Global Business and Management Research: An International Journal

Vol. 10, No. 3 (2018, Special Issue)

A Study of Purchasing Intention of Private Label

Brands in Malaysia
Lim Kah Boon
Faculty of Business, Multimedia University, Malaysia

Yeo Sook Fern *

Faculty of Business, Multimedia University, Malaysia
Email: yeo.sook.fern@mmu.edu.my

Yong Wei Meng

Faculty of Business, Multimedia University, Malaysia

* Corresponding Author

Abstract
Purpose: Today’s private label brands growing rapidly around the world. Private label brands
can be seen in almost every category of consumer product due to the entry barriers of consumer
goods industry became lower and easy to access manufactures. Thus, this has making the market
become more and more competitive among private label companies. Furthermore, the
acceptance rate of private label brands among the Malaysian are still relatively low. Hence, the
main purpose of this research is to investigate the factors that influence the purchase intention of
consumers towards private label brands.
Design/methodology/approach: Price, perceived quality, store image, brand image and
perceived risk are the independent variables and purchase intention of private label brand
product is the dependent variable in this study. A set of self-administered questionnaire has been
distributed to 200 targeted respondents in Malaysia for data collection purpose. The data are
entered into SPSS version 25 and followed by using PLS-SEM 3.2.7 for hypothesis testing
purpose.
Findings: The hypothesis result showed that perceived quality, price and store image have
significant influence on the purchasing intention of private brand products.
Research limitations/implications: The result of this study able to provide knowledge for
students and people who plan to start up a private label brand business, ensure them do not repeat
the same mistake on making strategic decisions. This study also able to explain the factors that
cause the low acceptance rate of private label brands in Malaysia.
Originality/value: To the author’s knowledge, this is the first methodological study which
include the five independent variables to evaluate the purchasing intention of private label brands
that conducted in Malaysia.

Keywords: Private Label Brands, Purchase Intention, Perceived Quality, Price, Store Image

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Introduction
Private label brand is a brand owned by a company but the products, goods and services are
manufactured or provided by other manufacturer company. Private label goods and services are
available in wide range of product categories and able to find in almost every industry that
offering the products. Private label brand company does not manufacture products by themselves
as they are outsourcing other company’s production line. The company that manufacturing or
providing products known as original equipment manufacturer (OEM). Retailers choose to use
original equipment manufacturer (OEM) as outsources due to two main reasons. First, they do
not have huge capital to build up a manufacturing plant because a plant need not only capital but
also intellectuals and technologies that are not easily to access sometimes. Both factors making
the investment of plant became even more complicated and causing retailers more willing to use
outside source to produce the products. Second, retailers feel that it is so risking investing in a
manufacturing plant and became a manufacturer. It is a kind of business diversification. This
means that a company step into a completely new business. The retailers do not have any
knowledge about being a manufacturer and if they are not able to manage well in a short period,
the company will be facing huge amount of losses and might end up with bankruptcy.

In Malaysia, most of the famous private label brands owned by international hypermarket
including Aeon, Aeon Big and Tesco while local brand such as MYDIN, Giant and Econsave are
also introduce their own private brand to increase business competitiveness. Recent years, the
private label products are more and more acceptable by Malaysian due to world’s economic
downturn and high inflation rate make the consumers are willing to choose private brands instead
of national brands. Not only hypermarket industry is doing well in private label field at Malaysia
but some other industries like cosmetic, automotive accessories and furniture also doing private
label actively. Today’s private label brands growing rapidly around the world. According to
“Shopify” E-commerce Company, private label brands can be seen in almost every consumer
product category in today’s market. The main purpose of this research is to investigate the
factors that influence the purchase intention of consumers towards private label brand. Although
private label products already widely accepted by the consumers but they still face some
problems that might affect their sustainability.

Literature Review
Purchase Intention
Purchase intention can be defined as a customer trying to buy a good or service (Diallo, 2012).
Decision of consumers’ buying is a very puzzling matter. Consumers’ behavior, perception and
attitude often influence their purchasing intention. During taking and appraising a particular
product, purchase behavior is playing an important role for consumers (Keller, 2001). According
to Ghosh (1990), the most effective tool using to forecast purchasing process is purchase
intention. Purchase intention determined the customers’ decision when they decided to purchase
a product in a particular store. Even so, influence of the price, perceived quality and perceived
value of a product might indirectly vary purchase intention of consumers (Zeithaml, 1988;
Grewal et al, 1998).

Brand Image
A sequence of brand associations encoded in a consumer’s memory is defined as brand image
(Aaker, 1991). On the other hand, Keller (1993) defined brand image as the consumers’

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perceptions towards a brand is caused by the amount the total of brand associations held in the
memory of the consumers. Furthermore, quality dimension and affective dimension are classified
under associations of brand image (Keller, 1993). All these associations of brand image playing
very an important role because they influencing perceived quality in terms of attitudes and
beliefs (Vahie and Paswan, 2006). The strong, favorable and unique associations to the brand in
consumers’ minds are linked by a positive brand image (Keller, 2003).

Perceived Quality
Zeithaml (1988) has stated that quality means standard or value of a product, good or service.
Thus, meaning of perceived quality can be defined as the consumer's evaluation towards a
product's overall value or standard. According to few other authors, they claim that the quality
can be divided in to two categories, which are objective quality and perceived quality (Jacoby
and Olson, 1985). The problem occurs when come to measure quality of a product because there
is no an exact reference or measurement to measure a product quality. Thus, perceived quality
will become the consumers’ subjective meaning. Burt (2000) have concluded that during
customers come to evaluate the quality of private label brands. They are applying the perceived
quality of other brands to become the threshold of reference.

Perceived Risk
Consumer behavior researchers have used the concept of perceived risk to define consumer
perceptions regarding the uncertainty and harmful outcomes of buying a product or service
(Stone and Grønhung, 1993). Wu, Yeh and Hsiao (2011) explained that the concept of perceived
risk was developed from the psychology perspective as this is according to consumers’ feel of
uncertainty or expected loss which related to goods and services. Usually, most of the consumers
will have considerations about risk of a product when they doing purchase decisions (Batra and
Sinha, 2000). Hence, it is reasonable to argue that the private label brand tendency is negatively
related with the level of perceived risk (Richardson et al., 1996). VO and Nguyen (2015)
mentioned that a consumer will leave his purchase intention if he is thinking that a particular
product is risky.

Price
Price is a core component in every marketplace because it will present every time during
customers are going to purchase a particular product from a seller. In every purchase, customers
must give up a certain amount of their money in order to exchange a product or service with the
seller and this can describe as monetary sacrifice. (Zeithaml, 1988; Bao et al., 2011). Price can
be divided into three classifications according to Zeithmal (1998), which are objective price,
perceived non-monetary price, and sacrifice. The objective price defined as the actual price show
on the price tag that attached on a product. The perceived price is an imaginary price for a
product that appear in consumer’s’ mind. For most of the consumers, the objective price is not
always the same with the perceived price in their mind, whether it is above or below the
perceived price.

Store Image
Store image is known as consumer's overall impression of a retail store (Zimmer and Golden,
1988). One of the main components of store equity included store image (Hartman and Spiro,
2005). Some conceptualizations of store image have been discussed in previous studies. Those

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conceptualizations have modified from time to time, which causing the difficulties of involved in
defining the construction of store image (Hartman and Spiro, 2005). Store image can be
explained by a combination of functional qualities of a store and the psychological attributes a
store deliver while the exact attributes have changing over the years, the most-discussed
categorizations of store image attributes have included few combination of functional and
psychological attributes (Porter and Claycomb, 1997). Konuk (2018) concluded that store image
is important for retailers to increase consumers’ perceived quality towards organic private label
products. He mentioned that consumers tend to use store image as an extrinsic cue to evaluate
the quality of the products.

Hypothesis Development
The five hypothesis which are tested in this study are:
H1: There is a significant influence of brand image on purchasing intention of private label brand
products.
H2: There is a significant influence of perceived quality on purchasing intention of private label
brand products.
H3: There is a significant influence of perceived risk on purchasing intention of private label
brand products.
H4: There is a significant influence of price on purchasing intention of private label brand
products.
H5: There is a significant influence of store image on purchasing intention of private label brand
products.

Method
A set of questionnaire is distributed to 200 targeted respondents in the three states in Malaysia
which covered Melaka, Johor and Selangor for data collection purpose. The questionnaire items
of this study are adopted from Dursun, Kabadaya, Alan and Sezen (2011) and Diallo (2012). The
five independent variables which included in this study are price, perceived quality, store image,
brand image and perceived risk and the dependent variable is purchase intention.

Findings
There are 200 of the survey questionnaire distributed to the respondents in Malaysia. Majority of
the respondents who participated in this survey are make respondent with the percentage of 61%.
Next, the highest percentage of age category is 22-30 years old with 63%. Lastly, majority of the
respondents of this study have a degree as their highest education level.
The first step in the data analysis is to test the reliability and validity of the construct (Hair et al.,
2017). All the item loadings are range from 0.658 to 0.862 as shown in Table 1. This indicates
that all the item loadings are meeting the minimum requirement (Chin, 1998). Furthermore, the
result of composite reliability is range from 0.833 to 0.921. This also showed that the
measurement model is reliable and has adequate convergent reliability. Lastly, all the AVE
values have exceeded the cut-off value of 0.5. To sum up, all the instruments that were used in
this study has achieved the reliability and convergent validity conditions.

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Table 1: Measurement Model

Constructs Question Items Loadings AVE Composite
Reliability
BI1 0.783
Brand Image
BI2 0.842 0.625 0.833
BI3 0.745
DV1 0.758
Purchase
DV2 0.853
Intention 0.656 0.884
DV3 0.821
DV4 0.806
P1 0.679
Price P2 0.849
0.653 0.882
P3 0.834
P4 0.858
Perceived PQ1 0.658
Quality PQ2 0.862 0.631 0.835
PQ3 0.847
PR1 0.816
PR2 0.780
Perceived Risk PR3 0.831
0.659 0.921
PR4 0.800
PR5 0.796
PR6 0.847
SI1 0.714
SI2 0.704
SI3 0.712
Store Image 0.511 0.863
SI4 0.707
SI5 0.731
SI6 0.722

Table 2 showed that the square root of the AVE value for each construct has exceed its
correlation with other constructs. This indicates that our model is sufficient support for
discriminant validity at the construct level (Fornell and Larcker, 1981).

Table 2: Discriminant Validity of Constructs

BI PQ PR P PI SI
BI 0.791
PQ 0.615 0.794
PR 0.787 0.743 0.812
P 0.583 0.790 0.772 0.808
PI 0.637 0.789 0.767 0.839 0.810
SI 0.611 0.789 0.759 0.803 0.794 0.715

Table 3 showed the loading and cross-loadings for the measurement model. All items showed
high loaded in relation to their respective constructs and low in relation to other constructs. This

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provides sufficient support regarding convergent validity at the item levels as suggested by Chin
(1998).

Table 3: Loadings and Cross-Loadings for the Measurement Model

Brand Purchase Price (P) Perceived Perceived Store
Image Intention Quality Risk (PR) Image (SI)
(BI) (PI) (PQ)
BI1 0.783 0.506 0.448 0.474 0.582 0.515
BI2 0.842 0.552 0.505 0.539 0.661 0.532
BI3 0.745 0.446 0.427 0.441 0.627 0.390
PI1 0.454 0.758 0.571 0.533 0.508 0.554
PI2 0.560 0.853 0.759 0.699 0.669 0.667
PI3 0.516 0.821 0.680 0.668 0.674 0.675
PI4 0.526 0.806 0.695 0.640 0.618 0.668
P1 0.291 0.552 0.679 0.515 0.430 0.459
P2 0.446 0.688 0.849 0.683 0.633 0.708
P3 0.596 0.724 0.834 0.685 0.705 0.722
P4 0.516 0.733 0.858 0.656 0.694 0.679
PQ1 0.304 0.433 0.444 0.658 0.423 0.443
PQ2 0.584 0.713 0.687 0.862 0.682 0.705
PQ3 0.529 0.688 0.711 0.847 0.628 0.690
PR1 0.613 0.581 0.589 0.546 0.816 0.578
PR2 0.548 0.650 0.632 0.644 0.780 0.649
PR3 0.743 0.645 0.633 0.579 0.831 0.600
PR4 0.635 0.631 0.634 0.609 0.800 0.635
PR5 0.605 0.579 0.630 0.603 0.796 0.603
PR6 0.686 0.641 0.640 0.635 0.847 0.630
SI1 0.420 0.566 0.557 0.507 0.530 0.714
SI2 0.416 0.550 0.520 0.521 0.471 0.704
SI3 0.468 0.598 0.613 0.621 0.576 0.712
SI4 0.425 0.537 0.581 0.526 0.563 0.707
SI5 0.442 0.554 0.578 0.602 0.580 0.731
SI6 0.445 0.597 0.593 0.601 0.537 0.722

The goodness of the theoretical model is established by explained variance in the endogenous
construct (R2) and the significance of the all path coefficient (β) (Chin, 2010). The R2 value of
this study is 0.775 which means that 77.5% of total variation of purchasing intention can be
explained by the five independent variables. The summary of the hypothesis testing result is
shown in Table 4. Figure 1 demonstrates the conceptual framework of this study.

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Table 4: Result of the Hypothesis Testing

Standard
Beta t–
Hypothesis Path Error 2.5% 97.5% Decision
Value Value
(STERR)
Brand
Image -> Not
H1 0.094 0.062 1.510 -0.031 0.217
Purchase Supported
Intention
Perceived
Quality ->
H2 0.187 0.062 3.017** 0.064 0.302 Supported
Purchase
Intention
Perceived
Risk -> Not
H3 0.090 0.069 1.305 -0.053 0.228
Purchase Supported
Intention
Price ->
H4 Purchase 0.419 0.065 6.421** 0.299 0.547 Supported
Intention
Store
Image ->
H5 0.184 0.056 3.282** 0.072 0.293 Supported
Purchase
Intention
**p<0.01, *p<0.05, Bootstrapping (n=5000)

Figure 1: Conceptual Framework

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The hypothesis result showed that three hypotheses are supported at a minimum of 1%
significance level. The three independent variables which are perceived quality, price and store
image showed a significant influence on purchasing intention of private label brand products.

The result of this research showed that brand image does not have relationship with the purchase
intention of private label brand product. Some studies proven that sales of a company are directly
influenced by brand image and the increasing or decreasing of sales are heavily depending on
performance of brand image. A company needed to have thought that brand image is not only
matter about perceptions for a brand but it also linked with the company’s transactional activities
(Park, Jaworski and Maclnnis, 1986). Although the previous studies stated that purchase
intention is heavy rely on brand image but analysis of this research for brand image shows that
the hypothesis is not consistent with previous studies. Perceived quality showed a positive
influence with the purchase intention of private label brand product. Past studies in the western
countries have inspected that the difference in risk and perceptions of quality between national
brand and private label brands (Bellizzi et al., 1981; Richardson et al., 1994; De Wulf et al.,
2005). However, research has showed that national brands have better quality compare to private
brand in the perceptions of consumers (Dick et al., 1995). Some consumers refuse to buy private
label brands due to they perceive that the products are lack of quality and causing private brands
are less preferred and perform weaker than national brands (Semeijin et al., 2004). Perceived
Risk does not have relationship with the purchase intention of private label brand product. Wu et
al. (2011) have used perceived risk in terms of performance, financial, and physical risk. Even
so, they still using total dimensions of perceived risk to investigate the influence of risk on
consumer purchase intention towards private label brands (Wu et al., 2011). Price will have
positively influence with the purchase intention of private label brand product. The main factor
for consumers to purchase private label products is the price. Consumers that are price conscious
will switch from national brands to private labels because of the price difference. Price conscious
consumers have a resistance towards the prices of national brand products (Sinha and Batra,
1999). Even so, the consumers still consider that national brands will have a better quality but if
the price difference is too large, they are refuse to buy these products. In this situation, they are
willing to sacrifice quality to get the benefit of a lower price (Sinha and Batra, 1999). Store
image has positive influence with the purchase intention of private label brand product. Previous
research studies have clearly showed that private label brand’s purchase intention is positively
influence by store image perceptions in consumer mind (Grewal et al., 1998; Liljander et al.,
2009). Quality of products in a retail store able to determine store image based on the cue
utilization theory of Richardson, (Richardson et al., 1994; Smeijn et al., 2004).

Discussion and Conclusion

This research shows that price, perceived quality, and store image have relationship with the
purchase intention of private label brand products. This is beneficial to all marketers and
decision makers in this region because the results shown in this research can help them in
making business decision. Following with the findings of this research, marketers and the
companies should put more effort on price like pricing strategies and promotions. The pricing
strategies can be applied are psychology pricing, bundle pricing, economy pricing and price
skimming. Besides that, private label company should focus on the store image. The companies
can enhance their exterior and interior look of retail store by hire designer to design a good floor
plan for the retail store that looks neat and tidy. The customer and consumer will feel very

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comfortable to shop at a neat and tidy retail store. For the product quality, management of the
company can appoint some quality controllers that have good experience on company’s product
line to manufacturers’ plant to do quality control in order to make sure every product reach the
quality standard. The company can keep on changing suppliers if the company found out the
current suppliers do not able to deliver consistent quality product. Lastly, packaging of products
play an important role in product quality because good packaging able to make consumer feel
that the particular product has good quality. Thus, professional packaging designer should be
hire when the company plan to offer new products.

Marketers can apply this research result to identify which segments of people have high concern
on which factors of purchase intention of private label brand and able to help marketers or
decision makers do adjustment for particular factor for particular segment. Besides that, giant
retailers and private label brand companies able to put the right concern on the right factors by
referring to the result of this research.

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