Influence of consumer perceptions of private label brands on store loyalty – evidence from Indian retailing

Abstract

In India growth of private label brands corresponds with the increasing share of organized retailing. The consumer perceptions of private label apparel brands of retail department stores have been examined by means of structural equation modelling approach. The model illustrates the influence of consumer perceptions towards private label familiarity, affective perception, perceived quality, perceived value, and perceived risk perceptions including functional risk, financial risk, and social risk perceptions on store loyalty. The study found that favourable consumer perceptions of apparel private label brands of retail department stores significantly influence the consumer to be loyal to the store. It implies that retailers wishing to boost loyalty to their store should formulate appropriate private label brand strategies so as to solicit favourable perceptions towards their store’s private label offerings.

Keywords:

• familiarity
• affective perception
• perceived quality
• perceived value
• perceived risk dimensions

PUBLIC INTEREST STATEMENT

In retail business environment, it is challenging for retailers to retain their customer base and seek their loyalty. Private label brands (PLBs), are exclusive offerings of the retailers, consequently, they are given special emphasis by retailers while formulating strategies to seek store loyalty. PLBs are a global phenomenon and in India too they assertively compete with other brands in store. The study presents a conceptual model that depicts the influence of private label brands on store loyalty. Consumer perceptions of private label familiarity, affective perceptions, perceived quality, perceived value, and perceived risk perceptions are observed, and their effect on store loyalty is analysed. In this study, we indicate that retailers can create store loyalty through seeking favourable consumer perceptions of their PLBs. Retailers should capitalize and leverage their private labels such that the consumer’s familiarity and affective perceptions towards PLBs can be enhanced. The quality reputation of their PLB offerings also needs to be established so as to offer better value.

1. Introduction

In this era of highly competitive retail business environment, private label brands (PLBs) are a rising phenomenon in the growing Indian organised retail market. In India growth of private label brands corresponds with the increasing share of organized retailing. According to Nielsen’s Report (Nov. 2014), PLBs are prevailing mostly in European countries (40%), however in India, the private labels grew 27% between 2012 and September 2014. The report mentions that this growth is mainly driven by generation next buyers who seem to be less brand-loyal and are ready to try new brands. Though IBEF, 2018 reports that “the organised retail in India has begin to experience an improved level of activity in the PLB space but its share in India is just 6 per cent and stores like Shopper Stop, Lifestyle generates 15 to 25 per cent revenues from private label brands. Growth of online retail is also augmenting the growth of private label brand in India”.

A particular retail chain exclusively creates controls and markets PLBs (Levy & Weitz, 2007). Most department stores in India offer combination of national brands and PLBs. In an extensive literature review of PLB, it was observed that, more than 70% of the empirical studies are being conducted in the context of the US-based region (Hyman et al., 2010). Despite the world over recognition of PLB’s significance in the current retail scenario, increasing strategic positioning, considerable financial impact in retailing, there are very few studies being conducted in Asia on private label brands (Lin et al., 2009).

Moreover, PLBs have their presence in more or less all product categories (Geyskens et al., 2010; Nielsen, 2014). But in an extensive literature review conducted by Muruganantham and Priyadharshini (2017) found that most studies were in the context of food/grocery PLBs. Batra and Sinha (2000) had suggested that few consumer behaviour aspects of clothes differ as compared to grocery, thus the knowledge base of these cannot be relevant to the apparel. In addition, regardless of all the previous researches focusing on PLBs have been to understand the purchase intention of PLBs while very few have dwelled on to understand the impact of various consumer perceptions of PLBs on the customer’s loyalty towards the retail store as the association between PLBs and retail store loyalty can be relatively intricate (Koschate-Fischer et al., 2014) and is still rather vague.

Above-discussed gaps in retailing and marketing literature are addressed in the current study. This study aims to examine the consumer’s perceptions of apparel private labels of Indian retail department stores where PLB refers to the brands sold exclusively by retailer. A structural equation model approach is adopted such that responses of consumers are measured in terms of the consumer’s PLB perceptions and their influence on store loyalty is analysed. PLB perceptions include PLB familiarity, affective quality, value, and perceived risk perceptions, including functional risk, financial risk and social risk perceptions. The study will empirically test the proposed conceptual framework as given in Figure 1.

In this manuscript, first, we build the conceptual model, develop the hypotheses and later present, our data collection methodology, data analysis and testing of hypotheses is described. Lastly, we discuss our findings and their implications to practice and sketch possible avenues of further research.

2. Literature review and hypothesis development

This study reviews the empirical literature and the theoretical framework so as to develop improved understanding of store loyalty and private label perceptions. Specifically the focus is on the linkages of these PLB perceptions with store loyalty. As PLB’s market share raises universally, the significance of associated research increases. In practice and academic studies, PLBs have been extensively discussed deliberated, and documented (Sethuraman & Gielens, 2014). PLB growth is now a global phenomenon (Cuneo et al., 2015). According to Cuneo et al. (2012) researchers have performed various studies to comprehend this growth phenomenon (Erdem et al., 2004).

2.1. Private label brands

PLBs hold special significance to retailers’ business owing to the value it brings. PLBs retailers leverage PLBs such that it augments consumer preference to respective retail outlets (N. Kumar & Steenkamp, 2007); store differentiation (Koschate-Fischer et al., 2014); store/customer loyalty (Seenivasan et al., 2016). In addition, PLBs adds to increase customer walk-ins and facilitate in high market share (Corstjens & Lal, 2000). Consumer attitudes towards PLBs have altered immensely in past years. (Ailawadi et al., 2008), including study mainly focus on PLB’s price and value consciousness (Ailawadi et al., 2001; Delgado-Ballester et al., 2014), perceived risk (Bhukya & Singh, 2015; Dursun et al., 2011; Wu et al., 2011; Ural, 2008), perceived value (Diallo et al., 2015; Kara et al. 2009), perceived quality (Corstjens & Lal, 2000; Sarkar et al., 2016 ; Semeijn et al., 2004), affective perceptions (Vahie & Paswan, 2006); familiarity (Porral Cristina & Lang Mark, 2015).

2.2. Store loyalty

Consumers believe in visiting those retail stores where they have been before, are more familiar and over a period of time they happen to like the store and have developed winning associations with retailer and their sales personnel. Shopping from such retail outlets reduces their uncertainties, as they depend on the store’s services, exchange privileges, assurance as well as other modifications required because of any discontent. Thus, to gain loyalty of customers is significantly important for retailers as loyal customers are valuable, they spend a considerable amount of their spending at the outlet and at the same time, the possibility of switching the store decreases because they are not much sensitive to market offerings (Bustos-Reyes and González- Benito, 2008). According to Kumar and Shah (2004), there is no common agreement on the stated definitions. Store loyalty is defined by Mineo (2011) as “a customer’s loyalty to a specific store which secures repeated business and develops the store in a long term”. Bloemer and de Ruyter (1998) defined it as “the biased (i.e. non-random) behavioural response (i.e. revisit), expressed over time, by some decision making unit with respect to one store out of a set of stores, which is a function of psychological (decision making and evaluative) processes resulting in brand commitment”. Oliver (1997) defines it is “a deeply held commitment to re-buy or patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviour”. As per Baltas and Argouslidis (2007), store loyalty can be a manifestation of a store’s popularity, that is satisfied consumers, turn out to be repeat customers. Loyal customers of store articulate keenness to seek out PLBs that are solely endorsed by the retail outlet, thus enhancing their loyalty to retail store (Manzur et al., 2011).

2.3. PLBs and store loyalty

The major rationale that retail and marketing literature cites for retailer’s desire to stock PLBs is enhanced consumer store loyalty (Hoch & Banerji, 1993). Labeaga et al. (2007) argued that PLBs aids in building loyalty by bringing in differentiation. It was later emphasised by Beneke and Zimmerman (2014) too in a theoretical article stating the role of PLBs in enhancing store image differentiation which further reinforces retailer’s market positioning. As compared to a national or manufacturer’s brand, PLB’s availability is made exclusively at a particular retailer. When regular customers switch retailers for shopping, they go through various cognitive processes by appraising all brands, which includes unfamiliar PLBs as their familiar PLBs of their favourite store is no longer available. Thus, research shows that customers who buy PLBs frequently not only happen to show loyalty to that specific brand but also to the retailer of that brand (Collins-Dodd & Lindley, 2003). Hyman et al. (2010) reviewed the existing PLB literature and highlighted that they “boost store loyalty as PLB customers are more store-loyal, PLBs boost sales and build good will (especially if price subsidized and high quality). In addition, PLBs can sell higher margin PLBs to loyal customers”. Select studies are reviewed and tabulated (refer Table 1).

Table 1. Overview of literature review: Private label brand and store loyalty

Author Name/Date	Research Setting	Study Sample	Findings
Coelho Do Vale and Verga Matos (2017)	Portugal	Grocery	“Store price positioning and store service quality are of great importance in the attitudinal loyalty stages”
Coelho Do Vale et al. (2016))	Portugal	Grocery	“Depending on retailers’ market positioning, different store loyalty drivers (in-store and economic factors) contribute to loyalty and that the impact of PLs is mostly significant for medium-cost and premium supermarkets”.
Ipek et al. (2016)	Turkey	Supermarket products	“A negative relationship was observed between private label usage and store loyalty”.
Koschate-Fischer et al. (2014)	Germany	FMCG	“The relationship between PLB share and store loyalty is stronger for customers with high price oriented behaviour”.
Gonzalez-Benito et al. (2012)	Spain	Food/ Household/Personal Care	“A stronger effect of private label loyalty on store loyalty when private label positioning is more quality oriented”.
Ngobo Paul-Valentin (2011)	France	Grocery	“Effects of PLB share on store loyalty depend upon (i) the household’s private label usage, (ii) the store private label branding strategy, and (iii) how private label share is measured”
Hyman et al. (2010)	Literature Review	Food & Non-Food	“PLBs boost store loyalty as PLB customers are more store-loyal, PLBs boost sales and build good will. In addition, PLBs can sell higher margin PLBs to loyal customers”
Defeng and Xinxin (2010)	Shanghai (China)	(RT-Mart supermarket products)	“Results showed that both low-priced and medium-priced store brands are able to build individual store brand loyalty and store loyalty among customers”
K.L. Ailawadi et al. (2008)	Dutch	Grocery	“PLB share considerably affects three measures of behavioural loyalty namely share of wallet, share of items purchased, and share of shopping trips”
A.-S. Binninger (2008)	France	Grocery	“Increase in PLB satisfaction and loyalty influences store loyalty, and that attitude toward PLB products has a moderating effect on the relationships between PLB satisfaction and loyalty”
Chavadi and Kokatnur (2008)	India (Bangalore)	Apparel/Grocery/Consumer Durables/Lifestyle	“Quality, innovativeness, price gap, promotion has strong association with store loyalty”
Corstjens and Lal (2000)	United Kingdom, France & USA	Grocery	“PLBs will mark the establishment if consumers consider them to be quality brands, which leads to an increase in the costs of changing to other retailers and causes loyalty to the establishment”

Source: Compiled by Researchers

2.4. PLB familiarity and store loyalty

Previous research highlights that increased knowledge and familiarity with a brand builds trust with the brand, thus increasing its chances of having a higher perception and being patronized (Collins-Dodd & Lindley, 2003; Romaniuk & Sharp, 2003). The empirical evidence revealed that brand familiarity has vital effects on private label brand loyalty by creating a positive assessment of the brand (Gonzalez Mieres et al., 2006). So, once a consumer tries a private label brand product, the likelihood of subsequent purchases is high (Labeaga et al., 2007). Porral Cristina and Lang Mark (2015), in an empirically tested conceptual model found that private label brand familiarity greatly influences loyalty. Given the empirical evidences above, following hypothesis is framed:

H1: PLB Familiarity has positive impact on Store Loyalty

2.5. PLB affective perception and store loyalty

Brand loyalty may be drawn from greater trust in the dependability of a brand or from the favourable affect (feelings) experienced by consumers who utilize the brand. In turn, brand loyalty may be established by feelings (affective) experienced by the brand (Chaudhuri & Holbrook, 2001). A positive and favourable feeling towards a certain brand enhances consumers’ satisfaction towards a brand (Stauss & Neuhaus, 1997). A positive emotion towards a brand creates not only brand satisfaction, but a negative brand emotion leads to brand dissatisfaction. The emotional value of the brand relates to positive feelings ahead of using the brand, which boosts consumer loyalty to the brand (Stauss & Neuhaus, 1997; Yu & Dean, 2001). When consumers emotionally identify with a brand, then they become loyal and are less likely to switch to alternative brands (Lam et al., 2010; Oliver, 1999). Dick and Basu (1994) suggested that brand loyalty can be better under the state of more positive emotional mood or affect therefore brands that make consumers “happy” or “joyful” or “affectionate” ought to be more purchased and bring in attitudinal loyalty (Chaudhuri & Holbrook, 2001). Matthews et al. (2014) too, confirmed a positive relationship was between brand emotional value and brand loyalty for apparel brands. Consequently, if a consumer establishes emotional connection with the PLBs, they are more liable to show loyalty to the brand and thus to the store. Given these empirical evidences, following hypothesis is framed:

H2: PLB Affective perception has positive impact on Store Loyalty

2.6. PLB quality and store loyalty

High-quality PLBs help retailers enhance store loyalty (Koschate-Fischer et al., 2014). When the PLB positioning is more oriented towards quality, PLB’s effect on store loyalty was found much stronger by Gonzalez-Benito et al. (2012). According to Yang (2012), retailers should dynamically reinforce PLB perceived quality at strategic level. Yang and Wang (2007) measured variable brand perceived quality from a PLB perspective. Specifically, they posit that a perceived quality of PLB has a favourable positive effect on store loyalty. Given the empirical evidences above, following hypothesis is framed:

H3: PLB Perceived Quality has positive impact on Store Loyalty

2.7. PLB value and store loyalty

In literature perceived value is frequently linked with store loyalty intentions (Diallo et al., 2015; Sirohi et al., 1998; Yang & Wang, 2007), and intention to recommend (Cronin et al., 2000; Sirohi et al., 1998). According to Nenycz-Thiel and Romaniuk (2012), value-for-money is a quality that defines the schema of private labels in consumer memory, making value-for-money a key attribute in facilitating the retrieval of private label brands from a consumer’s memory. Given the empirical evidences above, following hypothesis is framed:

H4: PLB Perceived Value has positive impact on Store Loyalty

2.8. PLB perceived risks and store loyalty

Perceived risk is “consumers subjective expectation of a loss” (Sweeney et al., 1999), meaning that any action of a consumer will generate consequences which one cannot predict with anything similar to certainty, and some of them may be unpleasant (Liljander et al., 2009). Perceived risk associated with PLBs is receiving much attention in a considerable number of research studies (Lin et al., 2009; Mieres et al., 2006a; Richardson et al., 1996; Semeijin et al., 2004; Sheau-Fen, Sun-May, & Yu-Ghee, 2012; Wu et al., 2011). There were several previous studies to support a relationship between perceived risk and customer loyalty (Lai-Ming Tam, 2012; Marakanon & Panjakajornsak, 2017; Tuu et al., 2011). It was in 1997 that Chaudhuri established linkages between perceived risk and loyalty by considering perceived risk as an emotional rather rational component.

Mitchell (1998) had argued that perceived risk is a “multidimensional phenomena” which can be segmented into various different risk components. The dimensions that have been measured most often are overall risk, and financial risk (represents the price which consumer pays while shopping the product) and functional/performance risk (Agarwal & Teas, 2001; Grewal et al., 1998; Shimp & Bearden, 1982; Sweeney et al., 1999), since they appear to be less products specific than other dimensions. For example, social risk or psychological risk (represents the symbolic aspect of the product including faith/social status) (Campbell & Goodstein, 2001; Stone & Gronhaug, 1993), or self-image risk (Dowling & Staelin, 1994) are particularly more relevant for products that are visible to others and communicate the consumer’s self-image, such as clothes and other fashion items. Clothing is associated with consumers’ social identity and worn to express their identity to others (Feinberg et al., 1992).

Three dimensions of perceived risk were chosen for inclusion in this study, namely, functional, social and financial risk, due to the focus on these attributes in similar studies (Beneke & Zimmerman, 2014; Diallo, 2012; Liljander et al., 2009; Gonzalez Mieres et al., 2006; Semeijin et.al, 2004; Sheau-Fen et al. 2012) examining PLB purchase behaviour.

Functional risk is related to the probable loss ensuing from poor product quality. Earlier studies explain functional risk as the doubt that the outcome of a product/brand purchase will not meet expectations of the consumer (Beneke et al., 2012; . Since it is about the consumer’s fear that a product will not perform to its assured ability, it is also expressed as a performance risk. Dick et al. (1995) defines functional risk as manifestation of fear that a product/brand may not hold deliverable attributes and there is an uncertainty regarding the performance of product/brand. The risk is dependent on how much information about PLBs is available with the consumer. Gonzalez Mieres et al. (2006) also reported that due to uncertain functional performance PLBs are perceived to be significantly more risky as compared to national brands. This is because there seems to be more doubt with its intrinsic attributes and, therefore, more uncertainty of the quality and the functionality of the product (Erdem et al., 2004).

Financial risk is defined as the possibility of a monetary loss from a poor purchase choice/decision by Zielke and Dobbelstein (2007). It relates to the cost relative to an individual’s financial resources (Mitchell & Harris, 2005) and is also referred to the likelihood that the product/brand is not worth the price paid) or the risk that the product’s quality does not match its price1998). The price-quality association that consumers derive plays a vital role in perceived financial risk (Gonzalez Mieres et al., 2006; Liljander et al., 2009; Sweeney et al., 1999;). It has been suggested that regardless of the fact that most national brands are priced at a premium compared with private labels, their financial risk is in fact, lower, than that of private labels.

Social risk depicts the consumer’s perception of the uncertainty that is concerned with the adverse consequences associated with unfavourable opinions of significant other people on account of poor product choice (Tsiros & Heilman, 2005) or purchase and use of product or judgement on the basis of the brand used . Specially, while shopping apparel products, many consumers may experience social risk as it involves selecting the right brand name as defined by the reference group to which the consumer belongs. Furthermore, consumers may also be self-conscious about their look affected by the kind of clothes they wear as it may lead to positive social perceptions or otherwise may result in social embarrassment. Thus, social risk appears particularly important in the context of apparel because product/brand is visible to others and communicates consumers’ social identity or self-image (Liljander et al., 2009). Based on above discussions, following null hypothesis is framed:

H5: PLB Perceived Functional Risk has negative impact on Store Loyalty

H6: PLB Perceived Financial Risk has negative impact on Store Loyalty

H7: PLB Perceived Social Risk has negative impact on Store Loyalty

3. Methodology

3.1. Measurement scale

The survey instrument was prepared following a comprehensive review of the relevant literature. Besides questions on demographic variables, survey questionnaire consisted of questions about constructs “store loyalty” and questions on “private label brand perceptions” including the consumer’s private label familiarity, quality, value, risks and affective consumer perceptions, in the form of item statements. In the questionnaire, respondents were asked to rate their level of agreement with particular items using five-point Likert-type scale, anchored with strongly disagree and strongly agree. All items were adapted from previously published work; (refer Table 2) as a source of scale of measurement of constructs.

Table 2. The scale adapted for constructs

S. No	Constructs	No. of Items	Source of Scale
1	PLB Familiarity	3	Flavian et al. (2006); Kent and Allen (1994)
2	PLB Affective Perceptions	2	Vahie and Paswan (2006)
3	PLB Perceived Quality	3	Vahie and Paswan (2006)
4	PLB Perceived Risk	9
	Functional Risk	3	C. Gonzalez Mieres et al. (2006); Beneke et al. (2012)
	Social Risk	3	Dowling and Staelin (1994); Jacoby and Kaplan (1972); Liljander et al. (2009)
	Financial Risk	3	Stone and Gronhaug (1993), Beneke et al. (2012); Liljander et al. (2009).
5	PLB Perceived Value	3	Sweeney and Soutar (2001); Dodds et al. (1991)
6	Store Loyalty	3	Sirohi et al. (1998); Thomas (2013)

Source: Compiled by Researchers

3.2. Data Collection and Sampling

Primary data were collected from regular shoppers at different modern organized retail department stores. A non-probability convenience sampling technique was used to administer a customer survey. Only those who were aware of apparel private label brands were considered as the sample for this study. As a reference, to respondents, many examples of private label brands were listed in the questionnaire. After initial screening, 503 valid questionnaires were finally used for data analysis (refer Table 3 for sample characteristics). The sample comprises of 50% male and 50% female, 42% were graduates, 47% postgraduates, 40% were in 18–24 year age group, 28% in 25–34 year age group; 21% from 35 to 44 year age group and 11% were more than 45 years old. Moreover, seven major modern organized retail stores were indicated by respondents as their most frequently visited favourite store namely Shoppers’ Stop, Reliance Trends, Westside, Pantaloons, FBB (Fashion at Big Bazar), Globus and Max Fashion. The respondents were from varied socio-economic and educational background and were well spread across Indore city. Thus, the present study has a true representation of the department store’s target market for private label brands.

Table 3. Sample characteristics

Variable	Level	Frequency	Valid Percent
Gender	Female	253	50.3
	Male	250	49.7
Marital status	Married	251	49.9
	Single	252	50.1
Age	18–24	202	40.2
	25–34	140	27.8
	35–44	105	20.9
	More than 45	58	11.1
Education	Undergraduate	28	5.6
	Graduate	210	41.7
	Postgraduate	237	47.1
	PhD	28	5.6
Occupation	Service	201	40.0
	Professional	29	5.8
	Self Employed/Own Business	44	8.7
	Student	179	35.6
	Homemaker	50	10.7
Annual Family Income	Less than 2 Lac	67	13.3
	2–5 Lac	201	40.0
	5–10 Lac	165	32.8
	More than 10 lac	70	13.9
Department Store Patronized	Shopper’s Stop	82	16.3
	Reliance Trends	82	16.3
	Westside	80	15.9
	Pantaloons	90	17.9
	Globus	42	8.4
	Max Fashions	50	9.9
	FBB	77	15.3

Source: Primary Data Analysis using SPSS 25.0

4. Data analysis and research findings

To assess the conceptual framework of the study, structural equation modelling (SEM) approach was adopted, as is not only because it’s one of the most popular in marketing research and is frequently used in methodology for data analysis to exhibit the relationships between latent variables in business disciplines (Hair et al., 2012). Hair et al. (2013) defined structure equation modelling as “a multivariate technique combining aspects of factor analysis and multiple regression that enables the researcher to simultaneously examine a series of interrelated dependence relationships among the measured variables and latent constructs (variates) as well as between several latent constructs”.

It is challenging to measure latent constructs directly and thus make inferences regarding them from whatever we can examine, responses to the survey questionnaire items for instance. The techniques provide possibilities to model and estimate parameters for associations among theoretical constructs and to test entire behavioural sciences theories (Bollen, 1989). We integrate estimates of measurement errors into our measurement models. SEM differentiates amid theoretical constructs and their observed measurements by multiple observable variables. The measurement model is analysed by confirmatory factor analysis (CFA) for uni-dimensionality and constructs validity. The divergent validity of the factors within the model is also tested. To evade the multivariate normality problem, maximum likelihood method (Byrne, 2001) was used to estimate the measurement model. Subsequently, the findings of the research study are established through an assessment of the structural model.

4.1. Measurement model

4.1.1. Confirmatory factor analysis

The measurement model describes how well theoretical latent constructs are represented by observed variables (Hair et al., 2013). Confirmatory factor analysis (CFA) was assessed to all items so as to evaluate uni-dimensionality and validity. Standardized factor loading estimates between latent and observed variables ranges from 0.745 to 0.998 (refer Table 4). Therefore, convergent validity seems to be reasonably established for this construct, since all standardized factor loadings have to be exceed 0.5, all t-values must be greater than 3.0, and all standard errors are expected to be low (Hair et al., 2013).

Table 4. Confirmatory factor analysis and reliability results

Constructs	Scale Items	Standardized Loadings	Alpha	CR	AVE	Mean Score	Item SD
PLB Familiarity	F1	0.917				3.69	0.689
	F2	0.967				3.71	0.690
	F3	0.928	.955	.956	.879	3.67	0.701
PLB Affective Perception	A1	0.804				3.54	0.766
	A2	0.888	.833	.722	.504	3.65	0.777
PLB Perceived Quality	Q1	0.976				3.71	0.779
	Q2	0.998				3.71	0.781
	Q3	0.746	.928	.937	.835	3.66	0.817
PLB Perceived Functional Risk	R1	0.992				2.42	0.747
	R2	0.989				2.41	0.762
	R3	0.75	.933	.826	.633	2.41	0.713
PLB Perceived Financial Risk	R4	0.861				3.58	0.776
	R5	0.763				3.68	0.888
	R6	0.845	.861	.735	.515	3.47	0.867
PLB Perceived Social Risk	R7	0.804				2.31	0.787
	R8	0.85				2.26	0.811
	R9	0.863	.877	.741	.541	2.26	0.775
PLB Perceived Value	V1	0.9				3.57	0.744
	V2	0.951				3.60	0.754
	V3	0.764	.901	.814	.577	3.54	0.761

Fit statistics: χ2 (225 df) = 2.234, (p = 0.000), NFI = 0.959, RFI = 0.950, CFI = 0.977, RMSEA = 0.050, AVE = Average Variance Extracted, SD = Standard deviation,

CR = Composite Reliability.

In addition, the t-values which test the significance level of the link between observed and latent variables range from 17.934 to 78.661 and thus ensuring that all the relationships between observed variables and latent variables is statistically significant at the 0.001 level. Cronbach alpha was used to test the internal consistency of the constructs and each case far exceeds the acceptable level of 0.7.

Construct validity and psychometric properties were checked with confirmatory factor loadings, composite reliability values and average variance extracted values (AVE). All items loaded on their corresponding latent factors with significant (p = 0.000) factor loadings ≥ 0.70 (J.F. Hair et al., 2013) suggested a strong convergent validity of the constructs used in this study. The measurement model of our study exhibited strong psychometric properties with composite reliability and average variance extracted (AVE).

The composite reliability (CR) values of the constructs are as follows: 0.956 for PLB familiarity, 0.722 for PLB affective perception, 0.937 for PLB perceived quality, 0.826 for PLB perceived Functional risk, 0.735 for PLB perceived financial risk, 0.741 for PLB perceived social risk, 0.814 for PLB perceived value. All the CR values maintained the recommended minimum value of .70 (J.F. Hair et al., 2013).

The AVE values are: 0.879 for PLB familiarity, 0.504 for PLB affective perception, .835 for PLB perceived quality 0.633 for PLB perceived functional risk, 0.515 for PLB perceived financial risk, 0.541 for PLB perceived social risk and 0.577 for PLB perceived value. It was observed that all values maintained a recommended minimum value of 0.50 (Hair et al., 2013). The values of AVE extracted from all constructs were greater than the square of the correlation between the constructs indicating the discriminate validity of all constructs.

4.2. Structural Model

All the hypotheses as represented in the conceptual framework of this study (Refer Figure 1) were examined with structural equation modelling (SEM), on the most sophisticated multivariate statistical tool. The hypothesis represents many dependence relationships, particularly regressions, among the selected constructs of the study. Each construct comprises of several items.

Figure 1. Proposed conceptual framework.

In order to reconfirm the items of constructs and check validity and to examine various dependence relationships, we considered SEM. AMOS (version-18) was used to perform SEM. SEM consists of two sub-models, the measurement model and structural model (Byrne, 2010) wherein, measurement model represents the links between the latent variables and their observed measures and is performed through confirmatory factor analysis (CFA). The structural model represents the links among the latent variables themselves (Byrne, 2010).

Goodness of model fit was initially assessed through Chi-square value (χ2). However, as Chi-square test is sensitive to sample size and model complexity, we considered relative Chi-square value (χ2/degree of freedom) and some other measures including NFI, RFI, IFI, TLI, CFI and RMSEA as fit indices. The relative Chi-square value of our proposed model (2.234, df = 225, p=.000) maintained the standard of less than 5 (Marsh & Hocevar, 1985). The value of rest fit indices, NFI(.959), IFI(.977), TLI(.972) and CFI(.977) and the RMSEA(.050). The fit indices show good fit between the data and the structural model (Hair et al., 2013).

As the model was good fit, the standardized regression coefficients of the structural model were then analysed to test the hypotheses. Table 5 illustrating the SEM results depicts all seven hypotheses and their results, indicating that all hypotheses were supported. In the structural model, in line with hypothesis H1, there is a statistically significant relationship between private label familiarity and store loyalty in a positive way (β=0.819, t = 5.99, p=0.000). Therefore, the first hypothesis within the study is supported. The results are in sync with the literature. Porral Cristina and Lang Mark (2015) in the context of food PLBs also revealed that private label brand familiarity has substantial influence on purchase intention and loyalty.

Table 5. Structural equation modelling results

Hypotheses	Standardized path coefficient	t-value	p-value	Hypothesis status
H1: PLB Familiarity→ Store Loyalty	0.819	5.99	< .000	Supported
H2: PLB Affective perception→ Store Loyalty	0.782	5.076	< .000	Supported
H3: PLB Perceived Quality→ Store Loyalty	0.213	2.213	< .05	Supported
H4: PLB Perceived Value→ Store Loyalty	0.357	2.61	< .05	Supported
H5:PLB Perceived Functional Risk →Store Loyalty	− 0.354	−2.203	< .05	Supported
H6: PLB Perceived Financial Risk →Store Loyalty	− 0.428	− 2.986	< .05	Supported
H7: PLB Perceived Social Risk →Store Loyalty	− 0.658	− 4.178	< .000	Supported

Source: Primary Data Analysis using Amos

There is statistically a significant positive influence of the consumer’s affective perception of PLBs towards store loyalty (β=0.782, t = 5.076, p=0.000). Therefore, second hypothesis H2 of the study is supported. Dick and Basu (1994) also stated that “for loyalty, affective (those associated with feeling states involving the brand) may play a role in defining the nature of the attitude and consequently its relationship with patronage behaviour”. Diallo et al. (2015) while investigating relationships among price perceptions of different brand types had also revealed that the emotional value (as one of important dimensions of shopping value besides price, quality and social value) influence store retention loyalty. PLB-perceived value has a positive and significant impact on store loyalty (β=0.357, t= 2.61, p=0.009), supporting hypothesis H4

The results of the study are in sync with literature as the direct, positive relation between perceived value and customer loyalty is well established, especially in retail contexts (Chen & Quester, 2006; Cronin et al., 2000). Perceived value is frequently linked with store loyalty intentions (Sirohi et al., 1998; Yang & Wang, 2007), and intention to recommend (Jr. et al., 2000; Sirohi et al., 1998). Recently, Natalia et al. (2014) also observed the influence of value consciousness on perceived value, the influence of perceived value on identification and influence of identification on loyalty to the retail establishment. PLB-perceived quality has a significant positive impact on store loyalty (β = .213, t = 2.213, p = 0.027), thus hypothesis H3 is supported. The result is in align with the literature, Corstjens and Lal (2000) have also pointed out that PLBs will mark the establishment if consumers consider them to be quality brands, which leads to an increase in the costs of changing to other retailers and causes loyalty to the establishment.

PLB Perceived functional risk (β = −0.354, t = −2.203, p = 0.028), has a negative and significant impact on store loyalty by supporting hypothesis H5. PLB Perceived financial risk (β = −0.428, t = −2.986, p = 0.003), has a negative and significant impact on store loyalty by supporting hypothesis H6. PLB-perceived social risk (β = −0.658, t = −4.178, p = 0.000), has a negative and significant impact on store loyalty by supporting hypothesis H7.

5. Conclusion and managerial implications

As PLBs gain increasing significance globally (Sethuraman & Gielens, 2014) and are associated with the retailer in a unique way. The role of private label brands in fostering a retail store’s loyalty is evident. Coelho Do Vale and Verga Matos (2017) too confirmed the importance of PLBs on building store loyalty. In spite of rapid penetration of private label brands across the world in a large number of product categories, literature provides very few research studies addressing the role of PLBs in store loyalty. The current research seeks to extend previous research on private label brands in the specific context of apparel products by examining the role of the consumer’s perceptions towards PLBs in enhancing store loyalty of retail department stores. Moreover, current organised retailing in India has a substantially smaller share of pie as compared to an unorganised retail sector. Hence it becomes critically important to conduct an in-depth study of private label brands in the consumer’s context. This shall facilitate Indian retailers to match their PLB offerings with the expectations of Indian consumers to formulate appropriate PLB branding strategies to create competitive PLBs. Our study contributes to the body of knowledge and offers a framework of analysis. It encompasses the impact of the consumer’s perceptions of PLBs on store loyalty, which includes familiarity towards PLBs, affective PLB perception, perceived PLB quality, value and risk.

Researchers established that consumers’ familiarity with private labels can improve their purchase intention (Richardson et al., 1996). Subsequently, in order to improve consumers’ purchase, retailers constantly augment consumers’ PLB knowledge (Yang & Wang, 2007). In contrast, however, Yang and Wang (2007) while studying Chinese consumer perceptions of supermarket store brands argued that consumers’ PLB knowledge, neither influence purchase behaviour, nor does it have any impact on individual store brand loyalty. The finding by Porral Cristina and Lang Mark (2015) that familiarity is the most important factor in predicting consumer behaviour of food private label brands is in line with previous literature (Labeaga et al., 2007). In this study too positive oriented relationship was found between consumers’ familiarity with apparel private label brands and store loyalty. It implies that consumers when are more familiar with the private label brand are likely to patronize the store more. Consequently, retailers ought to engage in promotional campaigns on apparel private label brands so as to improve and enhance their image, recognition and awareness, prestige, positive word-of-mouth and popularity among consumers. Retailers need to create higher levels of PLB’s exposure, such as, for instance, prominent in-store displays; and marketing activities such as promotional offers and discounts, cross selling initiatives can also be considered.

Bowen and Chen (2001) states that attitudinal measures reflect the emotional and psychological attachment are inherent in loyalty. Moreover, apparel brands are heavily reliant on emotional appeal and the creation of imagery to achieve consumer recognition and interest (Kim, 2000). The results of this study have revealed that consumer’s affective perception of private label brands significantly influences store loyalty. Consumers who feel fine and happy with the purchase may repurchase the same brand even when provided with other alternatives (Gobe, 2001). The emotional value of the brand relates to positive feelings ahead of using the brand, which boosts consumer loyalty for the brand (Stauss & Neuhaus, 1997; Yu & Dean, 2001). Consequently, retail managers ought to focus on improving and enhancing consumer’s the emotional value towards PLBs. This indicates that it must be ensured that customers like their store’s PLBs and connect with them emotionally. This implies that retailers can create in-store experiences which can possibly engage customers with the brand. To emotionally attach the brand to consumers, it is recommended that retail managers can use social networking tools and employ advertising with nostalgic appeals. Retailers can also create “brand communities” to form alliances and emotional bonding between the brand and consumers. Customer involvement in a virtual brand community can enhance their loyalty to the brand around which the community is developed (Casalo et al., 2008) besides influencing their affective commitment towards the brand (Royo-Vela & Casamassima, 2011).

The significant role of perceived quality of PLBs is empirically backed by the study in a way that Consumers’ loyalty towards private labels is mostly driven by its quality and is in line with recent studies by Coelho Do Vale et al. (2016) and Nies and Martin (2012). As argued by scholars that the major factor in determining the purchase of store brands is perceived quality (Richardson et al., 1994). Consequently, retailers need to continue investing in PLBs quality, reducing the quality gap between national brands and private labels.

Further, Martos-Partal and González-Benito (2011) found that when PLB positioning is more quality oriented, there is a stronger effect of private label brand loyalty on store loyalty. Nevertheless, in a subsequent study (Gonzalez-Benito et al., 2012) in context to food, the household and personal care products, indicated that the relationship appeared to be more positive for retailers with a low price positioning, which implies a low-price PLB positioning because PLB strategy frequently line up with a retailer’s price-quality positioning (Gonzalez-Benito et al., 2012). However, for apparel PLB product category, perceived value and quality of PLBs are supposed to be the major drivers of consumers’ purchase intentions of PLBs (Liljander et al., 2009).

The results of this study also revealed that the PLB-perceived value has a positive significant influence upon store loyalty which is in line with Diallo et al. (2015) who had argued that store brand loyalty is significantly affected by store brands’ perceived value. Studying under the American market text, Richardson et al. (1994) found that consumers give more attention to store brands’ quality value, rather than their money-saving value. Hansen and Singh (2008) while studying a supermarket showed that store-brand buying behaviour is determined by households’ essential “value trait” over and beyond what is captured by price sensitivity only. Further, value oriented households, which demonstrate high-preference for PLBs in the pre-entry period, shift a considerably higher level of their expenditures to Wal-Mart. However, these findings were in disagreement to the conventional wisdom that high PLB patronage is associated with a higher level of store loyalty.

The study offers some practical implications for store retailers who wish to increase their apparel private labels’ value proposition. It implies that, consumers are loyal to a certain store is dependent on whether the PLB can offer higher value to consumers. It is because retailers’ private label brands not only have to compete with national or manufacturer brands, but also with PLB offerings of other retailers. Retailers need to strike a balance between price and quality of PLBs offered by the store to deliver value. This implies retailers have to pay additional attention on the quality of the PLBs, devise suitable price policies and at the same time offer apt merchandise to their target segment. It could alter their value proposition accordingly and can create successful private labels in competitive retail market space.

Though most of the PLB-related studies are in the context of food-related products and consider perceived risk as an overall risk, this study has considered three types of risks, namely functional, financial and social risk. Since this study is in the context of the apparel product category, the study has identified the impact of these relevant risks on store loyalty and found that each of them has a significant negative influence on store loyalty. These results corresponded with Marakanon and Panjakajornsak (2014), who studied the observed variables of functional risk, performance risk, and financial risk, found that risk, performance risk, and financial risk influenced customer loyalty. The findings are also in line with Tuu et al. (2011), who studied the effect of the mediation variables of perceived risk, knowledge, and uncertainty on satisfaction and loyalty. Retailers wishing to boost loyalty for their store should consider ways to reduce customers’ risk perceptions towards their PLBs while improving value for money and social value perceptions for value-conscious Indian consumers.

Financial risk, in terms of potential opportunities for financial losses or the possibility that the product will not offer the expected value in relation to the price paid, is a significant determinant of overall perceived risk. The empirical results concluded that consumers’ perceived risk towards apparel PLBs of the store negatively influence store loyalty. Consumers perceive financial risk as a significant dimension of the overall risk when making purchase decisions about PLBs (Mieres et al., 2006a; Tsiros & Heilman, 2005), while the other studies (e.g., Sheau-Fen et al., 2012) suggest that financial risk do not manifest itself as an important aspect in overall perceived risk. But this study makes it visibly imperative that retailers need to pay close attention and make efforts to reduce the functional risk as consumers are concerned that PLB can provide a satisfactory level of product experience in terms of functionality. Functional risk can be reduced by enhancing not only the quality of product but also the quality of ingredients used in its manufacturing. Additionally, retailer can use promotion to increase consumer awareness about the same and at the same time understand the expectations of consumers by increasing consumer awareness and gaining their confidence.

A perceived social risk can be reduced by improving and enhancing store image and reputation of retailers among the target customers, which can be minimized by creating an appealing store atmosphere, better service quality, and effective promotion and customer relationship management initiatives. Perceived financial risk can be reduced by positioning PLBs at par with national brands of the store according to price-quality associations and secondly retailers can consider employing appropriate store policies so that consumer’s fear of loss of money can be minimized for example, by ensuring smooth return/exchange policies, money back guarantee (in case they are not satisfied with a product and wish to return the product). Since perceived risk is associated with PLB purchases, it can hold back the consumers’ purchase intention of PLB products of retail stores. Hence it is recommended that department store retailers and marketers should make constant efforts to minimize these risks so as to enhance store loyalty.

There are social risks attached to clothes, according to a study on apparel PLBs by Vahie and Paswan (2006), clothes are normally a high involvement product as compared to grocery items as they are not purchased in a routine manner whereas grocery items, typically needs low involvement and their buying is more mundane in nature. Further, apparel is considered to have more “experience” characteristics and in contrast grocery items are considered to have more “search” characteristics (Erdem & Swait, 1998). For apparel, consumers ensure how the clothes fit, feel, when worn, how it looks on them and does it meet the expectation of how it would survive the wear and tear of use. Thus, the decision making process for apparel purchase is more experiential. In addition, the pleasure dimension, and symbolic and social meaning plays an important role in clothes buying. Batra and Sinha (2000) also suggested that some of the dimensions of purchase behaviour of clothes are different from that of purchase behaviour of groceries. Consequently, patronage behaviour would also differ.

Given the empirical evidence that the consumer’s perceptions of private label brands enhances store loyalty and that the particular retailer and management should capitalize and leverage their private labels such that the consumer’s familiarity and affective perceptions can be enhanced and its quality reputation on its PLB offerings along with national brands so as to offer better value. This would help the retailer to differentiate itself in today’s crowded marketplace, but also strengthen its store’s image and identity. The study has categorically focused on consumers of department store retail format. In India, this study can be of special significance as PLBs have been introduced by modern retailers at a very early stage of retail revolution.

6. Limitations and scope for further research

In this research, the impact of consumer perceptions of private label brands on store loyalty was investigated. Although the results provided new insights about the relationship between PLB consumer perceptions and store loyalty, this study has certain limitations. First, as the sample of study is confined to Indore, India, it confines the generalizability of the findings. Moreover, the research was conducted in India and the results may vary, when the study is replicated in another country due to the fact that consumers may have different perceptions toward private label brands. Furthermore, the current study has considered apparel private label brands of only department store retail format.

In the light of the findings of the study, the recommendations for possibilities of further research are drawn wherein future research may set better understanding of this phenomenon. First of all, we propose that further research could be conducted in diverse regions, countries and other retail formats, since retailers involve different strategies for their private label brands in various countries. Secondly, future researchers can attempt to include a longitudinal study which reduces to make interim inferences from the findings. Moreover, investigating the interrelationships between the consumer’s perceptions of affect, familiarity, perceived quality, perceived risks and perceived value and their direct and indirect influence on PLB purchase intention and store loyalty may reveal interesting results. In addition, it would be a valuable contribution for the literature to investigate who are loyal consumers to private label brands in terms of segmentation based on personal and psychological traits.

correction

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Acknowledgements

This research was funded by the deanship of scientific research at princess nourahbint abdulrehman university through the fast track research funding program..

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Sanjeevni Gangwani

Dr Sanjeevni Gangwani is Professor and Researcher at Department of Graduate Studies and Scientific Research, Princess Nora Bint Abdulrehman University, Riyadh. She has 17 years of teaching experience and has published more than 25 research papers in reputed journals and books. She has authored a book on “Organization Development”.

Meenu Mathur

Dr Meenu Mathur is Assistant Professor, Prestige Institute of Management and Research, Indore, India and is in team of Research Consultancy and Training Wing of the institute. She has rich blend of 14 years of industrial and 9 years of teaching experience. She has co-edited two books and published number of research papers in reputed journals. Currently, her research areas are Consumer Behaviour, Retail Management, Marketing and Retail Analytics.

Sana Shahab

Dr Sana Shahab is currently an Assistant Professor in the College of Business Administration, Princess Nourah Bint Abdulrahman University, Riyadh, Kingdom of Saudi Arabia. Her current research focuses on interdisciplinary applications of management, statistics and operations research to serve the broad area of problem solving and decision-making.