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?

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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

Here’s something to blow your mind, since you are already having a hard time understanding it:

Many times, those Equate products are made in the same plant that the name brand products are. They just put it in different bottles. You are literally buying the name of the product if you don’t want to buy the generic version.

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.

This often has benefits for the original brand too. As one can guess Head & Shoulders is rather expensive, yet effective. To truly cover the demand on the market you have to spread the supply over all levels of affordability. Thus Head & Shoulders overproduces the demand for H&S and sell the rest as bulk to Walmart for a smaller profit and a license to sell it as their house brand. This is clever on multiple levels because this way H&S can plan a constant output thus buy resources cheaper, plus they repress smaller brands from Walmart. E.g. Walmart sells three “different” shampoos: H&S for a high price, a third party brand for a reasonable price and H&S for a cheap price as their own brand. Guess who sells more shampoo to every customer group.

Because they are literally the same product, you are just paying more for the brand name product because the brand is worth that much.