for Turkey until the market shares reach 50% rate compared to national brands like Spain or Switzerland? Or will marketing professionals need to do something else?

The main aim of this study is to elucidate the questions given above and give suggestions to the practitioners of Turkish retailing sector regarding to making PLs more successful and increase their market shares. Although, there are quite many number of studies focusing on the driving forces behind PL growth (e.g. the determinants of market share (Lamey et al. 2007; Sethuraman et al, 2014), success (Batra & Sinha, 2000), consumer characteristics (Baltas & Argouslidis, 2007), branding strategies (Geykens et al., 2018 etc.), it would not be possible for a single study to overcome this issue. Thus, a vast literature review has been made in this study to be able to give those suggestions in one study by adapting them to the Turkish market considering its unique characteristics.

Key Terms in this Chapter

Stand-Alone Branding: The strategy that retailers use for their private label products by creating a different brand name for them other than their own store name.

National Brand: The brand that is marketed and distributed nationally which is also owned by a national manufacturer.

Discount Retailer: A retailer that sells products at an acceptable quality and price by saving from their marketing expenses.

Premium Private Label Brand: The brands which have similar or even higher quality than national brands which are owned and produced by the retailer.

Rebranding: Branding activities to reposition a brand which were positioned differently.

Store-Banner Branding: The strategy that retailers use by giving their own store name to their private label products.

Private Label Brand: Cheaper alternatives of national brands with an acceptable quality which are owned & produced by the retailer.

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