Factors Influencing The Propensity To Purhase Private Label Brands (PLBS)

Abstract

In Malaysian context, retailing industry is among the biggest industry that gives significant contribution to the economy. In retailing, apart from carrying manufacturer brands, some retailers also market private label brands (PLBs) or retailer own brands. In retail industry, PLBs own a big market share and the acceptance are increasing as they extent into many product categories and level of quality. Due to high pressure of living cost in Malaysia over the past few years, people start to choose cheaper products for their daily consumption. The scenario becomes the main reason for the growth of demand of PLBs. The current study was undertaken to investigate the influences of consumers’ perceptions on perceived quality, perceived risks and retailer store image on propensity to buy PLBs. The current study examines the indirect effects of perceived quality, retailer store image and perceived risks and propensity to purchase PLBs via perceived value. This study was conducted at three main retail stores namely TESCO, AEON and GIANT involving 130 respondents in Northern Region of Malaysia. Data collection method is by intercept survey. The analysis demonstrated that the links between perceived quality and retailer store image with propensity to purchase PLBs were positive while perceived risks was non-significantly related to propensity to purchase PLBs. The links between retailer store image and perceived quality on the propensity to choose PLBs among consumers are indirectly related via perceived value. Lastly, implications of this study to academic and industry were presented, together with suggestions for future researches and limitations.

Keywords: Private label brands (PLBs)retail storestore imageperceived qualityperceived risks

Introduction

Retailer own brands have been greatly associated in Malaysian market parallel with manufacturer brands (Zain & Saidu, 2016). Brands owned by retailers or also term as private brands or labels (PLBs) are characterised as consumers’ goods manufactured by store retailers themselves and sold using the retailer’s own brands or labels (Baltas, 1997).

The indirect effects of perceived quality, perceived risks and retailer store image with propensity to purchase PLBs through perceived value

In a study by Lai et al. (2009), they discovered that higher perceived quality will lead to higher perceived value. They concluded that value perception is an essential mediator that links between product quality and consumer purchase behaviour. As been mentioned by Broekhuizen and Jager (2004), consumers not only rely on quality element in choosing products but also take into account the product value. Various studies have discovered an association between perception on quality of the product and value (Dodds et al., 1991; Khalifa, 2004; Rangaswamy et al., 1993). So, the retailer has to add value that can make consumers get what they pay or more than they expected. Shafiq et al. (2011) concluded that value perception towards a product is positively related to the purchase rate. According to Beneke et al. (2013) consumer perception on the value of a product should be explored further for its influence on the perception on product quality, risks, retailer store image and propensity to choose PLBs. Thus, the hypotheses are developed as below:

H4: The link between perceived quality and propensity to buy PLBs is indirectly through perceived value.

H5: The link between perceived risks and propensity to buy PLBs is indirectly through perceived value.

H6: The link between retailer store image and propensity to buy PLBs is indirectly through perceived value.

Based on the supports from previous studies, the conceptual framework for this study is shown as Figure 01 .

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Problem Statement

Due to high pressure of living cost in Malaysia over the past few years, people tend to choose cheaper products as their choice. Moreover, the scenario becomes the main reason for the sales growth of private labels in Malaysia (Bashir et al., 2015; Chen, 2008). The situation has also dragged consumers to alter their shopping pattern to be more sensitive towards product value (Fong et al., 2015). Along with this increasing cost of living, however, there is a rising concern over the issue by Malaysian retailers. They have started to improve the private label sectors with the aim to attract more buyers particularly to help the low income groups surviving with the high living cost in urban area by reducing their burden of paying high charge/price for certain products. Retailers in Malaysia adopt value for money strategy to adapt with the changes of buying behaviour among Malaysian consumers. However, it is demonstrated that the strategy resulted to be ineffective to them. Unfortunately, only 35 percent of Malaysians agreed that PLB is the best alternative to national brand and private labels are still at the beginning phase for Malaysian (Fong et al., 2015). Yet, there has been scarce of studies about PLBs in Malaysia (Abdullah et al., 2012) hence, Zain and Saidu (2016) suggested more empirical studies relating to PLBs should be conducted in Malaysian context.\

Research Questions

The goal of the current study is to examine the influences of retailer store image, perceived risks, perceived quality, and perceived value on the propensity to choose PLBs among consumers, the research questions are developed as below:

• What are factors that contribute to the propensity to purchase PLBs among consumers?

• To what extend do the relationships between perceived risks, retailer store image and perceived quality on propensity to buy PLBs are indirectly related through perceived value?

Purpose of the Study

The present study was undertaken with the objectives to explore the links between perceived risks, perceived quality and retailer store image on propensity to purchase PLBs and the indirect effect of perceived quality, retailer store image, perceived risks and propensity to purchase PLBs.

Research Methods

To test the six hypotheses and to validate the propose framework, the current study engages in a quantitative approach. Respondents were recruited based on systematic sampling where every fifth customers were intercepted at the exit point of the selected stores (TESCO, AEON and GIANT) in northern region Malaysia in order to get their participation in this study. This is a similar method used in other studies conducted in purchase behaviour and PLBs (Jin & Kang, 2011; Thanasuta & Metharom, 2015). The items to measure propensity to purchase PLBs were derived from Beneke, Brito, and Garvey (2015). There were three items relating to consumers’ propensity to purchase PLBs. Perceived value was measured using three items adopted from Berbegal-Mirabent et al., (2016). Adapted measurement items by Beneke et al. (2015) were utilized to measure perceived quality. Measures for perceived product risks and store image where adapted from Beneke et al. (2015).

Findings

Out of 150 questionnaires distributed, 130 were completed and can be considered for further analysis. This brings the response rate of 87%. This percentage consisted of 75% women and 25% men. Majority of the respondents (58%) are at the ages of 20 years old to 30 years old. Respondents were asked about their employment sector and 47 percent of the respondents work in government sector, while those who work in private organization were 30 percent, own business (18 percent) and not working (5 percent) respectively. The demographic distribution of marital status in this study demonstrates that 68 percent of the respondents are married. Data were analysed using PLS-SEM. The convergent validity, AVE and discriminant validity assessment were conducted to test the validity of all the constructs (Hair et al., 2014). Table 1 below shows the value of AVE, CR and Cronbach’s Alpha for all the variables

After confirming the reliability and validity of the measures, the following step taken was accessing the structural model. Throughout this step, hypotheses relationships between the constructs were examined as well as the measures of predictive capabilities. The second step in structural model was path coefficient test by using SmartPLS 3.0. To identify the significant coefficient, standard error was used. In SmartPLS 3.0, identifying the standard value error was carried out through bootstrapping approach. The t-values for individual path coefficient in Table 2 below were derived using bootstrapping method. The coefficient is accepted as significant if the t-value is more than the critical value in a certain error aspect. By using PLS 3.0, t-value and p-value were generated through bootstrapping technique.

There were three hypotheses tested. H1 and H3 are found to be significant with t-values >1.69, that is positive relationships between perception of quality and retailer store image with propensity to choose PLBs. For H2, there is no relationship exists between perceived risks and propensity to purchase PLBs with the t-value of 1.781 and p-value .075.

From the output shown in the path model, the R2 value of the dependent variable, i.e propensity to buy PLBs is 0.514, respectively. This means that perceived quality, perceived risks and retailer store image account for 51.4 percent of the variance in propensity to purchase PLBs, which is moderate.

This study also tries to test whether the relationships between propensity to purchase PLBs and perceived risks, perceived quality, and retailer store image are indirectly related through perceived value. According to Preacher and Hayes (2008), “the path coefficient of a and b can be normally distributed but a*b will not necessarily be normally distributed” (refer figure 2 ). Therefore, a bootstrapping method was used to clear-cut the situation. Using the bootstrapping method with 5000 bootstrap samples, the results are shown in table 3 below.

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The bootstrapping results in table 3 below prove that the link between perceived quality and propensity to buy PLB is indirectly related through the construct of perceived value. Similarly, with the link between retailer store image and propensity to buy PLBs. Perceived value does not facilitate the link between perceived risks and propensity to purchase PLBs. Consequently, we accept H4 and H6, while H5 is rejected

Conclusion

As hypothesized, the present research demonstrates that perception of good product quality is positively related to propensity to purchase PLBs. Consumers have propensity to purchase PLBs because their perception towards product quality is high. This is in line with Porral and Lang (2015). The reason why perceived product quality becomes important is because consumers are searching for products with superior quality but at reasonable prices. Retailers have their own strategy to attract consumers (Witek-Hajduk & Grudecka, 2018), therefore by providing a high quality of product and diversification able to increase purchase propensity. Hence, if the retailer’s brand able to give a good product quality to consumers, they will opt to buy PLBs (Juan & Govindan, 2017).

This study shows an association between retailer store image and propensity to buy PLBs. The resulting implication is that, retailer with good image such as services, performance, privileges offered and store environment will drive consumers to come to their store as well as buying their home brand. Retailer store image is very significant to perceived value, thus it shows a positive influence on propensity to purchase PLBs. The findings seem to be consistent with research conducted by Porral and Lang (2015) and Juan and Govindan (2017).

Surprisingly, the finding demonstrates that perceived risks and propensity to purchase PLBs is not significantly related, which is contrary to the earlier suggestion. This also accords with earlier observations by Thanasuta (2015) who demonstrate no significant association between perceived risks and behavioural intention to choose PLBs. When the relationship is not supported, this implies that the factor is not important to contribute to the propensity to buy PLBs. The finding of the present study contradicts to the earlier findings by Beneke et al. (2013), Wu and Li (2018) and Kim and Lennon (2013) who discovered that perception on risks had a negative influence on consumer purchase. Retailers that involved in this study are very established and well-known retailers. Therefore, it makes no sense for the consumers to eliminate the products that comes from that particular retailers. Consumers feel safe and secure buying retailer’s brand although they have option to buy other brands.

This study shows that consumers perception on value facilitates the link between product quality and retailer store image on propensity to choose PLBs. Whilst the association between perceived risks and propensity to buy PLBs is not indirectly through perceived value. As hypothesized, the analysis undertaken demonstrates that the association between perceived quality and propensity to purchase PLBs is indirectly through perceived value. This shows that the link between perceived quality and propensity to choose PLBs is significantly influences by the perceived value of the consumers.

The results indicate that the higher the perceived quality, the higher the perceived value and later increase the propensity to buy PLBs. The high quality of retailer’s brand in terms of ingredients used, cleanliness, freshness, trustworthiness of the brand, lead to high perception of value henceforth increase the purchase of PLBs. Consumers will purchase if they fell that these product quality aligned with the values that they will get. Values such as economical, worth buying and has sentiment of value for money at the brand. The indirect influence of perceived value is in agreement with Maina et al. (2015) but it runs contrary with Ryu et al. (2012) where perceived value was not significantly act as mediator between perceived quality and consumer buying behaviour.

The analysis demonstrates that the link between perceived risks and propensity to buy PLBs is not indirectly through perceived value. This probably because consumers are keen on buying retailer’s brand without bias in making risks decision. The result gathered from this study was broad in terms of products selection, therefore consumers may think that as long as the brands are in good quality, worth buying and affordable there should not be any bias in perceived risks. Accordingly, there is no hesitation in propensity to purchase PLBs in these three retailers.

Finally, as hypothesized, the link between retailer store image and propensity to buy PLBs is indirect through perceived value. The statistical findings confirm that the link between retailer store image and propensity to buy PLBs is mediated by consumers’ perception on value of the brands. The results reported are consistent with prior result by Hanaysha (2018). The outcome of current study also proves that the respondents’ perception flows from retailer store image to purchase propensity via perceived value. This supports the argument that consumers rely on perceived value to evaluate their purchase of PLBs (Ryu et al., 2012).

The existence of PLBs might help to boost up the retailing industry as it gives various choices of products to consumers. The brand itself gives value to consumers as of today the businesses have provided wide selection to consumers, so the findings of this research will benefit retail businesses in Malaysia. Understanding the perception of consumer purchase towards PLBs in Malaysia will wake businesses up creating and introducing more products of their own. Understanding how various factors influence purchase and behaviour will help businesses understand better which factors should be prioritized and how they can encourage customers to decide what to buy, hence, developing future strategies. Furthermore, it also adds new knowledge and understanding to the public on the meaning of PLBs.

From the marketing perspective, the idea of having PLBs in the market is to create diversity and range of products so that consumers are able to purchase varieties of products with reasonable price and quality (Vo & Nguyen, 2015) and economical packaging along with low overhead cost compared to national brand (Kaur, 2013). Thus, in this study the perception of consumers especially on the acceptance of private labels will contribute to the new marketing strategies and future planning for retailer’s brand as well as consumers purchase behaviour. According to Raju and Xardel (2013) marketers rely on consumer behaviour studies in helping them to understand consumers as well as helping to segment the markets and therefore able to forecast their consumers.

As a conclusion, the study provides an understanding on consumers’ perceptions towards PLBs. Notwithstanding with the increase in overall sales, unbalanced sales growth of PLBs still exist among different product categories. Furthermore, there is lack of studies that could assist retailers to identify appropriate product categories for their private brands/labels. The current study suggests that consumer recognition of PLBs depend on the consumers’ perception on perceived quality and store image of the retailers.

Acknowledgments

This research is fully funded by University Utara Malaysia under the Center of Excellent (CoE) Grant.

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