Proceedings of GLOGIFT 12

July 30 – August 1, 2012

University of Vienna, Austria
pp. 1-11

Factors Moderating Private Label Purchase

Jayakrishnan.S 1, Ranjan Chaudhuri 2 and Rekha.D. Chikhalkar 3

Abstract
Private labels have gained immense popularity in the Indian retail market. Retailers are
creating new private labels or store brands in all categories to create unique store
image, brand variety, store loyalty and for higher margins. The development of quality
private labels or store brands can increase the leverage of retailers with the
manufacturer brands. Private labels and the impact of private labels on consumer buying
behaviour was always an interest for marketing researchers. This study focuses on
the private labels or store brands and the factors like price, quality, category, store
image, positioning, consumer perceptions and attitudes which are detrimental for the
private label purchase based on scientific studies.
Keywords: Category, Manufacturer brands, National brands, Private labels, Price,
Perceived quality, Store brands, Store image.

Introduction
India has emerged as the fourth attractive destination for the retailers with immense growth
potential and market attractiveness (Global retail development index by A.T. Kearney, 2011).
Organized retailing in India is projected to grow at a rate of 20-25% per annum and the total
retail sales to grow around 396 Billion USD on 2011(Business monitors, 2011). Currently Indian
retailers are following the strategies of some of the global retailers like Wal-Mart, Tesco, Aldi
etc by developing private labels or store brands for higher margins, to add diversity and store
loyalty. Private labels are developed by retailers which are sold exclusively through their retail
outlets.
Indian retail sector has private label penetration of 10-12% (India retail Report, 2009). Private
label market in India is estimated to be 23 million- 29 million USD (India retail report, 2009).
Trent (90%), Reliance (80%), Pantaloons (75%) have the maximum depth in private labeling
(KPMG, 2009). Private labels have emerged as the key players in FMCG segment in food and
personal care products with a share of 19-25%. Store brands account for 12-15% of sales and
contribute to 20-25% of profit for the retailers (Economic times, 2011). Retailers are developing
private labels or store brands in all categories to create unique store image, product variety,
store loyalty, differentiation and for higher margins. The development of quality private labels or

*Author information- Designation, Affiliation, address

1. Research Scholar, National Institute of Industrial Engineering, Powai, Mumbai-87
2. Assistant Professor, National Institute of Industrial Engineering, Powai, Mumbai-87
3. Associate Professor, National Institute of Industrial Engineering, Powai, Mumbai-87
Contact Information
E-mail- jayakrishnan303@gmail.com, ranjan@nitie.edu, rdchikhalkar@nitie.edu

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar
store brands can increase the negotiating leverage of retailers with the manufacturer brands. So
the presence of national brands and private labels are influencing consumer purchase behaviour
and providing retailers an opportunity to generate higher profits by selling their own merchandise.
Private labels were termed as “brands owned, controlled and sold exclusively by retailer” by
Baltas (1997). The contemporary description about private labels or store brands given by Nirmalya
kumar and Steen kamp (2007) is that private labels are any brand to be produced and owned
by the retailer which is sold exclusively in retailer’s outlet only. Private label manufacturers
association (PLMA) has termed private labels as the products that encompass all merchandize
sold under a retailer’s brand. That brand can be the retailer’s own name or a name created
exclusively by that retailer. The American marketing association (AMA) has defined private
label in a product development and retailing context. In product development context private
label is termed as brand that is owned by the product’s reseller rather than by its manufacturer.
In some instances, the reseller may be the manufacturer as well. In retailing context, private
label is termed as any brand name or label name attached to or used in the marketing of a
product other than by the product manufacturers usually by a retailer.
Purpose of the Study
The purpose of the study is to understand the product and consumer factors that can determine
the private label or store brand purchase.
Methodology
The present study makes an attempt to review the literature related to various factors that can
influence the private label purchase among consumers. Extensive search of literature was carried
out to understand the various factors that were found which determined the purchase of store
brands.
The literature review considered around Fifty four articles. Majority of the articles are from the
last ten years. The literature related with private labels has been collected from data bases like
Science direct, Ebesco and Emerald research. Some of the recent conferences, books and
consultancy reports were also refereed as a part of the study. The studies reviewed for the
study have been published from 1958 to 2011. The present study has included both quantitative
and qualitative studies (literature review papers).
Analysis of Research Studies
The research papers considered for the study have been analyzed and classified on the basis
of major dimensions considered for the research. The present study analyzed the literature
based on the multiple factors and the interaction of these factors among themselves in
determining the private label purchase. The classification of literature is presented based on the
various criteria. The synoptic overview of the studies is presented in table 1.

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Factors Moderating Private Label Purchase

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

Classification of Studies Based on Geographical Context

The literature review has considered studies across the globe which gives an overview of the
factors that can influence the purchase. The study has identified that majority of the literature
is published in Developed countries as private labels have higher penetration in these countries.
The geographical spread of the literature is presented in Table 2 and which is graphically presented
in Figure 1.
Table 2: Country\Region wise Studies

Country\Region No of studies
US 33
Europe 10
India 4
Other Asian Countries 3
Australia 1
Canada 1
Israel 1
South Africa 1

Figure 1: Classification of Studies Based on Geographical Context

Classification of Methods of Data Collection Used for the Research

Most of the research studies have used a variety of methods for data collection. The methods
like Questionnaire, Telephonic and mailed survey were used for data collection. Majority of the

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studies used questionnaire as a method for data collection. Telephonic survey and interview
was used in two studies, survey and mailed survey in four studies. Secondary data like
frequent shopper data from various retailers and agency like OCU (Consumers and Users
organization- Europe) data, AC Nielsen and Selling Marketing Inc (SAMI) were also used by
researchers to study the factors that determine the private label purchase. Some of the studies
are qualitative review studies which has not used any data as part of the research. The
classifications of studies based on the method of data collection are given in Table 3.

Table 3: Classification of Studies Based on Method of Data Collection.

Method of Data Collection No of Studies

Questionnaire 32
Survey 4
Telephonic Survey\Interviews 2
Secondary data 11

Classification of Studies Based on Methods of Data Analysis

The methodology used by the research studies includes both quantative and qualitative methods.
Most of the studies looked into multiple attributes of private label purchase. So the researchers
used structural equation modeling as one of the methods for data analysis. Regression analysis
was another major method for data analysis. ANOVA is also one of the methods adopted for
the studies. The methods like discriminant analysis, co-relation, T-test, ANCOVA and econometric
modeling etc were also used for the data analysis. The other methods adopted for the studies
include percentage analysis, multi dimensional scaling, game theory and qualitative review. The
different methods adopted for data analysis are presented in Table 4.

Table 4: Classification of Studies Based on Methods of Data Analysis

Methodology No of Studies
Structural Equation modeling 15
Regression 8
ANOVA 5
Discriminant Analysis 3
Co-relation 2
T-test 2
Econometric modeling 2
ANCOVA 1
Other methods 16

Factors Moderating Private Label Purchase

Many studies are done by marketing researchers about private labels, the consumer perception
about private labels, its influence on consumer choice and factors for private label purchase.
The major factors researchers found which determines the private label purchase include Price

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

and price related factors, perceived quality, extrinsic and intrinsic cues, category factors, store
image, product familiarity, perceived risk., positioning, value consciousness and business cycles.
Price and Price Related Factors
Price and price related factors have major influence in the purchase of private labels across
categories. Burger and Schott (1972) studied variables like demographic, product class salience,
product use and marketing attitude to understand the influence of these factors on the private
label purchase among US consumers. The categories focused include jams, jellies and iron
box. It is observed that private label buyers are price sensitive. The private label consumers
considered store name as more important factor than brand name. Demographic variables have
least impact on the purchase. Retailer’s price strategies are typically used in promoting private
brands. The intrinsic and other extrinsic attributes can also influence the private label purchase.
Price is one of the extrinsic cues which determine the private label purchase among US
consumers (Richardson.et.al, 1994). The attributes which are intrinsic and extrinsic in nature
had an influence on perceptions about store brand quality. The intrinsic attribute include the
ingredients and extrinsic attributes include price, brand name and packaging. Product categories
studied include regular potato chips, French onion chip dip, chocolate chip cookies, cheese
slices and grape jelly. Consumers rely more on extrinsic cues like price, brand name and
packaging when assessing the private label quality which determines the private label purchase.
The store brand success also depends on maintaining high intrinsic product quality and strong
brand image. The relationship of extrinsic cue reliance with perceptual and demographic factors
can determine the private label purchase. Further study by Richardson.et.al (1996) considered
extrinsic cues and other factors like intolerance to ambiguity, familiarity, perceived quality variation,
perceived risk, and perceived value for money and demographic factors that influence the private
label purchase in grocery segment among US consumers. They considered 25 grocery items
which included the items studied in the previous study (Richardson.et.al, 1994). It was found
that factors like price, brand name, and packaging are the cues which are recognized by
consumers that can influence consumer perception about private labels which determines private
label purchase. Extrinsic cue reliance can exert strong negative effects on consumer attitude
towards store brands which can be detrimental for the purchase. High income households were
found to have low preference for store brands.
Sinha and Batra (1999) considered the price, perceived quality, consumer price consciousness,
category risk, category price-quality association, price unfairness of national brands and its
impact on private label purchase among US consumers. The categories studied include cold
and flu medicine, liquid laundry detergent, carbonated soft drinks, ground coffee, frozen orange
juice, gift wrap, frozen plain vegetables and paper towels. It was observed that consumer’s
category price consciousness is a highly significant predictor of private label purchase. Consumers
tend to be less price consciousness in categories where perceived risk is high. The quality
variation, purchase mistake with respect to private labels can influence the purchase decision.
Another study by Batra and Sinha (2000) considered the potential effect of price consciousness
and factors like consequences of purchase mistake, degree of quality variation in category and
search versus experience nature of product features in categories to model the consumer level
factors determining private label success among US consumers. The categories considered for
the study includes ground coffee, powdered laundry detergent, canned tomato paste, tea bags,
liquid laundry detergent, gift-wrap, soft drinks, greeting cards, frozen orange juice, cold and flu
medicines, sheet fabric softeners and canned tomatoes. The interesting observation is that
consumers tend to be price conscious when they perceive price unfairness of national brands
within certain product categories. Consumer’s category price consciousness determines the
purchase of private label brands. Private label purchase increases when the consequences of
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 Factors Moderating Private Label Purchase
making a purchase mistake are reduced, quality variation is small, product categories have
more search characteristics. Quality variation didn’t have significant direct impact on private
label purchase. Factors like price differential and category price can determine the purchase of
store brands.
Mendez.et.al (2008) did a comparative study between store and manufacturer brands with respect
to quality and price differentials among Spanish consumers. The attributes studied include category
price, price differential, objective quality and store brand market share. The study analyzed
trends in food, drink products, personal hygiene and home cleaning products in the period from
1989 to 2004. Private label is distinguished from other brands because of its price only. Low
price can motivate the consumer for first purchase, but price differential won’t always drive
private label purchase in all categories. In categories with high social and emotional component
price differential between private labels and manufacturer brands are insignificant. When the
quality aspect is considered store brands occupy an intermediate position between local
manufacturer brand and high quality national brand.
But Thiel and Romanuik (2009) considered role of quality and price in perceptual categorization
of private labels and national brands among household shoppers in Australia. The categories
taken for study include toilet paper, salad dressing and sliced cheese. Low price is the strongest
differentiator between private labels and national brands. Pricing is the categorization driver for
private labels and national brands in consumer minds. Low quality was found to be the strongest
negative driver for private label and national brand categorization. The price quality association
and brand loyalty can determine the private label purchase.
Glynn and Chen (2009) considered factors like price consciousness, quality variability, purchase
mistake and the search vs. experience nature of product features in a category, demographic
factors, two additional constructs brand loyalty and price quality association to understand the
influence of these factors on private label purchase among consumers of Newzealand. The
categories studied include canned fruit, biscuits, toilet tissue, pet food, fresh milk, bread, breakfast
cereal, fruit juice, cheese and potato chips. The study found that price consciousness has
strong effect on determining private label purchase in most of the categories. Quality variation
which was insignificant in Batra and Sinha (2000) study was found to be significant. Purchase
mistake has marginal significance compared to other factors in determining private label purchase.
Search and experience didn’t have a significant influence on private label purchase. Price-
quality association and brand loyalty are relevant only in categories where private labels have a
low share. Demographic factors like income, education and household size also moderates
private label purchase to some extent. The impact of perceived risk on price consciousness
has a role in determining the private label purchase.
However Wu.et.al (2011) considered indirect effect of price consciousness and perceived risk
on purchase intention of private labels. The study was conducted in two most popular chains of
drug stores in Taiwan. Consumer’s category price consciousness was found to be the significant
predictor for the purchases of private label brands. It was found that effect of price consciousness
is outperformed by the influence of perceived risk associated with different categories. The
perceived risk has a mediating effect on the relationship between the brand image and the
consumer’s purchase intention of private labels. This again proves the fact that consumer tend
to less price conscious in categories where there is high perceived risk.
The empirical study by Pandya and Joshi (2011) took into account the category and demographic
attributes to study the private label purchase behaviour among consumers of Ahmedabad and
Surat. The key attributes taken for the study includes quality, price, risk and private label image
in personal care and consumer durables category. The study found that pricing is an important
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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

attribute that determines the private label purchase. Perception of quality has a positive effect
on brand perceptions that influences the private label preference and use. Even though pricing
and quality are the major factors influencing the consumer attitude, packaging was also found
to influence the consumer perceptions. Attitudinal difference was observed for the attributes of
quality, price and risk among consumers in Ahmedabad. Attitudinal difference was observed for
attributes of price and risk in consumer durable products and quality, price, risk and image for
personal care products among consumers in Surat. In case of consumer durables, consumer
attitudes were consistent for attributes like quality, packaging and image
Quality and Perceived Quality
Quality perceptions are important factor that influence the purchase of private labels. It can
determine the retailer consumer relationship which is important for private label purchase.
The exploratory study by Dhar and Hoch (1997) among US consumers considered consumer
(income, age, education), retailer (No of retailers, retail chain name, depth of assortment, private
label-national brand price gap, quality commitment, pricing strategy, retail chain size, category
expertise premium store brand program, economies of scale and promotion intensity for private
labels), manufacturer factors (brand competition, pull and push promotion) and its effect on
private labels in grocery category. It was observed that quality, low pricing, breadth of private
label offering, use of retailer name and premium offering can enhance private label performance.
Retailer promotions can enhance private label share. Low income and elderly consumers tend
to prefer store brands. The perceived quality differences among store brands and national brands
are an important factor that determines the purchase intention. Sethuraman and Cole (1999)
looked into the relationship between perceived quality differential and willingness to pay premium
for national brands compared to store brands in 88 grocery products (food and non food) among
US consumers. The factors considered includes perceived quality differential between national
and store brands, average purchase price, purchase frequency, familiarity with store brands,
price-quality inference, perceived deal frequency, the amount of pleasure derived from consuming
the product and demographics. It was observed that perceived quality differential is one of the
major factors that determine the private label purchase. It accounts for about 12% of the variation
in price premiums paid for national brands compared to private labels across consumers and
categories. So perceived quality differential has to be reduced to increase private label proneness.
Quality sensitivity among the consumers determines perception about private labels and national
brands.
Perceived quality and factors like differential quality sensitivity, non-quality utility and its effect
on consumer’s willingness to pay more for national brands than private labels were considered
by Sethuraman (2000) in US context. This study focused on the impact of perceived quality in
grocery items and non food category also. Perceived quality determines private label purchase.
Perceived quality differential is lower when consumer’s familiarity with the store brand increases.
Quality sensitivity is high among young consumers and they perceive high quality differential
between private labels and national brands. Non-quality utility is dominant driver for consumer
to pay more for national brands.
Further study by Sheinin and Wagner (2003) in US about store brands in apparels and tooth
paste focused on effects of price, retail image and category risk on store brand judgments,
perceived quality, attitude and purchase intention. Perceived quality can be detrimental in purchase
of private label purchase and it is having positive relationship with price when category risk and
retail image is high. Packaging and advertising has a key role to play in determining the private
label purchase. Baltas and Argouslidis (2006) looked into ratings of quality, price level, packaging,
store image, advertising of store brands in comparison with manufacturer brands, socio-
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demographics and shopping behaviour (shopping frequency, store loyalty, spending per shopping
trip, monthly grocery expenditure, brand and price sensitivity) among consumers in Greece for
grocery category. Quality has a significant role in store brand preferences. Advertising and
packaging were found to be significant in determining the consumption rate of store brands.
Large families are not more inclined towards the purchase of store brands. More frequent shoppers
tend to prefer store brands. Price sensitivity was found to have a positive relationship with
store brand proneness. Store loyalty had a significant influence on determining the private label
purchase. It was found that consumers who tend to prefer brands are found least likely to
switch into private labels. In Indian context, Koshy and Abhishek (2008) looked into how retailers
can influence the quality perceptions for private label brands in grocery by providing additional
information cues to the customers. The study concluded that consumer perceptions can be
improved by introducing public quality labels recognized by consumers which can ensure adequate
quality levels for private labels. The study focused on quality perceptions and didn’t take into
account the attributes like price, packaging and risk which can determine the private label
purchase
The impact of quality perceptions, trust, availability, pricing, and packaging and its influence on
determining private label purchase in grocery segment among South African consumers was
studied by Beneke (2010). Perceived quality was considered important factor for purchase followed
by accessibility, trust to the product and price tag. Perceived quality is influenced by packaging
and inner product quality.
The exploratory study by Nair (2011) in Indian context looked into the changing perceptions
about private labels in food and grocery segment among consumers and retailers in Pune
region. The factors considered for the study include perceived quality, trust in the brand, pricing,
freshness, healthy nature, accessibility, packaging, availability of alternatives and retail
communications related with private labels. Perceived quality emerged as the key determinant
for private label purchase followed by accessibility of products, price charged, trust in brand,
freshness, packaging, healthy nature, availability of alternatives, sales promotion and advertising.
The categories like cereals, pulses and spices were preferred category for private labels followed
by packaged foods and grocery segment.
Perceived quality is a major factor affecting the consumer perception. So retailers need to
enhance the quality image through minimizing the quality variation of store brands compared to
national brands.
Extrinsic and Intrinsic cues
Intrinsic cues and extrinsic cues are one of the major factors that influence the purchase of
store brands. These cues serve as indicators of quality and influence the consumer perceptions
which can determine the purchase intention of private labels.
Intrinsic cues include taste, freshness and ingredients. Bellizzi et.al (1981) studied about consumer
perceptions of national, private and generic brands with respect to intrinsic cues in US context.
Consumers consider private labels to be inferior to national brands in quality of ingredients,
taste, texture, and aroma in grocery category. Private labels were found to have more value
compared to national brands and generics. One time purchase of private labels cannot be
considered for determining the purchase behaviour of private labels. This was considered by
Cunningham.et.al (1982) who studied U.S consumer perceptions and preferences of generic
brands, national and store brands in canned food category. Consumers rated national brands as
superior to private label and generic brands in terms of taste, appearance, labeling and variety
of choice. The result was consistent with the study by Bellizzi.et.al (1981). National brands

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

were considered to have higher quality, better physical appearance, better taste, reliability and
offer greater variety. Store brand users rank all three brands similarly in intrinsic cue like nutritional
value. Extrinsic attributes where not studied for determining the private label purchase in the
above studies.
Further study by Richardson.et.al (1994) in grocery category among US consumers with respect
to intrinsic (ingredients) and extrinsic (price, brand name and packaging) cues found that when
ingredients were disclosed by retailers, there is minimal difference between national brands and
private labels. But intrinsic cue didn’t have significant influence on determining the store brand
purchase due to consumer’s reliance on extrinsic cues for product quality. The earlier studies
didn’t consider reliability, advertising as a factor that can influence consumer’s perception about
private label purchase.
So Dick.et.al (1996) focused on identifying how US consumers evaluate the store brands on
the basis of intrinsic and extrinsic attributes. This study focused on 28 products which includes
food and non food items in grocery category like bottled juices, cereal (hot or cold), spaghetti,
pasta, spaghetti, pasta sauce, canned tuna, canned soups, canned vegetables, canned fruits,
vegetable oils, liquid laundry detergent, paper towels, mayonnaise, salad dressing, relish and
pickles etc. The study analyzed consumer inferences taking into account intrinsic attributes like
overall quality, ingredients, taste and extrinsic attributes like price, brand name, packaging and
advertising. The consumers preferring store brands are less likely to believe that brand name is
an accurate predictor of how good a brand will taste. The important attributes that determine
the brand choice include the overall quality of the brand, the reliability and fineness of brand
ingredients, and taste. The study found that consumers judge intrinsic product characters on
the basis of price, brand name, packaging and advertising.
Extrinsic and intrinsic cues can strongly influence the perception of consumer about store
brands. So retailers need to improve the extrinsic and intrinsic cues of private labels to create
a positive image about the products in consumer’s mind.
Category and Category Related Factors
Product category also determines the private label purchase. The factors like category risk and
margins, cross category assortment influence the purchase of private label.
Hoch and Banerjee (1993) provided insights about private label growth in US. The factors
considered include consumer driven, retailer driven, national manufacturer driven factors, other
factors (income, economic trends) and its effect on private label success in grocery category.
Consumer driven factors are product quality, quality consistency, retailer driven factors are
categories sales, gross margin and the national brand manufacturer driven factors include no of
national manufacturers and amount of national advertising per manufacturer. Consumer driven
factors and retailer driven factors have positive impact on the private label share, whereas
national manufacturer driven factors have a negative impact on the private label share. The
study concluded that private labels tend to perform better in categories offering high margins
and against national brands with less spending on advertising. Private label success is high in
less promoted categories with number of brands and when price differential between private
label and national brands are high. High level intrinsic quality is important than price for private
labels. Price sensitivity among consumers can be detrimental for the purchase of private labels.
Raju.et.al (1995) in US context considered factors like no of national brands, cross price sensitivity
among national brands, cross price sensitivity between national brands and store brands and
base level demand for the store brands to understand the performance of store brands in
grocery category. Private labels will be introduced in categories where price sensitivity between
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 Factors Moderating Private Label Purchase
store brands and national brands are high which can increase the retailer’s profit. In categories
with high level price competition among national brands, private label introduction is not favourable.
Private labels can perform well in categories where there are large no of national brands. The
factors like cross-category assortment, store factors can influence the purchase of private
labels.
The category aspect of private label purchase was considered by Ailawadi and Keller (2004)
among US consumers. The study further investigated different aspects of retail branding by
looking into dimensions like store image, access, in-store atmosphere, price and promotion,
cross-category assortment, and within-category assortment in grocery and general merchandise.
It was observed that private label purchase is more related with category than consumer, store
and other factors. The study never explored the influence of consumer and house hold factors
along with category. But Hansen.et.al (2006) looked into the extent to which category, consumer
and house hold factors determine the private label purchase across different products in US
context. The categories considered for the study includes bath tissue, dish, foil, ham, mayonnaise,
oats, paper, peanut, tuna and waffle. The study concluded that store brands can be better
positioned in certain categories which can generate strong preferences where price and risk
concerns are limited. The general observation of the study is that store brands can perform
better in non food category due to the minimal quality variation perceived by consumers in this
category. The vulnerability of store brands increases in food category. In categories where house
hold perceives the store brand to be of high quality, price considerations have limited role than
in categories where the store brand is perceived to be of poor quality. This observation cannot
be extended to infrequently purchased product categories or for shoppers in retail outlets such
as wholesale stores and warehouse clubs.
Wanga, Tolga and Kalwanib (2007) considered the role of category and its influence on cross-
category purchase behaviour among infrequently purchased product categories from ware house
clubs and whole sale stores of US. The products considered for the study include trash bags,
diaper, detergent, multivitamin and ibuprofen. It also focused on attributes like price spread
between the store brand and national brands, frequency of store visits, duration of a customer’s
membership in the warehouse club and average basket size. Purchase of products is category
specific and if private labels have quality then consumers may purchase the same store brands
for other categories also. Private label purchase increase with the price discount offered to
consumers. Store visit frequency was found to have a positive association with store brand
purchase, but duration of membership didn’t have any significant impact on store brand purchase.
Recent findings by Bao, Yeqing and Sheng (2011) among US consumers gave us the insight
that retailer would be better off making entry into a category that is strongly associated with in
consumer’s mind. This may indicate that private label can be launched successful in categories
if consumers perceive that a particular commodity or category is associated with the store.
The success of private label depends on the category also. So retailer’s focus should be on
entering a category in which retailer has built a strong image in consumer minds through quality
merchandise and product variety. Retailers need to impart confidence in consumer minds to
mitigate the effect of category risk by providing adequate product information.
Store Image
Store image is one of the major factors that influence the purchase of private labels. The
consumer perception about the image of the store has a direct effect on brand image of the
private label which can determine the purchase. Store image is defined in the shopper’s mind,
partly by the functional qualities and partly by an aura of psychological attributes by Martineau

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

(1958). Different factors that develop image about the retail store in consumer’s mind includes
layout, architecture, symbols, colours, advertising and sales personnel in department and grocery
stores. It was observed that shopper seeks the store whose image is most congruent with the
image she or he has of herself or himself. Store image is developed over a time due to the
objective and subjective perceptions of the consumer about the store. Kunkel and Berry (1968)
devised an alternative approach to create an operational definition of store image taking into
account the behavioral aspects of consumers in U.S context. General department store was
considered for understanding store image. Retail store image will depend on the store convenience,
fashion, price, selection of merchandise, quality, quantity of sales personnel, other factors like
degree of reward and punishment associated with these factors. The aspects of layout and
variety of merchandise can influence the consumer perception about store image.
Store image as a factor was considered by Doyle and Fenwick (1974) to understand the effect
of store image on shopping habits of consumers in grocery chains of England. They considered
four dimensions for store image like value for money, variety of goods sold (assortment), layout
and quality. Even though consumer differs in their perceptions about the store image attributes
they choose stores with images most congruent with their own self-images. This means store
image is influenced by consumer’s self image. The development and formation of store image
was not focused on this study. Further study by Mazursky and Jacoby (1986) in US context
looked into different aspects that develop the store image. The study considered factors like
image aspects of interest (merchandise quality, service quality and pleasantness) with the types
of image formation circumstances (a new store entering an existing environment and new
consumer entering an existing environment). Category focused on the study was apparels. The
study concluded that store image depends on the price, merchandise information (core facets),
policy and service (peripheral facets). The store factors like convenience, atmosphere and other
non store factors like product selection that influences the store image was not considered in
this study. So Chowdhury.et.al (1998) considered alternative modes of measuring store image
and efficacy of structured and unstructured measures for determining store image of a grocery
retail chain in US. The study found that employee service, product quality, product selection,
atmosphere, convenience, prices and value are the dimensions that influence the store image.
Store Image and Private Label Purchase
Store image attributes considered by Chowdhury.et.al (1998) were considered to study the impact
of store image among Canadian retail consumers by Collins-Dodd and Lindley (2003). The study
looked into the influence of store image and store brand attitude on store brand perceptions in
grocery category. The important insight provided was that store brands are seen as extensions
of the store image and contribute to store differentiation in the minds of consumers. The study
didn’t look into influence of store image on image of the private label. Vahie and Paswan (2006)
looked into the interrelationship between store image and private label image among US apparel
retail consumers. The factors considered includes store image dimensions like employee service,
product quality, product selection, atmosphere, convenience, price and value and its impact on
private label image. Convenience, price and value dimension of store image positively influence
private label image. The study found that store image and the presence of national brands can
influence the consumer perceptions about private labels. The above studies never looked on
the impact of store image on store loyalty which can be detrimental for private label purchase.
Store image was considered by Martenson (2007) and the study focused on the impact of
store image on customer satisfaction and store loyalty among consumers in Sweden. The
categories study include gourmet food, lunch food, detergent, toothpaste, skin products, deodorant,
hair care products, vitamins and durables like microwave oven and vacuum cleaner. Image was

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dependent on factors like perceptions, inferences and beliefs. Store image, ambience and
assortment and price dimension influence the store loyalty and satisfaction. The study stated
that factors like store loyalty and satisfaction can be channelized to enhance private label
purchase. Consumer psychographics can influence the attitudes towards private labels. Liu and
Wang (2008) looked into store image and other factors affecting the attitude towards promoted
brand and private label brands among Taiwanese consumers in grocery category. The attitudes
of consumers are determined by the difference in psychographics and store image. The factors
considered included power-prestige, distrust, retention-time, anxiety, motivational needs, smart
shopper self-perception, store image, needs for power, needs for affiliation, smart shopper self-
perception and its influence of promoted and private label brand. Positive store image, smart
shopper self-perception, need for affiliation, money attitude regarding power-prestige and anxiety
are the major factors that determines the attitude towards promoted brands. On the other hand
private label attitude is determined factors like positive store image and money attitude regarding
retention and distrust.
Recent study by Chandon.et.al, (2011) among French consumers explored the effects of store
image perceptions, attitude toward private labels, private label price-image, private labels purchase
intention and value consciousness in food and grocery categories. Store image perceptions and
private label price image perceptions along with factors like value consciousness and perceived
quality determine the private label purchase. The impact of store image, product signatureness,
quality variation, quality perception, purchase intention, value consciousness and brand name
in determining the private label purchase was studied by Bao, Yeqing and Sheng (2011) among
US consumers. The studies were conducted in two drugs and electronics retail stores. Store
image and product signatureness were found to positively impact consumers quality perception
of store brands which determines the private label purchase. Quality variation will negatively
impact quality perception which can affect the private label preference.
Store image has direct and indirect influence on the consumer perceptions which can be
detrimental for store brand purchase. The image factor can influence the quality perceptions,
prestige factor and store loyalty which can be vital in influencing the purchase decision.
Consumers can extend the image of the store to its store brand also. Retailer’s image in the
consumers mind can strongly influence the purchase of store brands by the retailer.
Product Familiarity
Familiarity is one among the major factors that influence store brand purchase. This is determined
by product knowledge and brand comprehension. It’s an important factor that can influence the
consumer choice of private labels.
Bettman (1974) focused on the relationship of information-processing attitude structures to private
brand purchasing behavior among US consumers in grocery category. The effect of factors like
demographic, perceived risk, product quality related and information related were studied. Store
brand familiarity increase with the information available about the brands which can increase
the purchase due to reduction in perceived risk and perceived quality variation associated with
these brands. The study has not focused on the role of product familiarity and its consequent
effect on product evaluation. The relationships between product familiarity, brand name, price
limits, and their effects on product evaluation were the focus of the study by Raju (1977) in US
context. The fifteen different brands of stereo receivers and the influence of above factors were
examined. The factor product familiarity was related positively to the degree of confidence in
brand selection in a purchase situation. Price and brand name were found to be positively
related to product evaluation but higher product familiarity was found to create discrimination
among brands during post-purchase evaluation. The effect of familiarity can be extended to
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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

private label also. When consumers are familiar with the private label products it can enhance
the consumer confidence which can be detrimental for private label purchase. The study has
limitations in terms of looking into the extent to which information are available with the
consumers and its influence on purchase decision.
Wolinsky (1987) study about general merchandise among consumers of Israel suggested that it
is not easy to recognize an unlabeled (or privately labeled) product with a recognized brand due
to lack of information about the unlabelled products. This can hinder familiarity of the products
which can affect the product purchase. The above studies were considered by Richardson.et.al
(1996) to examine the effect of familiarity on store brand proneness among US consumers in
grocery segment. Familiarity with the private labels determines the purchase. Consumers who
lack familiarity and experience with such brands are likely to view them as quality inferior, risky
products. This can affect the consumer attitudes towards private labels.
Recent study by Sheau-Fen.et.al (2011) considered the effect of perceived risks, perceived
quality and familiarity in determining the store brand proneness among Malaysian consumers in
Shampoo category. Age was considered as a factor and the extent to which it moderates the
effect of perceived risk (performance, social, financial and physical risk), perceived quality and
familiarity. The study found that familiarity on store brand purchase intention is partially mediated
by perceived quality. Age moderates the effects of performance risk, physical risk, familiarity
and perceived quality. The effect of physical risk on perceived quality was stronger for mature
people. When purchase intention was considered, the effect of performance risk, physical risk,
familiarity and perceived quality were stronger for mature groups compared to young people.
In a retail store, store brands have to compete with national brands so consumers need to be
familiar with private label which is important for the purchase. From these studies it is evident
that lack of familiarity can act as a factor which can reduce the consumer reliance on product
attributes, brand name and other factors
Perceived Risk
Perceived risk is one of the factors which are detrimental for the purchase. It can be inferior
quality, image, status, product failure and low value which are usually perceived by consumers
about private labels.
Bettmann (1974) studied the effect of perceived risk of private label purchase among US
consumers in grocery segment. The study found that consumers consider perceived risk as an
important factor to evaluate store brands. Perceived risk is determined by uncertainty with
respect to store brand quality and consumer perceptions about store brand. Category factors
were found to influence the perceived risk associated with private labels.
Further study by Sinha and Batra (1999) in grocery category among US consumers considered
factors like category risk, category–price quality association and category price consciousness.
Perceived risk associated with product categories can affect consumer’s price consciousness
which can determine the private label purchase. As perceived risk increases consumers who
consider price-quality association do not prefer store brands. Most of the earlier studies never
looked into the multiple dimensions of perceived risk which included functional risk, psychosocial
risk, social risk and financial risk.
Semeijn.et.al (2004) considered these aspects of perceived risk among male and female shoppers
in three leading grocery chains of Netherlands. The variables considered include functional risk,
psychosocial risk, financial risk and store image attributes like merchandise, layout and service.
Financial risk and store image was found to have direct effects on the consumer evaluation of

14
 Factors Moderating Private Label Purchase

store brands. The study found that functional risk about store brands can be reduced by favourable
store image and financial risk by improving the quality aspects of private labels. In product
categories where risk of public exposure of the product is an important issue a manufacture
brand will often outperform a store brand. The factors like time risk, physical risk and
psychological risk associated with perceived risk can determine the purchase.
Mieres.et.al (2006) considered perceived risk as a multidimensional concept and looked into its
effect on store brand proneness among Spanish consumers in categories which includes kitchen
rolls, shampoo, toasted bread and canned fish. The different dimensions considered for perceived
risk include functional (associated with the performance of the product), financial (related with
the potential monetary loss), social (relative to the perception of other consumers about the
store brand consumer), physical (relative to the health or physical well-being), psychological
(associated to the individuals self-esteem) and time risk (time lost due to product failure). The
difference perceived by consumers with respect to the above dimension of perceived risk has a
direct influence on store brand proneness. The study pointed that improving the quality perception
can reduce the perceived risk associated with store brands which can enhance store brand
proneness.
In a different study about store brands among German consumers by Zielke and Dobbelstein
(2007) considered social, financial and functional risk. The product categories considered for
study were shampoo, laundry butter, detergent, potato chips and sparkling wine etc. The
perceptions of social risk followed by functional risk determine the private label purchase. If we
look at product categories like potato chips and sparkling wine has high social risk compared
to other categories. Premium store brands were preferred over classic and generic private label
products in high social risk categories, especially for sparkling wine. The product category like
butter has low risk associated with it which increases consumer willingness to purchase store
brands.
Positioning
Private label positioning was one of the major factors that determine the private label purchase.
Store brands can be better positioned in certain categories as they attract buyers mainly due
to stronger preference rather than price reasons. Sayman.et.al (2002) has done in depth analysis
of retailer’s problem of positioning of private labels in categories which includes dry grocery,
frozen, refrigerated foods and health and beauty aids. The data was collected regarding extrinsic
attributes like labeling, package design, colour and shelf placement to study the positioning of
store brand. Observational data study across two US super markets reveal that most of the
store brands target their competing national brands. In cases where base demands for two
national brands are equal but higher than that of the store brand it’s optimal for the store brand
to be positioned in between the two brands. The store brand can be successful if it targets
any of the national brands. When store brand quality is not at par with national brands, the
retailer treats the store brands as inferior products and positions it against the weaker national
brands. In categories where first national brand is stronger than other national brand it is
advantageous to target first national brand than the second one. If store brands are targeting
national brands it can influence the consumer perception of physical similarity but it had no
effect on overall perceptions of product quality. The study didn’t give an insight into attributes
to be focused for positioning.
Further study by Choi and Coughlan (2004) studied the positioning of private labels based on
horizontal and vertical differentiation. The study focused on general merchandise and grocery in
US context. Vertical differentiation is basically quality driven and based on the differentiation of
the characteristic which consumers value the most. Horizontal differentiation is based on the
15
 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

size, packaging of the private labels. Retailers should focus on vertical differentiation when
consumers taste is diverse which is applicable to category breakfast cereals. This can be
extended to the entire food category because quality is one of the major determinants for brand
preference. Private label is better imitating the stronger band when national brands are substantially
differentiated horizontally in categories like analgesics. If the quality levels of the two national
brands are equal with substantial level of horizontal differentiation imitating either brand is optimal.
Private label should take a distinct position when national brands lack clear horizontal
differentiation. If the national brands are of different quality, the retailer should position at par
with the national brands. Optimal positioning of the store brand should take into account relative
horizontal positions of the national brands. The study didn’t look into the use of product features
for positioning of private labels. This was addressed by Choi and Coughlan’s study (2006)
looked into the positioning problem of store brands against two national brands with respect to
product quality and features in grocery and general merchandise category. When national brands
are feature-undifferentiated (Ex: offer similar flavors and packaging), the retailer should differentiate
their private label from the national brands with maximum features. When there is higher quality
private label then private label has to be positioned closer to the national brand and while a
lower quality private label has to be positioned with respect to the weaker national brand. The
optimal positioning can be based on (a) with minimum quality differentiation from the national
brands (b) with minimum feature differentiation from one of the two national brands. The study
didn’t consider the aspects of price.
The role of positioning and its competitive effects on private labels in European markets were
explored by Benito (2010). The category considered for the study was grocery segment. The
study focused into aspects like store brand positioning with respect to quality, price, the
competitive structure within product categories, shopping behaviour and market segmentation.
The study found that the importance of positioning strategy based on the price than quality
which can be favourable for the private label.
When positioning is considered as a factor retailer should keep in mind factors like category,
quality, price and the position of national brands. The positioning strategy should be customized
on the basis of category, competitive position of national brand and target customer segment
Value Consciousness
Value consciousness is an important factor that determines the private label purchase. Value is
perceived by consumers differently. Some consumers perceive value as low price, some others
as the benefits they receive from the products, quality they get for the price they pay and what
they get for what they pay (Zeithaml, 1988).
Harcar.et.al (2006) looked into buying behaviour of store brands in relation to consumer perceived
value among US consumers in grocery segment. The study considered perceived value as a
multidimensional concept which includes involvement, brand loyalty, price perception, quality
perception, familiarity and perceived risks. The study gave insight that value consciousness
contributes positive to store brand perceptions. So marketing strategies should focus on promoting
the value of the store brand. The study didn’t look into effect of switching cost on private label
purchase. Factors like involvement, product type, switching cost and consumer value
consciousness were considered by Kwon.et.al (2008) to understand the private label purchase
intent among US consumers. The product categories taken include shampoo, glue sticks, juice,
wine, painkillers, and bottled water. The study revealed that low value conscious customers
are likely to purchase private brands for search goods compared to experience products. In
categories like food and personal care products consumers tend to be highly value conscious.

16
 Factors Moderating Private Label Purchase

The study found that when perceived switching cost of products decreased private label purchase
intent increased. The study didn’t look into factors like prior experiences and uniqueness along
with value consciousness in determining the private label purchase.
Another study by Kara.et.al (2009) considered the role of value consciousness and experiences
in determining the purchase of store brands among US consumers in grocery category. Low
price aspect of value consciousness was taken along with other factors like quality, high trust,
attractive packaging, loyalty, availability, uniqueness and prestige habits. The factors like value
consciousness and prior experiences have a significant influence on the consumer perceptions
about store brand which can influence the purchase decision. Consumer’s value consciousness
contributes positively to store brand perceptions. The study found that 63% consumer prefers
private labels due to its uniqueness. Consumer prior experiences were found to have significant
effect on store brand perceptions which can influence store brand purchase. The study didn’t
consider private label price image which can influence value consciousness
Recent studies among French consumers considered this factor which revealed that private
label consumers are value consciousness and focus on low price of store brands (Chandon.et.al,
2011). This study didn’t look into the effect of value consciousness and its influence on quality
aspect of private labels. Value consciousness has a moderating effect on the quality perception
of private labels which can influence the purchase intention of private labels (Bao, Yeqing and
Sheng, 2011).
Value consciousness can influence the purchase of store brands. It can influence the consumer
perceptions about store brands which can determine the purchase decision. Retailers need to
focus on the quality and price aspect of value consciousness to improve the consumer
perceptions about private labels.
Business Cycles
The influences of business cycles and its potential influence on private label purchase were
also studied by researchers. The recessionary trends and growth in economy was found to
influence the consumer preference for private labels.
Hoch and Banerji (1993) studied the variation in private label share in grocery segment due to
the changes in economy in US context. Private label share and personal disposable incomes
were considered along with consumer driven, retailer driven, national manufacturer driven factors
to understand the variation in the private label share. The study found that consumer’s preference
for private labels increased during the economic slowdown. This phenomenon can be attributed
to increasing price consciousness during economic slowdown and decrease in income which
results in the switching to private labels. The study has limitations in terms of its application to
US markets and emphasize on the short run change in the economy.
Recent study by Lamey.et.al (2007) looked the impact of business cycles on private label
purchase in grocery segment by comparing the US and European markets. The study found
that private label share increased with the slowing down of economy and the share decreased
with the growth trends in the economy. It reveals that consumers switch to private labels during
periods when economy is not performing. The aggregate business cycle contributes to private
label success. The sequence of contraction and expansion can induce upward and downward
trend in private label share, but it’s expected that private label share may decrease with the
economic expansion. Sometimes this behaviour continues with some consumers which can
affect the performance of national brands in long run. The private label share gained during the
economic down turn can remain permanent over the years even after economy regains normality.
Thus business cycles can be detrimental for both private labels and manufacturer brands.
17
 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

Research Gaps
Most of the research studies focused on the price, quality and category attributes which can
vary across the globe. Other factors like brand variants, promotional schemes, shelf space
allocation, store loyalty programmes and FDI inflow in multi-brand retail outlets and its effect on
private labels were not studied in Indian context. So these factors need to be considered for
future research and its interrelationship, impact need to be investigated.
1) Major studies related with private labels relates to US and European retail businesses. So
there is adequate scope of studying about private labels and different factors that determine
the private label purchase in Indian context.
2) One of the major factors that determine the private label purchase is the number of variants
offered by private labels. When national brands can offer higher variety in terms of flavor,
packaging and content then private labels cannot perform well in such category. So how
this factor affects the private label purchase need to be studied.
3) In–store promotions may play a vital role for influencing the purchase decisions. These
promotions are not limited to discounts and offers. Retailer’s promotional schemes can create
awareness about store brands which may determine the purchase of these brands. The
studies conducted previously have not considered this factor which needs to be explored.
4) Shelf space allocation, plannogramming and visual merchandising are also important for
categories like apparel, personal care products and packaged food products to ensure that
it seeks attention of consumers. Minimal focus is given in most of the literature regarding
this factor. So inclusion of these factors can help us to understand the store brand or
private label purchase in a better manner.
5) Store loyalty programmes and customer service can also influence the store brand purchase.
Initiatives like this can enhance retailer’s image and consumer confidence in the retailers,
which can be a driver for private label purchase. This factor was not considered in many
studies which need to be explored to understand the private label purchase in a better
manner.
6) Indian Government is toying with the idea of infusing equity to the cash strapped organized
retail sector in the form of FDI in the single brand and multi-brand retails. So with FDI
inflow more global retailers will be entering in to Cash and Carry format (Business to Business)
and Multi brand formats. These retailers will be introducing their private labels in Indian
market. This would increase flow and availability of private label products to the end
consumers. This possibly can be a decisive factor for the growth and development of private
labels from International retailers in India.
Conclusion
Most of the research studies related with private labels have conducted in US markets followed
by European markets. This can be due to the higher growth rate and consumer preference for
private labels in these countries. In India, private labels are showing a growing trend in grocery,
apparel and consumer durable segments. The major factors studied related to private labels
include price, quality, familiarity, perceived risk, category, intrinsic, extrinsic attributes, value
consciousness, positioning and other factors like demographics, switching cost, purchase mistake
and uniqueness. The effects of store image, business cycles on private labels were also
investigated. Private labels or store brands have improved the consumer choice in terms of
price, variety and quality. Even though price considerations always play a major role in purchase
of commodity, in modern days consumer look at the quality parameters, value for money and

18
 Factors Moderating Private Label Purchase

variants available for every product. Consumer perceptions and attitudes towards private labels
are governed by this factors which are decisive for the purchase of private labels. The studies
found that consumer perceptions and attitudes governed by a number of products, economic
and demographic factors which are the key determinants in the purchase of private labels.
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• The Market Publishers(2009) Branded Furniture – India
Website References
• American Marketing Association : http://www.marketingpower.com/_layouts/
Dictionary.aspx?dLetter=P

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 Jayakrishnan. S, Ranjan Chaudhuri and Rekha.D. Chikhalkar

• The Economic times : http://articles.economictimes.indiatimes.com/2011-06 13/news/

29653341_1_private-labels-spencer-s-kampani-ceo-thomas-varghese

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