1. Why do you think chain stores carry brand-name items alongside their own in-house brands?

2. What are some of the ways that stores such as Target are able to keep their prices low?

Shoppers who buy brand-name products usually cite quality as a reason. Shoppers who buy store-brand products usually cite price. Is it possible to have the best of both worlds?

Retailers such as Target, CVS, and Walgreens have found they had too many of the same products under different brand names. They saw that shoppers were buying less and looking for bigger bargains than usual. Items that weren’t selling well were replaced by more popular brands or by in-house generics. This was particularly true of such basic items as household and personal products and food staples. As one observer said, “People don’t want to have to choose between among 15 or 20 different brands of toilet paper or paper towels or even basic food stuff.” The retailers were confident that shoppers would be eager to snap up these bargains.

Target guessed that consumers would buy their in-house brands and it looks like they were correct. The high quality store lines that Target stocks have yielded a 2 percent increase in same-store sales for one recent month. The in-store brands of up & up, Archer Farms, and Market Pantry account for more than 20 percent of all food products sold at Target. A retailing analyst wrote in a recent report, “the company has unique top-line drivers that aren’t dependent on macro recovery.”

To some extent, this overall strategy has worked. The market share of store brands has grown between 2 and 6 percent. And 77 percent of consumers who bought less expensive store-brand items were satisfied with their choice.