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, shahirbhatt@gmail.com
Ms. Amola Bhatt is Assistant Professor – L.J. – MBA Program. Ahmedabad, Gujarat Technological
University, amolamba@gmail.com

Abstract stores of Ahmedabad district. Analysis has

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.
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
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.
Paper type: Research paper
Keywords
Private labels (PL), Store Loyalty

31
 Dr. Shahir Bhatt and Ms. Amola Bhatt
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 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
32 SIES Journal of Management, September 2014, Vol. 10(2)
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. 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
 Private Label Perceptions and its Impact on Store Loyalty: An Empirical Study
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 “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 play 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
l To bring out the major factors that affect the
perception of consumers related to private
label apparels
l 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
The research design for the study is descriptive
in nature. The sampling unit consisted of
33
 Dr. Shahir Bhatt and Ms. Amola Bhatt

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 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
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 was 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

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

37
 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

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. Identical study by
Sethuraman (2003) concluded that store brand
consumers are those who: “(i) value price as an
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

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
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
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 them 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
39
 Dr. Shahir Bhatt and Ms. Amola Bhatt

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 includes 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 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
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
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 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
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.
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

41
 Dr. Shahir Bhatt and Ms. Amola Bhatt
format should focus on the above-mentioned
factors so as to expect loyalty from their
customers.
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