how do corporations get away with “house brands” such as Walmart having Equate products that are “Head and Shoulders” shampoo even comparing themselves to them on the bottle and are cheaper?

Question

how do corporations get away with “house brands” such as Walmart having Equate products that are “Head and Shoulders” shampoo even comparing themselves to them on the bottle and are cheaper?

In: Economics

Answer 1

You pay extra for the brand name. Sometimes there is a difference, sometines, there is not.

Let’s say P&G negotiates with Walmart buyers, and Walmart says, we’d like to sell Head & Shoulders for X. P&G won’t do it because it’s selling Head & Shoulders for Y and doesn’t want Safeway to get undercut. However, that’s exactly what Walmart wants.

So P&G says it will bottle Head & Shoulders under the Equate brand. The equate bottle will contain 15% water, so they’ll make bigger margins on the shampoo. The overall average price between the two puts the price where Walmart wants it.

So Walmart is happy, they got their price. Safeway is happy because they don’t want to be the fat red-neck store. P&G is happy because they sell in Walmart too. People who are stuck on brand names get their brand. People who think they’re saving money are happy even though they’re getting ripped off.