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Title -
Private Label Perceptions & its Impact on Store
Loyalty: An Empirical Study
Authors -
1. Dr. Shahir Bhatt
Assistant Professor – National Institute of Cooperative Management. Gandhinagar, Gujarat
[email protected] , 9687600550
2. Ms. Amola Bhatt
Assistant Professor – L.J. – MBA Program. Ahmedabad, Gujarat
[email protected]
SIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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Abstract
Rationale: Retailing in India is evolving rapidly, indicated by
increase in consumer spending at unprecedented rates and increase
in number of global players investing in this sector. Private
brands, which were once a small part of retailers’ merchandise,
are occupying a significant portion of most retail operations
today. For evaluating any retail store, the first thing customer
takes into account is the brands (merchandize) it carries. This
statement holds true in case of metro cities; however, a similar
trend is evident in the young urban population of Ahmedabad as
well. The current study attempts to discover the consumer
perceptions related to private labels in apparels and its impact
on store loyalty.
Purpose: The study indicates the factors moderating the
perceptions of customers towards private labels and tries to
explore their impact on store loyalty.
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Design/methodology/approach – The data is collected using a self
administered questionnaire. The sample size for the study is 305
respondents. The focal product was private label apparels sold in
four retail stores of Ahmedabad district. Analysis has been done
by using multivariate technique like Factor Analysis followed by
one way ANOVA and Chi Square test.
Findings – The factors for moderating private label perceptions
include value, proximity, brand loyalty, familiarity, shopping
exploration, sale proneness, store image and variety seeking
behavior. Additionally it was found that value, proximity, brand
loyalty, familiarity, shopping exploration and store image have
relationship with store loyalty. It was also found that
innovativeness and promotional offers have association with store
loyalty.
Research Limitations/implications - A key limitation of this
study is the sampling frame. Future studies should replicate this
study in different context.
Keywords – Private labels (PL), Store Loyalty
Paper type Research paper
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Introduction
Retailing in India is evolving rapidly, with consumer spending
growing by unprecedented rates and with increasing number of
global players investing in this sector. The Investment
Commission of India has projected a three times growth in retail
market in India by 2016, and organized retail will occupy almost
16% (US $165 billion) of the same. Apparel, along with food and
grocery, will lead the organized retailing in India. The Indian
apparel industry is estimated to be worth Rs. 1,876 billion in
FY11 and is expected to grow at a CAGR of 8.7 per cent till FY16.
The growth would primarily be driven by the surge in demand
for readymade apparels in rural areas, rising income levels and
young population and increasing preference for branded
apparels. Apparel shopping consists of shopping for men’s and
boys’ wear, women’s, children’s, girls’ and infants’ wear,
general clothing businesses, footwear, leather products and
travel goods (Guy 1998).
Perception is a process by which we select, organize, and
interpret information to create a meaningful picture of the world
(Bernard Berelson and Gary Steiner, 1964). The Private Label
Manufacturers Association (2010) provides on its website the
following definition for private labels: “Private label products
encompass all merchandise sold under the retailers’ brand. The
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brand can be retailer’s own name or a name created exclusively by
the retailer. In some cases, a retailer may belong to a
wholesaler group that owns the brands that are available only to
the members of the group.” A Private Label Brand (PLB) is
defined as “a brand owned by the retailer or a wholesaler for a
line of variety of items under exclusive or controlled
distribution” (Nielsen, 2005). Private labels are also known as
private brands, store brands or own brands.
The introduction and development of private brands is constantly
on the rise. Private brands which were once a small part of
retailers merchandise, account for a significant portion of most
retail operations. For evaluating any retail store, the first
thing customer takes into account is the brands (merchandize) it
carries. This statement holds true in case of metro cities;
however, a similar trend is evident in the young urban population
of Gujarat as well. The current study attempts to discover the
consumer perceptions related to private labels in apparels and
their impact on store loyalty.
Literature Review
Sharma et al. (2010) showed that in India private brands account
for only 5% of the total organized retail market whereas globally
it is 17%, hence, private labels have a huge potential here.SIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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Vakariya and Chopde (2011) researched on private label and
national brands for the apparel segment and found out that store
brands provide value for money to the customers and higher margin
to the retailers. Customers have strong brand preference for
national brands. A study conducted by Roy (2005) on factors
governing consumers’ choice of supermarkets, analyzed that
factors such as add on benefits, general services, convenience
and variety influence consumers’ choice of supermarkets.
Krishna & Venketesh (2008) researched on clothing, textile and
fashion accessories segment and showed that the segment occupies
a share of 12% in total retail sales and has been growing at the
rate of 18% per annum. A large number of players have entered in
the organized and unorganized sectors. These players have
realized that in order to attract the customers, they need to
offer a wide variety of merchandize in terms of width, length and
depth and also need to provide intangibles in the form of store
image, experience and ambience.
Conventional wisdom maintains that PL use is associated with
higher store loyalty. For example, Richardson, Jain, and Dick
(1996) state that “store brands help retailers increase store
traffic and customer loyalty by offering exclusive lines under
labels not found in competing stores.” Likewise, the Private
Label Manufacturers Association (2007) Web site states that
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“retailers use store brands to increase business as well as to
win the loyalty of their customers.” However, empirical evidence
on the subject is mixed. On the one hand, a positive correlation
between PL use and store loyalty has been observed in some
studies (e.g. Ailawadi, Neslin, and Gedenk 2001; Kumar and
Steenkamp, 2007). Corstjens and Lal’s (2000) analytical model
supports PLs’ ability to build store loyalty, and Sudhir and
Talukdar (2004) report indirect support for PLs’ store
differentiating ability. On the other hand, there is evidence
that consumers may not differentiate between different retailers’
PLs; that is, PL users may be loyal to PL products in general,
not to the PL of a particular retailer (Richardson 1997). If this
is the case, it is difficult to understand how PL use would
increase store loyalty.
Empirical research was carried out by Chavadi & Kokatnin (2008)
to investigate whether private label brands result into store
loyalty. As per Marcel and Lal (2000), a research on building
store loyalty through store brands, revealed that when consumers
are sensitive to product quality and brand choice, then quality
store brands introduced by retailers can be used as an instrument
to create store differentiation and thereby develop store loyalty
and store profitability. This holds well for packaged goods
categories and not for cheap private labels. The research
highlights that store brands and national brands playSIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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complementary roles, while the former becomes a source of store
differentiation and loyalty; the latter plays the role of
increasing the price of store labels thereby contributing towards
store profitability.
Goswami (2012) investigated from their survey that variables such
as quality, number of categories, innovativeness, price gap, and
promotion have strong association with store loyalty. Gogoi
(2013) explained that purchase intention itself develops a loyal
feeling about the product or service the customer intends to buy
which in turn may transform the customer to become loyal to the
brand. Hence, here the researcher has tried to figure out the
relationship between private label use and store loyalty in
Ahmedabad.
Research Objectives
To bring out the major factors that affect the perception of
consumers related to private label apparels
To analyze whether the following parameters have impact on
store loyalty:
a. Factors brought out from the study
b. Innovativeness of store brand
c. Price differentiation
d. Promotion
Research Methodology SIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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The research design for the study is descriptive in nature. The
sampling unit consisted of consumers who were aware of private
labels of major apparel formats located in Ahmedabad (Pantaloon,
Westside, Lifestyle and Shopper Stop). The questionnaire
constructed for the study included several questions which were
continuous and categorical in nature. A scale was constructed
with five point Likert type statements in which respondents were
asked to indicate their level of agreement (1 = strongly disagree to
5 = strongly agree). For this study, the scale constructed by Gomez
and Fernandez (2009) was used which comprised 26 Likert scale
statements. The final study involved a survey conducted in
Ahmedabad between December 2013 and February 2014. The sampling
technique used for the study was convenient sampling. Reponses
were obtained from 305 respondents. SPSS 19 was used to analyze
the data. Factor Analysis along with ANOVA and chi square was
used to analyze the data collected.
Data Analysis
The breakup of the sample on demographic variables is provided
below.
Table 1 Demographic Statistics
Particulars Specifications Frequency PercentageGender Male
Female
181
124
59.3
40.7
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Marital Status Married
Unmarried
45
260
14.8
85.2Education Level Under-graduate
Graduate
Post-graduate
15
104
186
4.9
34.1
61.0Monthly Income Less than 25,000
25,000-50,000
50,000-75,000
More than 75,000
205
56
19
25
67.2
18.4
6.2
8.2Age Less than 25
25-35
More than 35
244
50
11
80.0
16.4
3.6Occupation Service
Business
Housewife
Student
75
41
9
180
24.6
13.4
3.0
59.0
Table 2 Rank Order/Weighted Score
Attributes Weighted Score RankQuality 80.13 1Price 68.4 2Comfort 67.13 3Brand Name 53 4Store Name 36.93 5
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From the above table 2, we can observe that Quality has been
given 1st rank among the 5 attributes followed by price, comfort,
brand name and store name in the order of their importance given
by consumer during their shopping trips. This ranking order
suggests that consumers of Gujarat are very quality conscious as
well as price conscious.
Factors Affecting Consumer Perceptions
To determine the important factors affecting the perceptions of
consumers, the Principal Component Factor Analysis (PCA) with
varimax rotation was performed for the 26 items measuring
perceptions of consumers. The result indicated that the
Bartlett’s Test of Sphericity (Bartlett, 1954) was significant
(Chi-Square 3053.81, p-value < 0.0001). The Kaiser-Mayer-Olkin
(KMO) measure of sampling adequacy was high at 0.932. This KMO
value of 0.932 is excellent since it exceeded the recommended
value of 0.6 (Kaiser, 1974). The two results of (KMO and
Bartlett’s) suggest that the data is appropriate to proceed with
the factor analysis procedure (Malhotra, 2010).
Exploratory Factor Analysis (EFA) was performed and only those
factors were retained which had an eigen value more than 1 since
they are considered significant. An eigen value represents the
amount of variance associated with the factor. The result wasSIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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that there were a total of 8 factors, which explained for 67.806
% of the total variance. The inter-item correlation and inter-
item consistency of each Factor was also measured by calculating
each Factor’s Cronbach’s alpha (Cronbach 1951).
Table 3 Factors influencing private label perceptions
Valu
e
Proximi
ty
Brand
Loyal
ty
Fami
liar
ity
Shoppi
ng
Explor
ation
Sale
Pron
enes
s
Stor
e
Imag
e
Varie
ty
Seeki
ngImportance of
information written
on PL in apparels.
0.74
6
Both price and
quality are equally
important while
purchasing PL in
apparels
0.67
1
Style is an
important criteria
for purchasing PL
Brands in apparels
0.50
3
Generally I like to
try new brands
0.49
3I like some variety
from time to time
among known brands
0.48
9
I don’t mind 0.711
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gifting PLs in
apparels to guestsI don’t mind
admitting that I
buy these PL brands
0.618
Ingredients are
important while
purchasing PL
brands in apparels
0.531
If there were no
PLs in my store, I
would look for them
in other store
0.731
I consider myself
loyal to PLs in
apparels
0.655
PL brands always
meet my expectation
0.531
With PLs in
apparel, I get what
I am looking for
0.435
PL brands in
apparels never let
me down
0.63
8
PL brands in
apparels have a
good reputation
among consumer
0.55
3
Store name is an 0.50
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important criteria
for purchasing PL
apparels
3
PL brands in
apparels provide me
with security and
trust when I use
them
0.48
3
Expert shoppers
always buy these PL
brands
0.738
Smart shoppers
always buy PL
brands in apparels
0.725
When there are
sales on brands
other than PLs, I
always buy other
brands
0.74
2
Most times I do
shopping in nearby
stores
0.65
5
I always buy brands
that are on sale
0.63
6Store external
aspect are
important when
going for PLs in
apparels purchase
0.64
5
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Display is an
important parameter
while selecting PLs
in apparels
0.47
2
If the PLs in
apparels that I
usually buy are not
available one day,
I buy another brand
0.707
Although I am
satisfied with some
PL brands, I get
bored always buying
the same ones
0.447
I usually prefer
not to spread my
shopping around
to different stores
0.746
Interpretation
Factor 1 is loaded on 5 variables. This can be labeled as
“Value”, as these 5 variables revealed the perception of
consumers towards the quality indicators like information on PL
brands, price-quality relationship, style, trying new brands and
asking for variety among known brands by consumers. The items
received a mean of 3.33 on a scale of 1 to 5 where majority of
them were neutral that value is an influential factor for the
purchase of PLs. Cronbach alpha for these five items was 0.806.SIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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Identical study by Sethuraman (2003) concluded that store brand
consumers are those who: “(i) value price as an important
criterion for purchase, and (ii) do not value brand image as
important, but (iii) may consider quality as an important
determinant when choosing among brands.” Vakariya and Chopde
(2011) researched on private label and national brands for the
apparel segment and also found out that store brands provide
value for money to the customers and higher margin to the
retailers. This study also confirmed that value related measures
are related to private label brand perceptions. Factor 2 is
loaded on 3 variables. This can be termed as “Proximity”, as
these variables describe the closeness of the consumers towards
PL brands in apparels. The given factor name can be derived from
the type of variables included like confidence in gifting the PL
apparels, admitting about their purchase and relying on the
ingredients that PL apparels possess. The items received a mean
of 3.17 which depicted that respondents were neutral towards the
proximity factor. Cronbach alpha for these three items was 0.690.
Though it may sound very elementary, but this closeness factor is
extremely important in influencing the self perception of
consumers. Consumers who usually buy Store Brands (SBs) perceive
these brands to be suitable for “people like me.” Shoppers who
are closer to these brands will be more confident in obtaining
satisfactory performance with them. Research with Spanish
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customer done by Gomez and Fernandez (2009) suggested that
shoppers who are closer to these brands will be more confident
with them. Consistent with our expectations based on the
literature analysis, it was found that proximity represented a
basis for explaining Store Brand proneness.
Factor 3 includes variables which indicated fulfillment of
expectations by PLs and PLs meeting the consumer preferences.
This factor can be described as “Private Label Loyalty”. This
indicates some consumers prefer PLs when given choice between
national brands and store brands. The items received mean of 3.06
which can be referred as neutral attitude of respondents towards
brand loyalty. Cronbach alpha for these four items was 0.748.
Prior studies on this topic tested the negative influence of
brand loyalty on PL attitude and purchasing (Baltas, 1997; Burton
et al., 1998; Garreston et al., 2002). Factor 4 is loaded on 4
variables. This factor includes the variables that lead to the
knowledge and awareness among the users and potential users of
the PL brands in apparels. So this factor may be labeled as
“Familiarity”. It includes PLs’ ability to serve, reputation,
store name, security and trust. The items received mean of 3.19
and cronbach alpha value of 0.754. Factor 5 is loaded on 2
variables. This can be referred as “Shopping Exploration”. This
is because it is believed that smart shoppers as well as expert
shoppers tend to buy PL brands in apparels. This makes themSIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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opinion leader for the rest of the consumer segment to create
positive word of mouth. The items received mean of 2.77 and
cronbach alpha value of 0.717. Baltas (1997) found a negative
relationship between exploration and PL attitude. In contrast,
for Ailawadi et al., (2001) this relationship was not
significant.
Factor 6 is loaded on 3 variables. This can be labeled as “Sale
Proneness”, which describes whether the consumers purchase of PL
brands in apparels is influenced by promotional offers i.e Sales
or discounts or not. This factor includes variables like buying
brands i.e. store brands and national brands, when they are on
sale and shopping only from nearby stores. These items received
mean of 2.77 and cronbach value of 0.608. Consumers’ perception
of the price may also be related to sale proneness. Lichtenstein
et al. (1993) defined sale proneness as “an increased propensity
to respond to a purchase offer because the sale from which the
price is presented positively affects purchase evaluations.”
Those consumers who viewed price as what they gave up for the
product might exhibit sales proneness (Jin et al., 2005). Baltas
(1997) found that consumers who usually search for price cuts and
special offers were not private label brand prone. Factor 7 is
loaded on 2 variables. This might be termed as “Store Image” that
induces and attracts the current as well as potential consumers
of the PL brands towards the store. The store criterion includesSIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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the importance of a store’s external aspects and displays. The
item received mean of 3.17 and cronbach value of 0.610. Store
image is reflected in the store’s physical environment, and in
perceptions of its goods and service quality (Semeijn et al.,
2004). Therefore, store image strongly influences store brand
perceptions (i.e. brand image) (Collins-Dodd and Lindley, 2003)
and store brand attitude (Semeijn et al., 2004). However, the
extrinsic cue (store name) is more relevant for store brands than
national brands. Factor 8 is loaded on 3 variables and it has
been labeled as “Variety Seeking Behavior”. This includes
variables like looking for other brands due to lack of
availability, boredom and spreading shopping among different
stores. This suggests consumer’s neutral behavior of trying for
something new at regular intervals and not sticking to only one
thing. This item showed a mean of 2.99 and cronbach alpha of
0.611.
Hypothesis 1
Ho: There is no significant relationship between the factors
brought out from the study and store loyalty
The following Table 4 shows the result of One Way analysis of
variance. Data is normally distributed and variance is
homogenous.
Table 4 ANOVASIESCOMS Journal of Management, Volume 10, Issue 2 (ISSN: 0974-2956)
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FactorsStoreLoyalty Mean Std Deviation F Sig.
Value Yes 3.47 0.864 9.083 0.003No 3.16 0.952
Proximity Yes 3.27 0.886 4.802 0.029No 3.04 0.898
Private Brand Loyalty
Yes 3.23 0.869 16.835 0.000No 2.85 0.729
Familiarity Yes 3.33 0.819 10.904 0.001No 3.02 0.826
Shopping Exploration
Yes 2.92 0.947 8.784 0.003No 2.59 0.979
Sale Proneness Yes 2.7 0.758 1.109 0.293No 2.8 0.853
Store Image Yes 3.27 0.931 4.136 0.043No 3.03 0.997
Variety SeekingBehavior
Yes 3.02 0.814 0.4 0.528No 2.96 0.828
There is a statistically significant difference between groups as
determined by one-way ANOVA for Value, Proximity, Private Brand
Loyalty, Familiarity, Shopping Exploration and Store Image. Hence
we can reject the null hypothesis for the above factors. It can
be inferred that Value, Proximity, Private Brand Loyalty,
Familiarity, Shopping Exploration and Store Image have
relationship with store loyalty. Sale proneness and variety
seeking behavior have no relationship with store loyalty.
Hypothesis 2
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Ho: There is no association between the following factors and
store loyalty
a. Innovativeness of store brand
b. Price differentiation
c. Promotion
The following Table 5 shows the result of Chi Square.
Table 5 Chi Square
Store LoyaltyPearson Chi
SquareValue
SignificanceYes No
Innovativeness Innovative 155 106
8.103 0.005Traditional
16 28
Price Difference between Private Brand and Store Brand
More 120 88
0.703 0.458Less 51 46
Promotional Offers Yes 114 687.913 0.003No 57 66
A rejected null hypothesis is reflected for innovativeness and
promotional offers, where the significance value is less than
0.05. Hence there is an association between innovativeness and
store loyalty; and promotional offers and store loyalty.
Retailers should come up with innovative private labels, and also
go for promotional campaigns in order to make the customers loyal
to the store.
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Conclusion
Private labels have come a long way over the last three decades.
Retailers of Private labels brands in apparels should mainly
focus on providing products that are valuable to customers and
that would be beneficial for satisfying customer needs and
retailers profitability. This can even lead to good image
building for the retailers in the long run. The factors
moderating private label perceptions include value, proximity,
and brand loyalty, familiarity, shopping exploration, sale
proneness, store image and variety seeking behavior. Additionally
it is found that value; proximity, brand loyalty, familiarity,
shopping exploration and store image have relationship with store
loyalty. It is also found that innovativeness and promotional
offers have association with store loyalty. Hence, a retail
format should focus on the above-mentioned factors so as to
expect loyalty from their customers.
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