UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ NGUYEN THI KIEU CHI FACTORS INFLUENCING CONSUMER PURCHASE INTENTION: A STUDY PRIVATE LABEL IN HO CHI MINH CITY MASTER OF BUSINESS (Honours) SUPERVISOR: Dr.VO THI NGOC THUY Ho Chi Minh City – Year 2015 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS Table of Contents ABSTRACT .5 Significance/value/implications .6 Chapter 2: LITERATURE REVIEW, HYPOTHESES AND RESEARCH MODEL.1 The concept of brand.2 The concept of private label .3 The differences between private labels and national brands.4 The concept of consumer purchase intention .1 Summary of existing research related to private label context .2 Perceived quality and consumer purchase intention .3 Perceived risk, perceived quality and consumer purchase intention .4 Familiarity, perceived quality and consumer purchase intention .5 Store image, perceived quality and consumer purchase intention .28 iii | P a g e LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 3: RESEARCH METHODOLOGY .4 Data collection method.36 Chapter 4: DATA ANALYSIS AND RESULTS .2 Data statistical analysis .3 Measurement scales test and modifying .4 Confirmatory Factor Analysis (CFA) result .1 Model fit indices .5 Research model test.1 Theoretical model without moderating effect test by SEM .2 Theoretical model with moderating effect test by SEM .3 Theoretical model test by Bootstrap .53 iv | P a g e LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 5: CONCLUSION.1 The results of measurement scale .2 The results of theoretical model .4 Limitations and directions for further research .72 Appendix A: Interview Question .73 Appendix C: Bảng Câu Hỏi Khảo Sát .76 Appendix D: Cronbach's Alpha Testing .79 Appendix E: Exploratory Factor Analysis .80 Appendix F: Standardized Regression Weights .81 Appendix G: The SEM Result of Research Model With Moderating Effect .82 v|Page LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURE Figure 2.1 : The research model of private label proneness .2: The research model .2: The SEM result of theoretical model without moderating effect (Standardized) .3: The SEM results of research model with moderating effect (Standardized). 48 vi | P a g e LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLE Table 3.1: Measurement scale and sources .1: Descriptive of statistics .2 Cronbach’s Alpha, Composite reliability and AVE results .3: The correlation of research variables .4: Standardized estimates and p-value of hypothesized model .5: The findings of regression weights in SEM model (Standardized) .6 The results of indirect effects by bootstrap estimate (standardized) .7: The results of BOOTSTRAP estimate .8 : The results of hypotheses testing. 53 vii | P a g e LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT The appearance of private labels brings plenty of benefits for retailers and consumers during the past period. Although this trend is much appreciated and successful in Western countries, Asian buyers are not motivated to purchase private label due to the uncertain feeling.
Based on previous studies and findings, this research intends to investigate how several predictors including financial risk, performance risk, physical risk, store image, familiarity affect on perceived quality and consumer purchase intention towards private labels. Besides, the mediating and moderating effects are also evaluated with the purpose of accessing deeply knowledge about this brand extension strategy. The research model is designed to test in HCMC retailing market with sample size being 380 participants and collected data is analyzed by SEM method. The results reveal that excepting financial risk, the other factors have significant meaning in explaining the variance of dependent variables.
Specifically, performance risk, physical risk and store image influence remarkably on perceived quality and on purchase intention indirectly whereas only direct effect of familiarity on purchase intention is fully proved. More interestingly, the moderating role of store image, which modifies the relationship between performance risk, physical risk and perceived quality, is strongly determined. Hence, store image is considered as a symbol of quality and risk reducer. The research finding provides useful reference for retailers and marketers to give effective strategies associated with private labels.
Among them, quality guaranty and maintaining store reputation and image must receive more attention. The current study also contains some limitations involving sample size, lack of diversity on product category as well as measurement scale of store image, which need to evaluate carefully. Thus, it is approval to fulfill these drawbacks by further research. Keywords: Private labels, perceived risk, perceived quality, familiarity, store image, and purchase intention.
1|Page LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 1 INTRODUCTION 1.1 Research background The harsh competition among business sector motivates company to apply their brand strategies in order to survive and pursue clients. One of the efficient actions these firms employ is the emergence of brand extension. By this, it is likely to develop their brand image in the shoppers’ minds and achieve the customers’ loyalty as well. With regard to retailing sector, nowadays more and more products with diverse categories and brand names have been come into the supermarkets that create a dynamic competitive environment.
From that, not only manufacturers but also retailers have to set up novel mission stressing the important ability to gain long-term profit and differentiating their products from others rivals. More seriously, the pressure of unfavorable economic condition and the rapid increasing of living cost, most of consumers gradually change their shopping habits and become more sensitive with the price these days. This is to say, while the shoppers try to spend less as little as possible, they also indicate to seek higher quality from the products. To deal with these difficulties, globally retailers start to produce products branded their own name and sold in their stores, which are perceived as private labels.
Actually, offering private labels is considered as a smart strategy because of not only rising margin for themselves but also attracting customers and gaining their customers' loyalty in an aggressive competition. The more private label products are offered, the more customers have choices to evaluate and purchase with the same quality but at lower price compared to national brand. Hence, this leads to a new severe battle between retailers and producers. In addition, according to a survey of AC Nielsen, 68% of 21,100 respondents in 38 markets from Europe, North American, Asia-Pacific to South Africa agree that supermarket own brands are good alternatives to other brands (2005).
Globally, private label penetration has developed remarkably in Western Europe and North America. The US market has a value share 2|Page LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 billion dollars in 2012 and it is lower than that in Western Europe at 13%. Nevertheless, the vast US consumers evaluate the quality of private labels as well as national brand whereas they are perceived negatively in Asia Pacific, the Middle East and Africa (Euromonitor International, 2013).2 Management problem The penetration of private label is appreciated and developed in most of the Western countries and regions, however, Asian-Pacific consumers are still resisting in buying private labels in spites of the promotional efforts (Sheau- Fen et al. The report of AC Nielsen in 2005 shows that market share of private label in this area is only 4%.
Compared to some nations, New Zealand and Australia are the two countries which have the highest rates of private label market share whereas this number in others countries such as Thailand, Malaysia or Vietnam is not significant. Turning to Vietnam, even though the market size is quite smaller than other countries in the same region, Vietnamese retailing market is still expected to have vast growth owing to the large population, the majority of young generation in population structure, high economic growth and the continuous improvement on residents’ living standard. It is evaluated as an attractive destination of multinational retailing corporations. With regard to Ho Chi Minh City- the biggest economic and commercial center, it has diverse distribution channels from traditional markets, supermarkets to convenience stores that offer a variety of good categories, quality and price.
This distribution system not only provides better approach to attract and serve customers, but also becomes one of competitive advantages of each retailer. Compared to other distribution types, supermarkets account 30% in the first quarter of 2014 (Savills, 2014). In addition, consumers gradually change their habits into choosing supermarkets or hypermarkets instead of traditional markets due to comfortable shopping environment and the portfolios of products or brand names. From that, establishment and development of this modern distribution channel in Vietnamese market is speculated in full yield.
3|Page LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Recognizing this potential, both international and domestic investors set up a range of supermarkets in many cities in Vietnam. Considered as one of their empirical expansion strategies, thus, recently they start to complement private label proneness. After the entry of Metro Cash and Carry, private labels are introduced by other big supermarkets namely Co.opMart, Big C and Vinatex Mart. These product categories often focus on fresh and processed foods, household products and garments and receive heavy promotion such as price and display.
Moreover, private label products are the corporation of supermarkets and small local manufacturers or farms, thus it help them solve output issue due to weak competitive abilities with other strong brand names. A survey including 305 participants of Vinaresearch in HCMC and Hanoi shows that 81% of informants who have known and used to purchase private label products of supermarkets because of attractive prices (2012). A paradox occurs that although Vietnam has the highest promotion sensitivity in Asia at 87% and consumers gradually change their perception of purchase more Vietnamese goods, the consumption of private labels is still not high as other countries such as Thailand, Malaysia and Indonesia (Nielsen, 2011). This is because consumers are lack of awareness of private labels as well as afraid of risk.3 Research problem With the potential growth of retailing market and the advantages of private label penetration, the question raised by retailers and marketers is what reasons or key factors would customers consider when they intend to buy private label products.
In addition, though a numerous studies especially brand strategy, market performance or buyer behavior have drawn both marketing academics and managerial implications (Baltas, 2003; Dursun et al., 2001), official studies about consumers purchase intention towards private labels in Vietnamese context remain limited. Following prior studies conducted in many nations and some initial investigations explored consumer attitude in Vietnamese market, the current study tries to fulfill these gaps by measuring the relationships between several variables namely perceived 4|Page LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com risk, perceived quality, familiarity, store image and consumers purchase intention towards private labels.4 Research objectives Based on these issues above, the overall objective of this study is to identify some key factor affecting consumer purchase intention towards private labels. Specifically, - To test the effect of financial risk, performance risk, physical risk and store image on perceived quality. - To test the indirect effect of financial risk, performance risk, physical risk and store image on consumer purchase intention through perceived quality.
- To test the direct effect of familiarity on consumer purchase intention and the indirect effect through perceived quality. - To test the moderating role of store image, which modifies the relationship between financial risk, performance risk, physical risk and perceived quality.5 Significance/value/implications This research intends to access and gain more knowledge about private label proneness offered by supermarkets by measuring the significant role of financial risk, performance risk, physical risk, perceived quality, familiarity and store image that consumers use to judge their purchase intention. From the research finding, managers or marketers gain good understanding of Vietnamese consumer behavior towards private labels in order to have appropriate decisions and strategies to improve the product's standards, increase sales volume and enhance the customer evaluation.6 Research scope The research focuses mainly on investigating consumers who usually shop in supermarkets located in Ho Chi Minh City.