Yong Gu Suh Department of Business Administration, Sookmyung University, Seoul, Korea

Transcription

1 Integrating effect of consumer perception factors in predicting private brand purchase in a Korean discount store context Byoungho Jin Department of Design, Housing, and Merchandising, College of Human Environmental Sciences, Oklahoma State University, Stillwater, Oklahoma, USA, and Yong Gu Suh Department of Business Administration, Sookmyung University, Seoul, Korea Abstract Purpose Despite proven strategic significance and wide acceptance of private label products (PB), our understanding of PB in international markets is limited. The purposes of this study are to propose a model that integrates four consumer characteristic variables (price consciousness, value consciousness, perceived price variation, and consumer innovativeness) toward PB attitude and purchase intention, and to test the model in two product categories, grocery and home appliances, in a South Korean discount store context. Design/methodology/approach A total of 168 usable data (87 for food and 81 for home appliances were collected using mall intercept method from female shoppers at one Korean discount store in Seoul, Korea. Findings The findings revealed that, depending on the product category, contribution of the factors varies. Among four consumer characteristics, only three in each category exhibited direct and indirect association with PB purchase intention. Perceived quality variability in a food category and price consciousness in a home appliance category did not show any relationship with PB purchase intention nor with PB attitude. In both product categories, only two variables, value consciousness and consumer innovativeness, predicted PB attitude. Overall, consumer innovativeness was the strongest factor predicting Korean shoppers PB attitude. Originality/value Important theoretical contributions of this study are finding the relative importance of the variables on PB attitude and purchase intention, and differing roles of consumer variables by product characteristics. Further significance of this study lies in understanding the differing impact of consumer perceptual variables in predicting PB attitude and purchase intention simultaneously. Managerial implications of these results were discussed. Keywords Brand identity, South Korea, Discount stores, Prices, Perception, Consumer behaviour Paper type Research paper An executive summary for managers and executive readers can be found at the end of this article. Private label products or store brands (from now on PBs), owned and branded by retailers, generate higher margins, increase control over shelf space, and give retailers greater bargaining power in the channel of distribution. Because of their exclusiveness, they also increase store traffic and ultimately lead to customer store loyalty (Liesse, 1993; Richardson et al., 1996; Steenkamp and Dekimpe, 1997). One-fifth of all groceries in the USA are currently sold under retailers names (Dunne and Narasimhan, 1999; Garretson et al., 2002). In European countries, PB has assumed a more prominent position vis-à-vis the national brands (Richardson et al., 1996). Notably, PB dominates the grocery market in the The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at 22/2 (2005) q Emerald Group Publishing Limited [ISSN ] [DOI / ] UK where 36 percent of the total dollar sales of the grocery market comes from PB, followed by Canada (25 percent), Germany (24 percent), and France (24 percent) (Hoch, 1996). Despite proven strategic significance and wide acceptance of private label products, most prior studies have been performed in the USA (Burton et al., 1998; Hoch, 1996; Sinha and Batra, 1999; Richardson et al., 1996), and our understanding of PB in international markets is limited. Contribution of PB over retail sales is dependent not only on countries retail structure, such as size of national brand market, the level of retail concentration, advertising rate by manufacturer, economies of scale and scope, and imagination and management talent (Hoch, 1996; Hoch and Banerji, 1993; Steenkamp and Dekimpe, 1997), but also on consumer characteristics for which PB research in other international markets has been sparse. For example, De Mooij and Hofstede (2002) posit that collectivism cultures are less likely to exhibit preference toward PB than individualism cultures, since collectivism cultures tend to rely on extrinsic cues such as well-known brands. Therefore, understanding PB from the international consumer perspective is imperative, considering the rapid internationalization of retail markets. The literature to date has identified a number of consumer factors correlated with store brand preferences. However, an 62

2 attempt to integrate these disparate findings into a solid model for better comprehension is lacking. Additionally, while a number of mass merchandisers, such as Wal-Mart and Target, have increased PB in many product categories other than food, such as apparel, most prior research has dealt largely with grocery PB in a grocery chain setting (i.e. Burton et al., 1998; Garreston et al., 2002; Hoch, 1996; Sinha and Batra, 1999; Richardson et al., 1996). Product category is the largest source of variation in PB share across markets (Dhar and Hoch, 1997), and consumer reaction to brand and price differs by product category (Monroe and Krishnan, 1985) and retail environment (Jin and Sternquist, 2003). Therefore, it is logical to posit that consumer attitude toward PB varies by product category and retail environment. This study is designed to fill the voids of prior studies as discussed above. This study proposes a model that integrates consumer characteristic variables toward PB attitude and purchase intention, then will test the model in two product categories, grocery and home appliances, in a South Korean discount store context. The South Korean discount store sector merits close attention since this sector is one of the few international markets in which local retailers outperform multinational retailers (Jin and Kim, 2003). One of the strengths of local retailers is thought to be their private brand strategies. As many multinational retailers develop and leverage PB in their management, it will be important to examine the association of consumer characteristics to the PB preferences in international markets. We first present a brief literature review regarding PB in Korean discount stores. Following the literature review, we discuss the constructs of the proposed model and present our research findings. We conclude with a discussion of the implications of the study, its limitations and suggestions for future studies. Literature review PB in Korean discount stores In the past ten years in Korea, discount stores have dominated the retail market showing rapid increases in sales and even outperforming department stores in recent years. Since the first discount store, E-mart, was opened in 1993 by Shinsegae, one of the leading Korean retailers, Korean discounters (e.g. E-mart and Lotte Mart), joint venture (e.g. Home Plus, a joint venture of Tesco and Samsung), and multinational discounters (e.g. Wal-mart and Carrefour) have competed fiercely in the market. In order to survive the intense competition, discount stores attempt to differentiate themselves from competitors in ways other than simply lower prices. These efforts include facilities within the stores such as childcare services, bookstores, nail care shops, dry cleaners, banks and entertainment components such as cafés and theatres. Korea is one of the few markets in the world in which local discounters outperform multinational firms (Jin and Kim, 2003). E-mart, a native Korean discounter, has kept its premier position for several years and leads the severe competition. E-mart s outstanding performance is due to its shopping environment which is especially geared to Korean consumers. E-mart has created a shopping environment more suitable to Koreans physical characteristics by adjusting the height and size of display racks and shopping carts. Also, Jin and Kim (2003) regarded fresh vegetables and freshly cooked snacks and dinner dishes as key success factors of E-mart. One of the notable strategies of E-mart was its introduction of PB products that brought considerable growth in the company s sales. PB products in Korean discount stores currently generate approximately 8-10 percent of total sales. In addition to E-mart, Lotte Mart and Carrefour are launching PB for Korean customers, gradually increasing the categories and the number of items available in PB. Recognizing the strategic importance of PB, discounters operating in Korean markets are expanding PB products beyond grocery items. In particular, apparel PB products are showing remarkable growth in sales, especially in men s casual wear. Part of this growth is explained by the increasing trend of Korean companies to give Saturdays off and to changes in lifestyle due to that trend. Consumer correlates of PB purchase A review of the literature reveals that the majority of consumer factors correlated with PB attitude can be classified in one of three categories; personality (e.g. Myers, 1966; Burton et al., 1998), perceptual (e.g. Garretson et al., 2002), and socioeconomic (e.g. Batra and Sinha, 2000; Richardson et al., 1996). Of these categories, consumer perceptual characteristics were most linked to PB purchase. Consumer perceptual variables that have been identified include price-quality perception, perceived quality, value consciousness, price consciousness, perceived price fairness, smart shopper self perception, familiarity with PB, brand loyalty, perceived risk associated with PB purchase, risk averseness, and general deal proneness (Bettman, 1974; Burton et al., 1998; Garretson et al., 2002; Schindler, 1992; Richardson et al., 1996). A review of these studies shows that significant attention has been given to consumer perception toward price and quality of PB since these factors have been identified as two of the important reasons for purchasing PB (Hoch and Banerji, 1993; Hoch, 1996). Price and quality should be examined jointly since the concepts are interrelated. Lichtenstein et al. (1993) viewed price in relation with quality when they posited multidimensional aspects of price. For example, purchasing at the lowest price may the best choice for some consumers, however, for others, price with respect to quality may be more important. For this study, we selected the three most relevant price-quality related variables, price consciousness, value consciousness, and perceived quality variation. Additionally, one concept not previously linked to PB preference, consumer innovativeness, was integrated into the model. Proposed model of PB purchase intention It is uncertain whether the individual perceptual factors discussed above increase PB preference, PB attitude, or PB proneness (i.e. Richardson et al., 1996) since previous studies used the terms interchangeably. As a result, it is unclear whether the factors increase PB purchase intention directly or indirectly increase intention via a positive PB attitude. This study adapts Fishbein s model to clarify further the relationship between PB attitude and purchase intention. Adopting Ajzen and Fishbein s (1980) theory of reasoned action and integrating the factors that might influence private brand preference and purchase intentions, we present a proposed model of PB purchase intention in Figure 1. The premise of the proposed model is that the four consumer 63

3 Figure 1 A proposed model of private brand purchase intention characteristic factors price consciousness, value consciousness, perceived quality variation, and innovativeness contribute directly to explaining individual differences in PB attitude and PB purchase intention. Following is a discussion of the constructs of each of the factors in the proposed model and theoretical support for the hypothesized relationships. PB attitude-pb purchase intention Burton et al. (1998) found in a grocery store setting that PB attitude is positively related to the actual percentage of PB purchase on a shopping trip, and PB attitude is the strongest predictor of the percentage of PB purchase in relation to other price perceptions, deal perceptions, and other marketing related constructs. More recently, Garretson et al. (2002) provided support for the results of Burton et al. (1998). That is, PB attitude positively affects the percentage of actual PB purchase in a grocery store chain in the USA. These studies measured actual percentage of PB purchase in a shopping trip by examining the sales receipts. While this measurement was possible in a grocery shopping setting, our study compares two product categories: groceries and home appliances. Because of the relatively low frequency of buying home appliances and because of the recent introduction of PB home appliances in the Korean market, it was not feasible for our study to check sales receipts. Therefore, we used purchase intention as a proxy of PB purchase. The relationship between attitude and purchase intention is well established in previous studies that utilized the Fishbein model (i.e. Shim et al., 2001). Therefore, we hypothesize: H1. The greater the PB attitude, the greater the PB purchase intention. Price consciousness While slightly different definitions have been given to the term price consciousness, this study defines it as: the degree to which the consumer focuses exclusively on paying low prices (Lichtenstein et al., 1993, p. 235). The general consensus in research is that price is the most important reason for purchasing PBs (Burger and Schott, 1972; Burton et al., 1998; Sinha and Batra, 1999). Batra and Sinha (2000) found data from 12 different product categories indicating that price consciousness directly increases PB purchase and is the strongest predictor. As such, a positive association is anticipated between price consciousness and both PB attitude and purchase intention: H2-1. The greater the price consciousness, the greater the PB attitude. H2-2. The greater the price consciousness, the greater the PB purchase intention. Consumer price consciousness differs by product category (Monroe and Krishnan, 1985). Some consumers may be more or less price-conscious toward a particular product category because of perceived risk or personal importance. Sinha and Batra (1999) discovered that consumers are more price-conscious in a product category where they perceive greater risk and price unfairness by national brands. In addition, Batra and Sinha (2000) found that PB buying increases as the consequences of making a purchasing mistake decline. Relative to food items, home appliance products represent a higher perceived risk, therefore attitude and purchase intention of home appliance PB products may not be solely based on low price. H2-3. H2-1 and H2-2 will differ by product category. Value consciousness We define value consciousness in this study as the quality one gets for the price one pays (Lichtenstein et al., 1993; Zeithaml, 1988). Value consciousness implies consideration of quality not in absolute terms, but in relation to the price of a particular brand. Contrary to common perception that price is the premier factor of PB success, Hoch and Banerji (1993) found that quality of PB is much more important than the level of price discount in determining the PB category share. This indicates that perceived quality is an equally important factor of PB success. Empirical research has confirmed that value-related measures are positively related to PB attitude (Burton et al., 1998; Richardson et al., 1996). Recently, 64

4 Garretson et al. (2002) provided further evidence that value consciousness is positively related to attitudes toward both private brand and national brand (NB). Therefore, other things being equal, greater value for money perceptions of PB will lead to higher levels of PB attitude and purchase intention: H3-1. The greater the value consciousness, the greater the PB attitude. H3-2. The greater the value consciousness, the greater the PB purchase intention. Based on retail grocery data, Richardson et al. (1996) discovered that higher perceived risk associated with a PB purchase lowers as individual s perception of value for money. They also found that an individual with high intolerance for ambiguity considers value for money less important. This suggests that value consciousness differs by perceived risk in the product category and by individual characteristics with regard to ambiguity. Home appliance PB has been introduced to the Korean discount market recently relative to food PB, so the home appliance category is more ambiguous than food. Likewise, perceived risk and the consequences of making a purchase mistake are more serious for a home appliance PB item than for a food PB item. Hence, we hypothesize that: H3-3. H3-1 and H3-2 will differ by product category. Perceived quality variation Perceived quality is a critical element for consumer decision making; consequently, consumers will compare the quality of alternatives with regard to price within a category. If a consumer purchases PB over NB, the decision might be made on the consideration that quality variation between PB and NB is minimal or acceptable compared to the price. In other words, less quality variation between PB and NB will result in higher PB purchases. One empirical study found that the perceived quality differential in certain categories is the most important reason consumers opt to pay more for national brands (Sethuraman and Cole, 1997). Two studies empirically suggest a moderating effect of perceived quality variation on PB proneness. Batra and Sinha (2000) found that perceived quality variation indirectly impacts on PB purchases via consequences of making a mistake in brand choice. Richardson et al. (1996) found that perceived quality variation between PB and NB positively affects perceived value for money of PB, which in turn increases PB proneness. As consequences of making a mistake and value for money of PB were not included in our model, we expect a direct relationship between perceived quality variation and PB attitude/purchase intention: H4-1. The greater the perceived quality variation, the lesser the PB attitude. H4-2. The greater the perceived quality variation, the lesser the PB purchase intention. Hoch and Banerji (1993) found that the quality differential between PB and NB depends on the technology requirements in manufacturing that varies across product categories. Batra and Sinha (2000) compared two product categories, one with experience characteristics (i.e. requires experience to estimate) and one with search characteristics (i.e. requires little experience to estimate) and found differing effects of quality variation on PB purchase. That is, consumers felt higher quality variation and higher consequences of making a purchase mistake in experiential product categories than in search product categories. Because of the inherent risk involved with product category, the perceived quality gap between PB and NB may be perceived more important in home appliances than in food. From this, we anticipate that: H4-3. H4-1 and H4-2 will differ by product category. Consumer innovativeness Rogers (1983) defines innovativeness in terms of the degree to which a person is earlier in adopting an innovation relative to other members of his or her social system. Consumer innovativeness in this study is defined as the predisposition to buy new and different products and brands rather than remain with previous choices and consumption patterns (Steenkamp et al., 1999). It is generally accepted that consumer innovative predisposition leads to early product adoption (Goldsmith et al., 1995; Im et al., 2003; Midgley and Dowling, 1993) and internet shopping (Citrin et al., 2000). However, linkage between consumer innovativeness and PB purchase has received little attention. One reason for the lack of attention is the long history of PB in US and European markets. However, as PB in discount stores is relatively new to Korean markets, Korean consumers with higher innovativeness will be more likely to have favorable attitude toward PB and exhibit higher purchase intention of PB: H5-1. The greater the consumer innovativeness, the greater the PB attitude. H5-2. The greater the consumer innovativeness, the greater the PB purchase intention. Ever since Midgley and Dowling (1978), scholars have recognized that the relationship between innovativeness and behavior is mediated by many situational and product-specific factors. Richardson et al. (1996, p. 180) suggested that consumers may be more prone to select store brands for think type rather than feel type products. This finding implies a more positive relationship between consumer innovativeness and purchasing PB food items as this category is considered a think type. In addition, because a food item is consumed in a short time relative to a home appliance item, innovative Korean consumers may have less reluctance to choose food PB than home appliance PB. Based on our conceptual development, we postulate that: H5-3. H5-1 and H5-2 will differ by product category. Methodology Measurement The measurement of two dependent variables of this study, PB attitude and PB purchase intentions, were adopted and revised from prior studies (Burton et al., 1998; Shim et al., 2001). For the measurement of four independent consumer characteristics, multi-items were taken from prior research and revised to fit the Korean discount store context. Four price consciousness measures and four value consciousness measures were adopted from Lichtenstein et al. (1993). Perceived quality variation are derived from Richardson et al. (1996) and revised to reflect various aspects of each product category examined. For example, in the food category, 65

5 respondents were asked to indicate their level of agreement with statements regarding differences in taste, nutritional value, freshness, and package. For the home appliance category, they were requested to compare in terms of quality, design, service, and technology. Consumer innovativeness items are revised based on Manning et al. (1995). The number of items and sample item for each of the multi-item measures are shown in Table I. Consumer demographic characteristics, such as age, monthly average income, and the size of household, were asked. With the exception of demographic variables, all measurements were five-point Likert scale (1 ¼ strongly disagree, 5 ¼ strongly agree). The product categories selected for comparison were food and home appliances because these product categories are the most popularly developed in Korean discount stores. In addition, the two product categories are considered different in terms of consumers reactions to price and quality, perceived risk, and frequency of purchase. In particular, because of wide range of price and technology level in home appliance category, this study selects one home appliance item, a television set. To measure consumer perception toward two product categories, two sets of questionnaires, one for food PB and the other for home appliance PB, were developed. The questionnaires were written in Korean and face validated by experts in PB research and graduate students studying marketing. The questionnaires were pretested using a convenience sample of approximately 30 female students and shoppers in Seoul, Korea. The questionnaire was revised based on the pretest responses (e.g. wording). Sampling procedure Our sample consisted of female shoppers from one Korean discount store in Seoul, Korea. We chose female shoppers because they are the primary shopper in a typical Korean household. A trained interviewer randomly intercepted shoppers and requested participation in the study. Respondents were screened by asking whether a food PB product had been purchased. Owing to the short history of home appliance PB in Korean discount stores, it would be difficult to secure shoppers with experience purchasing home appliance PB. Therefore, respondents were asked to answer the questions with the assumption of purchase. To ensure the meaning of PB to Korean shoppers, detailed written descriptions about PB with photos of both PB and NB were provided at the beginning of each questionnaire. In addition, verbal explanations were presented before shoppers began answering the questionnaires. The interviewer waited until a respondent filled out the questionnaire, then collected the questionnaire. Of the 200 questionnaires administered, 168 usable questionnaires were obtained across the two categories, 87 for food and 81 for home appliance. Approximately 60 percent of food product respondents and 80 percent of home appliance respondents were in the age range of For both product categories, approximately 50 percent of the respondents had US$1,500-$3,000 average monthly income and four family members. These demographic characteristics represent typical Korean discount shoppers. Results Measurement properties We performed confirmatory factory analysis (CFA) to assess the measurement model. The first measurement model indicated a couple of low factor loadings in each product category. Deleting one item each, a series of consecutive CFA were performed. In this way, two lowfactor loading items in food and four in home appliance were deleted. All indicators belong to a respective construct and standardized factor loadings in each category showed (all t-values. 10:50, p, 0:001), proving multidimensionality and construct validity of the constructs. Internal consistency was examined using Cronbach s alpha technique. The coefficient ranges for food and for home appliance, proving acceptable reliability of the measurements. Model and hypotheses testing Results pertaining to structural path estimates are shown in Table II. The overall fit statistics (GFI ¼ 0:96, AGFI ¼ 0:94, RMSEA ¼ 0:10 for food; GFI ¼ 0:99, AGFI ¼ 0:98, RMSEA ¼ 0:04 for home appliance) indicate an acceptable level of fit. Hypotheses were separately tested by product categories, then two product categories were compared based on the results of each product category. Food product category indicates that: H1 (PB attitude! PB purchase intention); H2-2 (price consciousness! PB purchase intention); H3-1 (value consciousness! PB attitude); H5-1 (consumer innovativeness! PB attitude); and H5-2 (consumer innovativeness! PB purchase intention) were accepted. However, the rest of the hypotheses were rejected. The path coefficients for the home appliance category show that: H1 (PB attitude! PB purchase intention); H3-1 (value consciousness! PB attitude); H3-2 (value consciousness! PB purchase intention); H4-2 (perceived quality variation! PB purchase intention); and H5-1 (consumer innovativeness! PB attitude) were accepted, while the rest of the hypotheses were rejected. Table I Overview of the multi-item measures Multi-item scale measures No. of items Sample items PB purchase intention 2 I will continuously buy PB food (food questionnaire). I will buy PB home appliance in the future (home appliance questionnaire) PB attitude 2 When I buy a PB product, I always feel that I am getting a good deal Price consciousness 4 The money saved by finding lower prices is usually worth the time and effort Value consciousness 4 When purchasing a food PB product, I compare the prices of different brands to be sure I get the best value for the money Quality variability 4 Compared with NB, PB in this store has inferior quality Consumer innovativeness 4 I often seek out information about new products and brands 66

6 Table II Tests of proposed relationships in the model Path Product categories Coefficient t-value Result H1. PB attitude! PB purchase intention Food Accepted Home appliance Accepted H2-1. Price consciousness! PB attitude Food Rejected Home appliance Rejected H2-2. Price consciousness! PB purchase intention a Food Accepted Home appliance Rejected H3-1. Value consciousness! PB attitude Food Accepted Home appliance Accepted H3-2. Value consciousness! PB purchase intention a Food Rejected Home appliance Accepted H4-1. Perceived quality variability! PB attitude Food Rejected Home appliance Rejected H4-2. Perceived quality variability! PB purchase intention a Food Rejected Home appliance Accepted H5-1. Consumer innovativeness! PB attitude Food Accepted Home appliance Accepted H5-2. Consumer innovativeness! PB purchase intention a Food Accepted Home appliance Rejected Note: a Indicates differing results by product category All four hypotheses comparing two product categories (i.e. H2-3, H3-3, H4-3, and H5-3) were supported. Figure 2 summarizes the significant paths by product category. Specifically, H2-3, stating that the relationship between price consciousness and PB attitude and PB purchase intention differs by product category, was supported. Price consciousness positively influences PB purchase intention for food, but not for home appliance. H3-3, specifying that the relationship between value consciousness and PB attitude and PB purchase intention varies by product category, was supported. While value consciousness positively affects both PB attitude and PB purchase intention on home appliance, it only positively affects PB attitude on food. H4-3, hypothesizing that the relationship between perceived quality variance and PB attitude and PB purchase intention differs by product category, was supported. In the home appliance category, perceived quality variation only impacts on PB purchase intention, not on PB attitude. However, it neither influences shoppers attitude, nor purchase intention on food PB. Finally, H5-3, stating that the relationship between consumer innovativeness and PB attitude and purchase intention differs by product category, was also accepted. Consumer innovativeness positively impacts on both attitude and purchase intention in food PB, however, it only influences PB attitude in the home appliance category. Detailed discussion of the findings is provided next. Discussion and implications This study attempted to integrate consumer perception factors into a solid research framework to comprehend better consumer PB attitude and purchase intention in an international market (i.e. Korea) in two product categories (i.e. food and household appliance). An examination of the significant relationship and relative importance of the factors influencing PB attitude and purchase intention reveals that, depending on the product category, contribution of the factors vary. This affirms Batra and Sinha s (2000) finding of differing importance by product characteristics. As expected, depending on the consequences of making a purchase mistake, the significance and relative contribution of the factors differed. For example, in the home appliance category, price consciousness did not increase Korean shoppers PB attitude nor their PB purchase intention. Price consciousness only exerted the smallest contribution to food PB purchase intention. This result is rather surprising considering Batra and Sinha s (2000) finding that price consciousness had the strongest role in predicting PB purchase in a category such as food. In contrast, value consciousness in both product categories positively influenced PB attitude and provided stronger impact than price consciousness (in value consciousness, b ¼ 0:29 for food, b ¼ 0:24 for home appliance as compared to b ¼ 0:14 for food and insignificant relationship for home appliance in price consciousness). This finding supports Hoch and Banerji (1993) in that the quality of PB is much more important than low price in determining the PB market share. In particular, value consciousness also directly increases Korean discount shoppers intention of home appliance PB purchase. This finding suggests that Korean shoppers are more concerned about quality of home appliance than quality of food. Contrary to our expectation, the perceived quality variation did not provide any association with PB attitude or PB purchase intention in the food category. It only showed negative association with PB purchase intention in the home appliance category, indicating that Korean discounts shoppers are concerned about quality of home appliance. This finding supports that of Sethuraman and Cole (1997) that the perceived quality variation is the most important reason of purchasing NB over PB in certain product categories. However, unlike Batra and Sinha (2002) and Richardson et al. (1996), who found indirect impact of perceived quality variation on PB purchase, this study found direct relationship in one product category, home appliance. It is interesting to note that in both product categories, consumer innovativeness 67

7 Figure 2 Comparison of the proposed model in two product categories is the strongest factor predicting Korean shoppers PB attitude (b ¼ 0:39 for food, and b ¼ 0:33 for home appliance). Moreover, consumer innovativeness also directly predicts Korean discount shoppers PB purchase intention (b ¼ 0:21 for food). This result provides additional evidence to the general idea that consumer innovativeness is linked to early product adoption (Goldsmith et al., 1995; Im et al., 2003; Midgley and Dowling, 1993). From this result, it is clear that PB is viewed as a new product by Korean discount shoppers. In sum, among four consumer perceptual variables examined in this study, only three in each category exhibited direct and indirect association with PB purchase intention. Perceived quality variability in a food category and price consciousness in a home appliance category did not show any relationship with PB purchase intention, nor PB attitude. In both product categories, only two variables, value consciousness and consumer innovativeness, predicted PB attitude. However, when it came to PB purchase intention, consumer innovativeness explains PB purchase intention in the food category while in the home appliance category, value consciousness predicts PB purchase intention. This finding can be interpreted to explain the importance of consumer innovativeness in Korean discount shoppers PB purchase of food, and value consciousness in PB purchase of home appliance. 68

8 As an initial study investigating the integrated impact of consumer-side variables in predicting PB attitude and PB purchase in an international market (i.e. South Korea) and in two product categories (i.e. food and home appliance), we hope this study provides researchers and practitioners with meaningful information. An important theoretical contribution of this study is finding the relative importance of the variables on PB attitude and purchase intention. Each of the four variables were used in predicting PB purchases in prior research. By integrating the variables simultaneously, this study was able to discover the relative importance of the variables. A second significance of this study was finding differing roles of consumer variables by product characteristics. We expect this research fills the void of an under-researched product (i.e. home appliance PB) and provides logical explanations from the consumer side on relative success factors in each product category. Because of mixed usage of purchase, purchase intention, attitude, and proneness in previous studies, their results have been rather confusing. A third significance of this study lies in understanding the differing impact of consumer perceptual variables in predicting PB attitude and purchase intention simultaneously. From our study, it is clear that PB attitude significantly increases PB purchase intention. However, it is still unclear why some consumer variables directly influence on PB purchase intention while other indirectly impact on PB purchase intention through PB attitude. This merits attention for further study.... A key empirical finding in our study is the insignificance of price consciousness and relative importance of perceived quality variation in PB purchase intention in the home appliance category... The most interesting and novel among our results is the role of consumer innovativeness on PB purchase attitude and intention. This finding enables us to contemplate that consumer innovativeness may predict PB purchase, depending on the relative length of PB introduction in a particular country. For instance, consumer innovativeness in countries with a short history of PB may have more predicting power in anticipating PB purchase than countries with a long PB history, such as the USA. Our overall findings generate relevant insights that are more directly applicable by marketing management. A key empirical finding in our study is the insignificance of price consciousness and relative importance of perceived quality variation in PB purchase intention in the home appliance category. Therefore, emphasizing the low price of home appliances may not be effective for Korean discount shoppers. Instead what may be emphasized is comparable quality, quality that matches or exceeds that of leading national brands. This may be accomplished through product demonstration, in-store advertising, and extended warranty periods. Despite the fact that the majority of respondents of the home appliance questionnaire have not experienced home appliance PB, Korean discount shoppers perceive that PB television is inferior to NB television. Therefore, discount retailers operating in the Korean market should note that both increasing actual product quality in the home appliance category and educating Korean shoppers with relevant information are essential. In the food category, however, significance of both price and value consciousness in predicting PB attitude and intention suggests that an important first step in increasing PB purchases is to lower price and increase value for money simultaneously. However, for food PB products, keeping lower prices rather than offering similar quality to NB is more important. One caution is that just lowering prices is dangerous since it could create fierce price competition between PB and NB, thereby resulting in loss of profit in that product category. Therefore, careful leverage of price and quality with NB may be more desirable. Limitations and future studies A couple of limitations of this study suggest potential research opportunities. With the exception of Batra and Sinha (2000), research investigating product category effect in PB purchase has been scarce. Even Batra and Sinha (2000) compared only 12 grocery products. While our study further introduced a non-grocery item (i.e. home appliance PB products) and compared it with grocery items, a wider range of products needs to be compared. Further, inclusion of more experiential or feel type products, such as apparel, is worthy of attention. Apparel has particular relevance to investigation because apparel sales volume is growing fast in Korean discount retailing. Korea is a culture of strong uncertainty avoidance and collectivism, and its consumers exhibit a high level of brand loyalty and quality consciousness (Jin and Koh, 1999). While this study found differing effects of consumer variables on PB attitude and intention by product categories, it may not an issue of the product categories investigated, but rather the combined effect of cultural dimensions on consumption. Therefore, cross-cultural comparison of the model would provide more accurate interpretation and increase the external validity of the model. A third limitation pertains to consumer innovativeness. While consumer innovativeness explained the most significant portion of the PB attitude in both product categories investigated in a Korean discount store setting, it is unclear whether the same construct is relevant for explaining PB attitude in other cultures and in countries with a long history of private brand products. As consumer innovativeness varies by national culture (Steenkamp et al., 1999), crosscultural comparison with simultaneous consideration of length of PB introduction, along with other consumer perceptual variables, would provide significant interpretation. References Ajzen, I. and Fishbein, M. (1980), Understanding Attitudes and Predicting Social Behavior, Prentice-Hall, Upper Saddle River, NJ. Batra, R. and Sinha, I. (2000), Consumer-level factors moderating the success of private label brands, Journal of Retailing, Vol. 76 No. 2, pp Bettman, J.R. (1974), Relationship of informationprocessing attitude structures to private brand purchasing behavior, Journal of Applied Psychology, Vol. 59 No. 1, pp

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(1999), The new appeal of private labels, Harvard Business Review, Vol. 77 No. 3, pp Garretson, J.A., Fisher, D. and Burton, S. (2002), Antecedents of private label attitude and national brand promotion attitude: similarities and differences, Journal of Retailing, Vol. 78, pp Goldsmith, R.E., Freiden, J.B. and Eastman, J.K. (1995), The generality/specificity issue in consumer innovativeness research, Technovation, Vol. 15 No. 10, pp Hoch, S.J. (1996), How should national brands think about private labels?, Sloan Management Review, Vol. 37 No. 2, pp Hoch, S.J. and Banerji, S. (1993), When do private labels succeed?, Sloan Management Review, Vol. 34 No. 4, pp Im, S., Bayus, B.L. and Mason, C.H. (2003), An empirical study of innate consumer innovativeness, personal characteristics, and new-product adoption behavior, Journal of Academy of Marketing Science, Vol. 31 No. 1, pp Jin, B. and Kim, J.O. (2003), A typology of Korean discount shoppers: shopping motives, store attributes, and outcomes, International Journal of Service Industry Management, Vol. 14 No. 4, pp Jin, B. and Koh, A. (1999), Differences between South Korean male and female consumers in clothing brand loyalty formation process: model testing, Clothing and Textiles Research Journal, Vol. 17 No. 3, pp Jin, B. and Sternquist, B. (2003), The influence of retail perception: an exploratory study of US and Korean students, International Marketing Review, Vol. 20 No. 6, pp Lichtenstein, D.R., Ridgway, N.M. and Netemeyer, R.G. (1993), Price perceptions and consumer shopping behavior: a field study, Journal of Marketing Research, Vol. 30 No. 2, pp Liesse, J. (1993), Private label nightmare, Advertising Age, April 12, pp Manning, K.C., Bearden, W.O. and Madden, T.J. (1995), Consumer innovativeness and the adoption process, Journal of Consumer Psychology, Vol. 4 No. 4, pp Midgley, D.F. and Dowling, G.R. 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(1992), A coupon is more than a low price: evidence from a shopping-simulation study, Psychology & Marketing, Vol. 9 No. 6, pp Sethuraman, R. and Cole, C. (1997), Why Do Consumers Pay More for National Brands than for Store Brands?, Report, Marketing Science Institute, Cambridge, MA, December, pp Shim, S., Eastlick, M.A., Lotz, S.L. and Warrington, P. (2001), An online purchase intentions model: the role of intention to search, Journal of Retailing, Vol. 77, pp Sinha, I. and Batra, R. (1999), The effect of consumer price consciousness on private label purchase, International Journal of Research in Marketing, Vol. 16 No. 3, pp Steenkamp, J.-B.E.M. and Dekimpe, M.G. (1997), The increasing power of store brands: building loyalty and market share, Long Range Planning, Vol. 30 No. 6, pp Steenkamp, J.-B.E.M., ter Hofstede, F. and Wedel, M. (1999), A cross-national investigation into the individual and national cultural antecedents of consumer innovativeness, Journal of Marketing, Vol. 63 No. 2, pp Zeithaml, V.A. (1988), Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence, Journal of Marketing, Vol. 52 No. 3, pp Further reading Chandon, P., Wansink, B. and Laurent, G. (2000), A benefit congruency framework of sales promotion effectiveness, Journal of Marketing, Vol. 64 No. 4, pp Corstjens, M. and Lal, R. (2000), Building store loyalty through store brands, Journal of Marketing Research, Vol. 37 No. 3, pp McGoldrick, P.J. (1984), Grocery generics an extension of the private label concept, European Journal of Marketing, Vol. 18 No. 1, pp Narasimhan, C. and Wilcox, R.T. (1998), Private labels and the channel relationship: a cross-category analysis, The Journal of Business, Vol. 71 No. 4, pp Quelch, J.A. and Harding, D. (1996), Brands versus private labels: fighting to win, Harvard Business Review, Vol. 74 No. 1, pp

10 Raju, J.S., Sethurman, R. and Dhar, S.K. (1995), The introduction and performance of store brands, Management Science, Vol. 41 No. 6, pp Executive summary and implications for managers and executives This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present. Perceived value is more important than low price in private branding Private brands (also called own label brands) have been with us for some long while. These brands developed by retailers as alternatives to national brands represent a significant challenge to fmcg marketers and something of a headache to retailers. However, private brands continue to eat into national brand market share and, as they become more important to retailers the strategies associated with private branding have evolved. The result is a greater amount of choice for marketers and an associated increase in the risks associated with such branding strategies. The origins of own-label or private branding lie with supermarket retailers particularly in the UK. Companies such as Tesco and Sainsbury introduced products carrying the retailer s brand at price points significantly below the main, nationally-advertised manufacturer brands. Initially these products were staple ingredients such as flour, butter and sugar, but over time the range extended to the point where few product categories do not have private brands available for consumers to choose. Elsewhere private brands have been slower to establish a foothold because of differing retail margins, the structure of retail markets and variations in shopper attitudes to supermarkets. However, in most of the developed world, private brands now make up an important part of total grocery sales and, in some categories, have by far the largest market share. Jin and Suh look at Korea, an emerging economy where a fragmented retail market has held back the development of private labels. Price, value or quality? For many years private labels were seen as a low priced option targeted mainly at price-conscious consumers. This strategy has been challenged as a result of aggressive promotions by national brands and the recognition that price-conscious consumers are not in the majority. Jin and Suh identify three related traits price-consciousness, value-consciousness and quality focus among consumers. To this they add the degree to which consumers are innovative in their purchase behavior. While there are consumers who say I want the cheapest, they are outnumbered by those who say I want good quality at a fair price and those for whom the highest quality is a requirement. This factor guides us away from the original private label strategy of low price at all costs and leads us towards a focus on value for money. The consumer s behavior is determined by his/her perception of the brands on offer and, for most, this results in a focus on good value. Taking a value approach also makes more sense than trying to take on national brands with high levels of perceived quality since it is likely to result in pricing levels that are, on average, lower than those of national brands. In most cases the leading national brands will enjoy a premium in price as a result on past investment and associated perceptions of better quality. The private brand will compete directly with secondary national brands. Innovation, consumer trial and the private brand Jin and Suh argue that one factor not included in past studies of consumer attitude to and purchase of private brands in the degree to which such purchase represents an innovative decision by the consumer. In developed markets where private brands are well established this innovation factor has declined (although it may still apply where private branding is extended to new product areas and especially outside traditional grocery markets). However, in markets such as that in Korea where private branding is not yet as significant, the extent to which the consumers sees herself taking a risk in making the purchase is important. The usual approach in these studies is to look at the interplay between price, perceived quality and their interaction (value). Yet the consumer faced with a new brand (even if it is familiar in another context) must be willing to switch if the strategy is to succeed. It is at this stage that the consumer s willingness to try out new brands what we can call innovativeness becomes important. We are expecting to accept the transfer of brand equity from the retail brand itself to an associated product brand. This is more likely to succeed when compared to the situation where the consumer faces an entirely new brand but still asks the consumer to take a purchase risk by switching to the private brand. Quality and value plus risk-taking consumers The strategy that appears to work best in a market such as Korean where private label products remain relatively unfamiliar centers on the delivery of value and the encouragement of the more innovative consumers. Jin and Suh conclude that... the quality of PB (private brands) is much more important than low price in determining the PB market share. This finding suggests that retailers in these markets need to select product categories very carefully (avoiding those where market share is overwhelmingly with high profile national or international brands) and to concentrate on delivering a level of value that appeals to the consumer. Such a strategy can be supported by the overall branding and promotional strategy applied to the retail offer itself the right consumer association with the parent brand can assist the private brand through reducing the perception of risk associated with that purchase. This allows consumers greater confidence in taking an innovative purchase decision. There is no reason to suppose that private label strategies will be any less effective in Korea over the long-term but in the short-term retailers can use Jin and Suh s findings to select approaches with a greater chance of success. (A précis of the article Integrating effect of consumer perception factors in predicting private brand purchase in a Korean discount store context. Supplied by Marketing Consultants for Emerald.) 71