How Hard Discounters' National Brand Strategy Impacts Consumers
How Hard Discounters' National Brand Strategy Impacts Consumers
A recent study published in the Journal of the Academy of Marketing Science (JAMS), titled “Do Consumers Benefit from National-Brand Listings by Hard Discounters?,” takes a deep dive into the effects of national brands entering hard discounter assortments. Using economic-welfare modeling and market data from hard discounter Lidl’s operations in Germany, the study quantifies how these assortment changes impact consumer pricing and access to variety.
The findings reveal both benefits and drawbacks, especially for price-sensitive shoppers.
A Strategic Shift: National Brands in the Hard-Discount Model
For years, hard discounters like Aldi and Lidl have built their success on streamlined, private-label assortments at lower prices. But recently, these retailers have been shaking things up by introducing select national brands into their shelves. What does this shift mean for consumers, and what should marketers take away from this trend?
How This Affects Consumer Welfare
While hard discounters promote national brand introductions as a win for shoppers, the research paints a more nuanced picture. The study quantifies consumer welfare in monetary terms, analyzing how national brand listings at Lidl in Germany impacted prices and access to variety. Here’s what marketers need to know
About the Research
Do consumers benefit from national‑brand listings by hard discounters?
Journal of the Academy of Marketing Science (JAMS), 2023; Volume 52
Authors:
Inge Geyskens
Barbara Deleersnyder
Marnik G. Dekimpe
Didi Lin
Full Citation:
Geyskens, I., Deleersnyder, B., Dekimpe, M.G. et al. Do consumers benefit from national-brand listings by hard discounters?. J. of the Acad. Mark. Sci. 52, 97–118 (2024). https://doi.org/10.1007/s11747-023-00937-3
1. Pricing Strategies Need to Adapt
One might assume that introducing big-name brands into discount retailers would intensify price competition, benefiting consumers. However, the research finds the opposite: prices actually rise across the market. The presence of national brands at Lidl led to an increase in private-label prices—not just at Lidl, but also at competing retailers.
Most concerningly, these price hikes disproportionately impact low-income consumers, who rely heavily on private labels for cost savings. The study found that the monetary loss for impoverished shoppers was five times greater than for affluent consumers. Marketers in the grocery space must recognize how national brand introductions reshape pricing dynamics and prepare for shifts in price perception across retail channels.
2. Segmentation is Key
Not all consumers experience these changes in the same way. While multi-store shoppers may benefit from increased price competition at conventional retailers, loyal discount-store shoppers face higher private labels prices, making everyday essentials more expensive. This pricing pressure could alter brand loyalty and shopping behavior. Marketers need to understand how different customer segments are affected and tailor their pricing and promotional strategies accordingly.
3. Brand Positioning Needs to Balance Reach and Pricing
For national brand manufacturers, entering hard discounters expands visibility and reach, but it also presents risks. Conventional supermarkets may retaliate by reducing trade support for brands that collaborate with discounters. Additionally, national brands must carefully balance their price positioning to remain competitive across both discount and traditional retail channels. Offering deep discounts at hard discounters could erode brand equity and create conflicts with conventional retail partners.
What Should Marketers Do?
Adding national brands to hard discounters reshapes pricing, competition, and consumer behavior. The key strategic takeaways include:
Adjust pricing strategies. Be aware of how national brand introductions shift price perceptions and plan accordingly.
Understand consumer segmentation. Multi-store shoppers may benefit, but discount-loyal customers face price hikes that could impact long-term loyalty.
Balance reach and pricing. National brands need to manage price positioning carefully to maintain competitiveness across multiple retail channels.
The grocery market is evolving, and so are consumer expectations. As discounters blur the lines between their traditional low-cost approach and the premium appeal of national brands, marketers must stay ahead of the curve, ensuring their strategies align with shifting market dynamics.
From the Authors
Provide precise examples of companies/organizations/industries that will benefit from your findings?
Hard discounters like Aldi or Lidl
Grocery manufacturers that supply national brands like Danone, Coca Cola, Nestlé or Proctor & Gamble and that consider selling their popular brands at the hard discounters
Policy makers that monitor competition and consumer welfare in retail markets with strong retailers and/or manufacturers.
Using one of the entities listed above, illustrate precisely how and to what extent it may benefit.
Hard discounters may be hesitant to expand their assortments with expensive national brands as it may blur their low-price image and they are unsure if the cash-trapped core buyers will purchase premium brands from a low priced assortment. Our results show that adding expensive national brands is appreciated by discount shoppers, but it will also take away pressure on other prices within and outside the hard discounter. Hard discounters will be tempted to raise prices of their low-tier brands and store brands. If hard discounters want to maintain their key value proposition, however, they should refrain from raising other prices or avoid listing (many) leading national brands.
How can the recommendations from your findings specifically be implemented?
Discounters are recommended to add leading national brands to their assortment. To avoid moving aways from their low-price image, they are recommended to maintain prices of the incumbent offerings when they strategically add higher tier national brands.
What outcomes would be expected?
We expected that consumers would benefit when hard discounters sell leading national brands because they can conveniently buy both low tier and high tier brands at the same store now. Interestingly, we see that prices especially for lower tier brands and store brands in the entire market will rise, making especially cash-constrained consumers worse off.
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