E-tailer's choice between low-quality store brand and high-quality store brand: the role of data-driven marketing

In addition to selling the manufacturer's national brand, the e-tailer also sells low-quality or high-quality store brands. Meanwhile, data-driven marketing can help the e-tailer sell more store brands, but it can also promote national brand sales, which may intensify competition and hurt the e-tailer. Considering the impact of data-driven marketing, our study investigates the e-tailer's choice between low-quality and high-quality store brands, and analyzes how store brands affect the national brand manufacturer, consumer surplus, and social welfare. We find that, due to data-driven marketing, the e-tailer can benefit from the low-quality store brand even though its quality disadvantage is pronounced. The e-tailer prefers the high-quality store brand if the procurement cost of the high-quality store brand is low and the quality disadvantage of the low-quality store brand is relatively moderate. Data-driven marketing makes the e-tailer more likely to choose the low-quality store brand. Second, the national brand manufacturer prefers the high-quality store brand to the low-quality store brand if the quality disadvantage of the low-quality store brand is unremarkable or if the procurement cost of the high-quality store brand is high. Third, when the e-tailer implements data-driven marketing, if the procurement cost of the high-quality store brand is high and the quality disadvantage of the low-quality store brand is unremarkable, then compared with introducing the high-quality store brand, introducing the low-quality store brand can improve consumer surplus and social welfare. Furthermore, we expand our models to take into account coexistence of the low-quality store brand and the high-quality store brand, the different impacts of data-driven marketing, marketing cost sharing, and endogenous store brand quality.