If I understand your scenario...you have a retailer that
has developed an in-store brand of merchandise. It appears to be shoes selling in India.
This store has taken their in-store brand and merchandised it through its wholesale
channel. The problems I see with this are several but I must start with some questions
as I do not feel there is enough information given.
If the
in-store brand (brand) carries the store label through the wholesale channel then it in
one way is weakening its value. Why? Well, let's say that the store name has high
recognition and value so that a shoe with that name commands a greater demand. This is
good for the store's bottom line. However, should this brand now go through the
wholesale channel, it will be available in many more outlets. This is good for exposure
and maybe sales but the perception is now weakened and this may drive down demand as the
value of the line may be viewed as cheapened. What I'm saying is there is a certain
interest to a product that is somewhat exclusive. Take away that exclusivity, make it
available at every street corner, and its value is diminished greatly. The product is
viewed as cheap or too easily attainable and the price it can draw is diminished. Add to
that fact that retailers will charge different prices for this line. At some point will
they underbid oneanother to get the sale? Will the underbidding be so much that the
price point is less than the wholesale cost? If so, and it probably will get there
sooner than later, you will soon see retailers trying to dump the line just to recoup
some of their investment. The early dumpers will get the most for their dollar. But
through all of this you wipe out a line that could have done relatively well had its
exclusivity remained tied to one retailer.
So do I think
the company did the right thing? It truly depends on what their goals were with the line
as you can see by my answer.
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