Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

Private Label Perceptions and its Impact on Store Loyalty: An

Empirical Study
Dr. Shahir Bhatt and Ms. Amola Bhatt
Dr. Shahir Bhatt is Assistant Professor, National Institute of Cooperative Management. Gandhinagar,
Gujarat Technological University, [email protected]
Ms. Amola Bhatt is Assistant Professor – L.J. – MBA Program. Ahmedabad, Gujarat Technological
University, [email protected]

Abstract stores of Ahmedabad district. Analysis has

Rationale: Retailing in India is evolving been done by using multivariate technique
rapidly, indicated by increase in consumer like Factor Analysis followed by one way
spending at unprecedented rates and ANOVA and Chi Square test.
increase in number of global players Findings: The factors for moderating
investing in this sector. Private brands, private label perceptions include value,
which were once a small part of retailers’ proximity, brand loyalty, familiarity,
merchandise, are occupying a significant shopping exploration, sale proneness,
portion of most retail operations today. For store image and variety seeking behavior.
evaluating any retail store, the first thing Additionally it was found that value,
customer takes into account is the brands proximity, brand loyalty, familiarity,
(merchandize) it carries. This statement shopping exploration and store image have
holds true in case of metro cities; however, relationship with store loyalty. It was also
a similar trend is evident in the young found that innovativeness and promotional
urban population of Ahmedabad as well. offers have association with store loyalty.
The current study attempts to discover the Research Limitations / implications: A
consumer perceptions related to private key limitation of this study is the sampling
labels in apparels and its impact on store frame. Future studies should replicate this
loyalty. study in different context.
Purpose: The study indicates the factors Paper type: Research paper
moderating the perceptions of customers
towards private labels and tries to explore Keywords
their impact on store loyalty. Private labels (PL), Store Loyalty
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

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 Dr. Shahir Bhatt and Ms. Amola Bhatt

Introduction labels are also known as private brands, store

brands or own brands.
Retailing in India is evolving rapidly, with The introduction and development of private
consumer spending growing by unprecedented brands is constantly on the rise. Private brands
rates and with increasing number of global which were once a small part of retailers
players investing in this sector. The Investment merchandise, account for a significant portion
Commission of India has projected a three of most retail operations. For evaluating any
times growth in retail market in India by 2016, retail store, the first thing customer takes into
and organized retail will occupy almost 16% account is the brands (merchandize) it carries.
(US $165 billion) of the same. Apparel, along This statement holds true in case of metro
with food and grocery, will lead the organized cities; however, a similar trend is evident in the
retailing in India. The Indian apparel industry is young urban population of Gujarat as well. The
estimated to be worth Rs. 1,876 billion in FY11 current study attempts to discover the consumer
and is expected to grow at a CAGR of 8.7 per perceptions related to private labels in apparels
cent till FY16. The growth would primarily be and their impact on store loyalty.
driven by the surge in demand for readymade
apparels in rural areas, rising income levels and
young population and increasing preference for Literature Review
branded apparels. Apparel shopping consists of
shopping for men’s and boys’ wear, women’s, Sharma et al. (2010) showed that in India
children’s, girls’ and infants’ wear, general private brands account for only 5% of the total
clothing businesses, footwear, leather products organized retail market whereas globally it is
and travel goods (Guy 1998). 17%, hence, private labels have a huge potential
Perception is a process by which we select, here. Vakariya and Chopde (2011) researched
organize, and interpret information to create on private label and national brands for the
a meaningful picture of the world (Bernard apparel segment and found out that store brands
Berelson and Gary Steiner, 1964). The Private provide value for money to the customers and
Label Manufacturers Association (2010) higher margin to the retailers. Customers have
provides on its website the following definition strong brand preference for national brands.
for private labels: “Private label products A study conducted by Roy (2005) on factors
encompass all merchandise sold under the governing consumers’ choice of supermarkets,
retailers’ brand. The brand can be retailer’s analyzed that factors such as add on benefits,
own name or a name created exclusively by the general services, convenience and variety
retailer. In some cases, a retailer may belong to influence consumers’ choice of supermarkets.
a wholesaler group that owns the brands that are Krishna & Venketesh (2008) researched
available only to the members of the group.” on clothing, textile and fashion accessories
A Private Label Brand (PLB) is defined as “a segment and showed that the segment occupies
brand owned by the retailer or a wholesaler for a share of 12% in total retail sales and has been
a line of variety of items under exclusive or growing at the rate of 18% per annum. A large
controlled distribution” (Nielsen, 2005). Private number of players have entered in the organized

32 SIES Journal of Management, September 2014, Vol. 10(2)

 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

and unorganized sectors. These players have as an instrument to create store differentiation
realized that in order to attract the customers, and thereby develop store loyalty and store
they need to offer a wide variety of merchandize profitability. This holds well for packaged
in terms of width, length and depth and also goods categories and not for cheap private
need to provide intangibles in the form of store labels. The research highlights that store brands
image, experience and ambience. and national brands play complementary roles,
Conventional wisdom maintains that PL while the former becomes a source of store
use is associated with higher store loyalty. For differentiation and loyalty; the latter plays
example, Richardson, Jain, and Dick (1996) the role of increasing the price of store labels
state that “store brands help retailers increase thereby contributing towards store profitability.
store traffic and customer loyalty by offering Goswami (2012) investigated from their
exclusive lines under labels not found in survey that variables such as quality, number
competing stores.” Likewise, the Private Label of categories, innovativeness, price gap, and
Manufacturers Association (2007) Web site promotion have strong association with store
states that “retailers use store brands to increase loyalty. Gogoi (2013) explained that purchase
business as well as to win the loyalty of their intention itself develops a loyal feeling about
customers.” However, empirical evidence the product or service the customer intends to
on the subject is mixed. On the one hand, a buy which in turn may transform the customer
positive correlation between PL use and store to become loyal to the brand. Hence, here the
loyalty has been observed in some studies (e.g. researcher has tried to figure out the relationship
Ailawadi, Neslin, and Gedenk 2001; Kumar between private label use and store loyalty in
and Steenkamp, 2007). Corstjens and Lal’s Ahmedabad.
(2000) analytical model supports PLs’ ability
to build store loyalty, and Sudhir and Talukdar
(2004) report indirect support for PLs’ store Research Objectives
differentiating ability. On the other hand, there
is evidence that consumers may not differentiate l To bring out the major factors that affect the
between different retailers’ PLs; that is, PL users perception of consumers related to private
may be loyal to PL products in general, not to the label apparels
PL of a particular retailer (Richardson 1997). If l To analyze whether the following parameters
this is the case, it is difficult to understand how have impact on store loyalty:
PL use would increase store loyalty. a. Factors brought out from the study
Empirical research was carried out by b. Innovativeness of store brand
Chavadi & Kokatnin (2008) to investigate c. Price differentiation
whether private label brands result into store d. Promotion
loyalty. As per Marcel and Lal (2000), a research
on building store loyalty through store brands,
revealed that when consumers are sensitive to Research Methodology
product quality and brand choice, then quality The research design for the study is descriptive
store brands introduced by retailers can be used in nature. The sampling unit consisted of

33
 Dr. Shahir Bhatt and Ms. Amola Bhatt

consumers who were aware of private labels of Fernandez (2009) was used which comprised
major apparel formats located in Ahmedabad 26 Likert scale statements. The final study
(Pantaloon, Westside, Lifestyle and Shopper involved a survey conducted in Ahmedabad
Stop). The questionnaire constructed for between December 2013 and February 2014.
the study included several questions which The sampling technique used for the study was
were continuous and categorical in nature. A convenient sampling. Reponses were obtained
scale was constructed with five point Likert from 305 respondents. SPSS 19 was used to
type statements in which respondents were analyze the data. Factor Analysis along with
asked to indicate their level of agreement (1 ANOVA and chi square was used to analyze the
= strongly disagree to 5 = strongly agree). For data collected.
this study, the scale constructed by Gomez and

Data Analysis
The breakup of the sample on demographic variables is provided below.

Table 1 Demographic Statistics

Particulars Specifications Frequency Percentage

Gender Male 181 59.3

Female 124 40.7

Marital Married 45 14.8

Status Unmarried 260 85.2
Table 2 Rank Order/
Education Under-graduate 15 4.9
Weighted Score
Level Graduate 104 34.1
Post-graduate 186 61.0
Attributes Weighted Rank
Monthly Less than 25,000 205 67.2 Score
Income 25,000-50,000 56 18.4
Quality 80.13 1
50,000-75,000 19 6.2
More than 75,000 25 8.2
Price 68.4 2
Age Less than 25 244 80.0
25-35 50 16.4 Comfort 67.13 3
More than 35 11 3.6
Brand 53 4
Occupation Service 75 24.6 Name
Business 41 13.4
Housewife 9 3.0 Store 36.93 5
Student 180 59.0 Name

34 SIES Journal of Management, September 2014, Vol. 10(2)

 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

From the above table 2, we can observe that 3053.81, p-value < 0.0001). The Kaiser-Mayer-
Quality has been given 1st rank among the 5 Olkin (KMO) measure of sampling adequacy
attributes followed by price, comfort, brand was high at 0.932. This KMO value of 0.932
name and store name in the order of their is excellent since it exceeded the recommended
importance given by consumer during their value of 0.6 (Kaiser, 1974). The two results of
shopping trips. This ranking order suggests that (KMO and Bartlett’s) suggest that the data is
consumers of Gujarat are very quality conscious appropriate to proceed with the factor analysis
as well as price conscious. procedure (Malhotra, 2010).
Exploratory Factor Analysis (EFA) was
performed and only those factors were retained
Factors Affecting Consumer which had an eigen value more than 1 since
Perceptions they are considered significant. An eigen value
represents the amount of variance associated
To determine the important factors affecting with the factor. The result was that there were a
the perceptions of consumers, the Principal total of 8 factors, which explained for 67.806 %
Component Factor Analysis (PCA) with of the total variance. The inter-item correlation
varimax rotation was performed for the 26 items and inter-item consistency of each Factor was
measuring perceptions of consumers. The result also measured by calculating each Factor’s
indicated that the Bartlett’s Test of Sphericity Cronbach’s alpha (Cronbach 1951).
(Bartlett, 1954) was significant (Chi-Square

Table 3 Factors influencing private label perceptions

Value Proxi- Brand Familia- Shopping Sale Store Variety

mity Loyalty rity Explora- Prone- Image Seek-
tion ness ing
Importance of 0.746
information
written on PL
in apparels.
Both price 0.671
and quality
are equally
important while
purchasing PL
in apparels
Style is an
important 0.503
criteria for
purchasing
PL Brands in
apparels

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 Dr. Shahir Bhatt and Ms. Amola Bhatt

Value Proxi- Brand Familia- Shopping Sale Store Variety

mity Loyalty rity Explora- Prone- Image Seek-
tion ness ing
Generally I 0.493
like to try new
brands
I like some 0.489
variety from
time to time
among known
brands
I don’t mind 0.711
gifting PLs
in apparels to
guests
I don’t mind 0.618
admitting that
I buy these PL
brands
Ingredients are 0.531
important while
purchasing
PL brands in
apparels
If there were 0.731
no PLs in my
store, I would
look for them
in other store
I consider 0.655
myself loyal to
PLs in apparels
PL brands 0.531
always meet
my expectation
With PLs in 0.435
apparel, I get
what I am
looking for
PL brands in 0.638
apparels never
let me down

36 SIES Journal of Management, September 2014, Vol. 10(2)

 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

Value Proxi- Brand Familia- Shopping Sale Store Variety

mity Loyalty rity Explora- Prone- Image Seek-
tion ness ing
PL brands in 0.553
apparels have a
good reputation
among
consumer
Store name is 0.503
an important
criteria for
purchasing PL
apparels
PL brands 0.483
in apparels
provide me
with security
and trust when
I use them
Expert 0.738
shoppers
always buy
these PL brands
Smart shoppers 0.725
always buy
PL brands in
apparels
When there are 0.742
sales on brands
other than PLs,
I always buy
other brands
Most times I 0.655
do shopping in
nearby stores
I always buy 0.636
brands that are
on sale
Store external 0.645
aspect are
important when
going for PLs
in apparels
purchase

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 Dr. Shahir Bhatt and Ms. Amola Bhatt

Value Proxi- Brand Familia- Shopping Sale Store Variety

mity Loyalty rity Explora- Prone- Image Seek-
tion ness ing
Display is 0.472
an important
parameter
while selecting
PLs in apparels
If the PLs in 0.707
apparels that I
usually buy are
not available
one day, I buy
another brand
Although I 0.447
am satisfied
with some PL
brands, I get
bored always
buying the
same ones
I usually prefer 0.746
not to spread
my shopping
around to
different stores

Interpretation important criterion for purchase, and (ii) do not

value brand image as important, but (iii) may
Factor 1 is loaded on 5 variables. This can be consider quality as an important determinant
labeled as “Value”, as these 5 variables revealed when choosing among brands.” Vakariya and
the perception of consumers towards the quality Chopde (2011) researched on private label and
indicators like information on PL brands, price- national brands for the apparel segment and
quality relationship, style, trying new brands also found out that store brands provide value
and asking for variety among known brands for money to the customers and higher margin
by consumers. The items received a mean of to the retailers. This study also confirmed that
3.33 on a scale of 1 to 5 where majority of them value related measures are related to private
were neutral that value is an influential factor label brand perceptions.
for the purchase of PLs. Cronbach alpha for
these five items was 0.806. Identical study by Factor 2 is loaded on 3 variables. This can
Sethuraman (2003) concluded that store brand be termed as “Proximity”, as these variables
consumers are those who: “(i) value price as an describe the closeness of the consumers

38 SIES Journal of Management, September 2014, Vol. 10(2)

 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

towards PL brands in apparels. The given includes the variables that lead to the knowledge
factor name can be derived from the type of and awareness among the users and potential
variables included like confidence in gifting users of the PL brands in apparels. So this factor
the PL apparels, admitting about their purchase may be labeled as “Familiarity”. It includes
and relying on the ingredients that PL apparels PLs’ ability to serve, reputation, store name,
possess. The items received a mean of 3.17 security and trust. The items received mean of
which depicted that respondents were neutral 3.19 and cronbach alpha value of 0.754.
towards the proximity factor. Cronbach alpha
for these three items was 0.690. Though it Factor 5 is loaded on 2 variables. This can be
may sound very elementary, but this closeness referred as “Shopping Exploration”. This is
factor is extremely important in influencing because it is believed that smart shoppers as
the self perception of consumers. Consumers well as expert shoppers tend to buy PL brands in
who usually buy Store Brands (SBs) perceive apparels. This makes them opinion leader for the
these brands to be suitable for “people like rest of the consumer segment to create positive
me.” Shoppers who are closer to these brands word of mouth. The items received mean of
will be more confident in obtaining satisfactory 2.77 and cronbach alpha value of 0.717. Baltas
performance with them. Research with Spanish (1997) found a negative relationship between
customer done by Gomez and Fernandez (2009) exploration and PL attitude. In contrast, for
suggested that shoppers who are closer to these Ailawadi et al., (2001) this relationship was not
brands will be more confident with them. significant.
Consistent with our expectations based on the
literature analysis, it was found that proximity Factor 6 is loaded on 3 variables. This can be
represented a basis for explaining Store Brand labeled as “Sale Proneness”, which describes
proneness. whether the consumers purchase of PL brands
in apparels is influenced by promotional offers
Factor 3 includes variables which indicated i.e Sales or discounts or not. This factor includes
fulfillment of expectations by PLs and PLs variables like buying brands i.e. store brands
meeting the consumer preferences. This factor and national brands, when they are on sale and
can be described as “Private Label Loyalty”. shopping only from nearby stores. These items
This indicates some consumers prefer PLs when received mean of 2.77 and cronbach value of
given choice between national brands and store 0.608. Consumers’ perception of the price may
brands. The items received mean of 3.06 which also be related to sale proneness. Lichtenstein
can be referred as neutral attitude of respondents et al. (1993) defined sale proneness as “an
towards brand loyalty. Cronbach alpha for these increased propensity to respond to a purchase
four items was 0.748. Prior studies on this topic offer because the sale from which the price
tested the negative influence of brand loyalty is presented positively affects purchase
on PL attitude and purchasing (Baltas, 1997; evaluations.” Those consumers who viewed
Burton et al., 1998; Garreston et al., 2002). price as what they gave up for the product might
exhibit sales proneness (Jin et al., 2005). Baltas
Factor 4 is loaded on 4 variables. This factor (1997) found that consumers who usually

39
 Dr. Shahir Bhatt and Ms. Amola Bhatt

search for price cuts and special offers were not loaded on 3 variables and it has been labeled
private label brand prone. as “Variety Seeking Behavior”. This includes
variables like looking for other brands due to
Factor 7 is loaded on 2 variables. This might lack of availability, boredom and spreading
be termed as “Store Image” that induces shopping among different stores. This suggests
and attracts the current as well as potential consumer’s neutral behavior of trying for
consumers of the PL brands towards the store. something new at regular intervals and not
The store criterion includes the importance of a sticking to only one thing. This item showed a
store’s external aspects and displays. The item mean of 2.99 and cronbach alpha of 0.611.
received mean of 3.17 and cronbach value of
0.610. Store image is reflected in the store’s Hypothesis 1
physical environment, and in perceptions of its Ho: There is no significant relationship between
goods and service quality (Semeijn et al., 2004). the factors brought out from the study and store
Therefore, store image strongly influences store loyalty
brand perceptions (i.e. brand image) (Collins-
Dodd and Lindley, 2003) and store brand The following Table 4 shows the result of One
attitude (Semeijn et al., 2004). However, the Way analysis of variance. Data is normally
extrinsic cue (store name) is more relevant for distributed and variance is homogenous.
store brands than national brands. Factor 8 is

Table 4 ANOVA

Factors Store Loyalty Mean Std Deviation F Sig.

Value Yes 3.47 0.864 9.083 0.003
No 3.16 0.952
Proximity Yes 3.27 0.886 4.802 0.029
No 3.04 0.898
Private Brand Loyalty Yes 3.23 0.869 16.835 0.000
No 2.85 0.729
Familiarity Yes 3.33 0.819 10.904 0.001
No 3.02 0.826
Shopping Exploration Yes 2.92 0.947 8.784 0.003
No 2.59 0.979
Sale Proneness Yes 2.7 0.758 1.109 0.293
No 2.8 0.853
Store Image Yes 3.27 0.931 4.136 0.043
No 3.03 0.997
Variety Seeking Yes 3.02 0.814 0.4 0.528
Behavior No 2.96 0.828

40 SIES Journal of Management, September 2014, Vol. 10(2)

 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study

There is a statistically significant difference loyalty. Sale proneness and variety seeking
between groups as determined by one-way behavior have no relationship with store loyalty.
ANOVA for Value, Proximity, Private Brand
Loyalty, Familiarity, Shopping Exploration Hypothesis 2
and Store Image. Hence we can reject the null Ho: There is no association between the
hypothesis for the above factors. It can be following factors and store loyalty
inferred that Value, Proximity, Private Brand a. Innovativeness of store brand
Loyalty, Familiarity, Shopping Exploration b. Price differentiation
and Store Image have relationship with store c. Promotion

The following Table 5 shows the result of Chi Square.

Table 5 Chi Square

Store Loyalty Pearson Chi Significance

Square Value
Yes No
Innovativeness Innovative 155 106 8.103 0.005
Traditional 16 28
Price Difference between Private More 120 88 0.703 0.458
Brand and Store Brand
Less 51 46
Promotional Offers Yes 114 68 7.913 0.003
No 57 66

A rejected null hypothesis is reflected for in apparels should mainly focus on providing
innovativeness and promotional offers, where products that are valuable to customers and
the significance value is less than 0.05. Hence that would be beneficial for satisfying customer
there is an association between innovativeness needs and retailers profitability. This can even
and store loyalty; and promotional offers and lead to good image building for the retailers in
store loyalty. Retailers should come up with the long run. The factors moderating private
innovative private labels, and also go for label perceptions include value, proximity, and
promotional campaigns in order to make the brand loyalty, familiarity, shopping exploration,
customers loyal to the store. sale proneness, store image and variety
seeking behavior. Additionally it is found that
value; proximity, brand loyalty, familiarity,
Conclusion shopping exploration and store image have
relationship with store loyalty. It is also found
Private labels have come a long way over the last that innovativeness and promotional offers have
three decades. Retailers of Private labels brands association with store loyalty. Hence, a retail

41
 Dr. Shahir Bhatt and Ms. Amola Bhatt

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