Many consumer-goods manufacturers believe that big-box retailers are bad for their business and a scourge on their brands. The conventional wisdom goes this way: Retailers like Wal-Mart, Toys R Us, Staples, and Home Depot cut prices relentlessly to squeeze out smaller retailers. In the process, they destroy brands and transform entire product categories into low-margin commodity markets dominated by private labels. Consumers become conditioned to buying on price and exchange loyalty to brands for loyalty to the retailer. Faced with shrinking margins, manufacturers cut back on investments in product innovation and brand building, further stunting their products’ growth.
A version of this article appeared in the September–October 2000 issue of Harvard Business Review.
