The influence of store attributes on consumer attitudes towards private labels the case of metro cash and carry vietnam

MINISTRY OF EDUCATION AND TRAININGUNIVERSITY OF ECONOMICS HOCHIMINH CITY Nguyễn Như Chang The influence of store attributes on CONSUMER ATTITUDES TOWARDS PRIVATE LABELS – The case of Met

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

Nguyễn Như Chang

The influence of store attributes on CONSUMER

ATTITUDES TOWARDS PRIVATE LABELS – The case of

Metro Cash and Carry Vietnam

MASTER’S DISSERTATION

In Business Administration Ology code: 60.34.05

Supervisor Asso Prof Dr Nguyễn Đình Thọ

Ho Chi Minh City, 2010

THE INFLUENCE OF STORE ATTRIBUTES ON CONSUMER

ATTITUDES TOWARDS PRIVATE LABELS – THE CASE OF

METRO CASH & CARRY VIETNAM.

ACKNOWLEDGEMENTS

ABSTRACT

ABBREVIATION

Chapter 1: INTRODUCTION

1.1 Background to the research

1.2 Retail modernization in Vietnam

1.3 The Metro Cash and Carry Vietnam

1.4 Research objectives

1.5 Significance of the study

1.6 Research question

1.7 Structure of the thesis

1.8 Definitions

1.9 Scope of the study

1.10 Summary

Chapter 2: LITERATURE REVIEW AND HYPOTHESES

2.1 Introduction

2.2 Retailer motivations for private labels

2.3 The evolution and repositioning of private labels

2.4 The store attributes

2.5 The relationship between store attributes and consumer attitudes towards private labels 15 2.6 The effects of store attributes on consumer attitudes towards private labels

2.7 Summary

2.8 The research gap

Chapter 3: METHODOLOGY

3.1 Introduction

3.2 Research Methodology

3.2.1 The development of the scales

3.2.2 The questionnaire design

3.2.3 Measurement

3.2.4 Data Collection

3.2.5 Sample Size and Type

3.3 Summary

Chapter 4: DATA ANALYSIS

4.1 Introduction

4.2 Preliminarily qualitative examination of the data through focus group (pilot study)29 4.3 Respondent profile

4.4 Quantitative examination of the data through questionnaire 32

4.5 Summary 37

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 39

5.1 Introduction 39

5.2 Significance of findings 39

5.3 Implications for theory 41

5.4 Managerial implications 42

5.5 Limitations of the research 43

5.6 Further research 45

5.7 Dissertation conclusions 46

REFERENCE 48

TIẾNG VIỆT 48

ENGLISH 48

APPENDIX A: LIST OF TABLES 52

APPENDIX B: MCCVN’S PRIVATE LABELS PORFOLIO 60

APPENDIX C-1: THE SURVEY QUESTIONNAIRE– TIẾNG VIỆT 61

APPENDIX C-2: THE SURVEY QUESTIONNAIRE – ENGLISH 66

APPENDIX D: THE INTERVIEW TOOLKITS 71

List of Tables Table 1: MCCVN performance 4

Table 2: The item list of store attributes 23

Table 3: Demographic profile of all respondents 31

Table 4.1: Descriptive statistics – Store attributes 52

Table 4.2: Descriptive statistics – Consumer attitudes 53

Table 5.1: Reliability – Store attributes 53

Table 5.2: Reliability – Consumer attitudes 54

Table 6.1: EFA results – KMO result 54

Table 6.2: EFA results – Communalities result 55

Table 6.3: EFA results – Total variance explained 56

Table 6.4: EFA results – Rotated component matrix 57

Table 7.1: Regression analysis – R2 value 58

Table 7.2: Regression analysis – Coefficients results 59

Table 8: Hypothesis test results 36

Here are numbers of persons who have played important roles in assisting me finishingthis research I would like to thank Asso Prof Dr Nguyen Dinh Tho who is mysponsor of the dissertation Thanks to his invaluable academic guidance while leading

me to this approach and encouraging me in uncovering the issues in comply with agreat understanding towards my working and studying time table, I deeply dug out thematter that is understood as also useful to the company I worked for

I also would like to thank Dr Tran Ha Minh Quan who was my class head teacher andgave me lots of encouragement and proactive support over the course

By the way, I couldn’t help acknowledging my classmates and colleagues who gave uptheir time to look for related documents and to help coaxing data in case

So does a thorough understanding of my family, especially my beloved husband duringthe progress, become a significant motivation for me to successfully fulfill this masterproject I therefore would be grateful to their support and patience indeed

Last, I would thank all consumers who have joined the questionnaire with sincere andactive feedback to help me put the theory of consumer attitudes towards private labels

in practice, specifically applied on the real case of Metro Cash and Carry Vietnam

The retail market is now growing faster and bigger than ever over the world of whichVietnam is the sixth most attractive retail market in the developing world in 2009.Considered as one of key motivation strategies to differentiate retailers from retailers,private label products have been introduced and quickly become a global phenomenonand of increasing interest to practitioners and academics alike (Hoch and Banerji, 1993;Quelch and Harding, 1996) Private labels have achieved a significant global salesshare, especially in grocery market, with a bright future of further developmentforeseen

Still there is little research on private labels in Vietnam This dissertation thereforewould contribute an empirical study about the influence of store attributes on theconsumer attitudes towards private labels, explored specifically to Metro Cash andCarry Vietnam There are two parts to deeply be deployed in the dissertation: 1) storeattributes, their roles and measurement scales; 2) consumer attitudes towards privatelabels in reference with the influence of store attributes And the Metro Cash and CarryVietnam case is chosen to examine

Deploying private labels from 2002, MCCVN enjoyed great success last year withsizeable sales share increased nearly double from 1.8% in 2008 to 3% in 2009 and itstarget to 2016 is 20% (MCCVN source, 2009) With the effort to find out determinants

of the success of private labels, consumer attitudes have been dug into while theconcept of retailer risen as brand The study bases on Chowdhury et al (1998) andDodd and Lindley (2003) empirical studies of the influence of store attributes on theperceptions of specific private labels with reference to problem approach of Fraser(2009) dissertation, and deep analysis on brand equity of Nguyen & Nguyen (2008)

From an academic viewpoint, this study contributes by illustrating that store attributesare considered as major strategic tools in the highly competitive retailing environment.This finding points to the need for both practitioners and researchers to examine the

“fit” between store positioning and private label positioning For retailers, the findingsuggests the need to reduce perceived risks of private labels For manufacturers, thefinding indicates that they should highlight the differences between their nationalbrands and private labels, especially in terms of the superior quality For researchers,the finding also suggests that store attributes should be incorporated in modelspredicting consumer proneness towards private labels

ABBREVIATION

Chapter 1: INTRODUCTION 1.1. Background to the research

Private label products, or store brands, have become a major force with more than 268billions US dollars in sales presented (Perez, 2008) Despite their market penetrationvaries from countries to countries, from retailers to retailers and from productcategories to product categories; these brands, owned and managed by retailers, havegrown to be a noteworthy threat to national brand manufacturers because of the too-closed quality gap between them To retailers, private labels are not only one of keymotivations for differentiation but also a strategy to improve their profitability, storeattributes and brand loyalty (Quelch and Harding, 1996)

This dissertation discovers consumer attitudes towards private labels of MCCVN withrespect to key attributes of the store Even though consumer attitudes towards privatelabels have been span more than 40years in the world, this concept is still new in such

a developing market of Vietnam as the first stage of penetration and furtherdevelopment prospect predicted in the future

The literature review would deeply draw the whole scene of private labels from theviewpoint of retailers It also presents private label positioning as well as determinants

of consumer attitudes towards private labels in which store attributes impressed andanalyzed in detail base on the research of Chowdhury et al (1998) and Dodd andLindley (2003) with reference to the dissertation of Fraser (2009) and Beyza and Leyla(2007), and the examination on brand equity of Nguyen & Nguyen (2008)

Within the scope of the first chapter, the retail market of Vietnam in general and MetroCash and Carry Vietnam in particular is examined The research question andhypotheses together with the methodology used in the study are introduced in the

subsequent sections, following by definitions and explanations of some terminologies.The last part provides a summary of the chapter.

1.2. Retail modernization in Vietnam

In Vietnam, the modern retailing began in the mid 1990s in the HCMC area (James M.Hagen, 2002), followed by the capital, Hanoi, and Danang By end of 2007, there are

153 supermarkets (Lotte Mart, Coop Mart, Maximark, Citimart,…), 70 convenientstores (G7 mart, Shop and Go, Vinatex…), 4 hypermarkets (Big C) and 5 warehouseclubs (MCCVN) (Retail and shopper trends – Urban HCMC and Hanoi, AC Nielsen,2008) Private labels have been established in 2000s, mostly by namely substantialstores as MCCVN, Coop Mart, Big C and Maximark Although they are considered asone of key parts of the modern retail strategy, their contribution is humble to count for,even in their internal sales shares, for example in MCCVN (one of the biggestconcentrating on private labels from the beginning) private label sales share is only by3% in 2009

As ranked by global management consulting firm A.T Kearney (the Global Retail

attractive retail market in the developing world in 2008 because of inflationarypressures from its own real estate boom, consumer price inflation in the last half of

2008, and a significant drop in its export-driven economy However, this retailing isstill considered one of the most attractive industries in Vietnam and continuing totransform Vietnam economics with domestic consumption as a primary focuscoinciding with its committable opening doors to international investors, youngpopulation and continuously urbanizing process – a trend that should favor continuedgrowth in retail over the long term (Moriarty and Shabat, A.T Kearney partners) Thisretail process of modernization and innovation would trigger enhance the bright

1.3 The Metro Cash and Carry Vietnam

MCCVN has started business in Vietnam since 2002 By 2009, it is voted as the firstchoice international wholesaler and the market leader in Vietnam with 9 stores nation-wide currently and 5 more plots expansion processing With sales regularly increaseyear after year, in 2009, it achieved vnd bil7,188 (11% increase in compare with 2008)

vs vnd bil15,770 of the modern grocery distribution in hypermarket and supermarket(MGD; 37% increase in compare with 2008); or 45.6% of MGD Vietnam (Source:Euromonitor, MCCI Corp Controlling) However, competitors still exist ashypermarkets, supermarkets and convenient stores (Big C, Saigon Co-op, Maximark,Lotte…), wet markets, importers, black/grey markets and shortly coming internationalretailers like Tesco, Auchan, Aeon Its most limitations but opportunities to improve arepayment method by cash and limited delivery services

It is also necessary to have a quick glance on MCCVN’s customer types MCCVN is asolely special business type in Vietnam that mostly concentrates on sales in bulk Theircustomer types are professionals, classified into three: Horeca to concentrate onhotel/accommodation, restaurant, bar/café, canteen, eateries and catering customers;Traders to concentrate on big groceries, mom and pop shops and small wholesalers;SCO to concentrate on service, companies, offices and non-residents consumers Whilecustomer shares among these types are in turn 12.6%, 19% and 68.4%; the turnovershares are slightly alike 15%, 30% and 55% (MCCVN source, 2008) For the scope ofthis dissertation, SCO consumers are chosen to examine because of its largest ratio inboth consumers share and sales share In another reason, SCO is also the consumertype of other supermarkets, hypermarkets and convenient stores That not only helpsexpand the dissertation scope to apply to other store types (supermarket, hypermarket,convenient store…) in somehow but also be adaptable for retailing concept applied forMCCVN in retailing aspect

Table 1: MCCVN performance

MCCVN performance

Metro vs competitions among professional customers

Customers (HoReCa, Trader, SCO), %

Source: IMAS study 2008

METRO Cash & Carry International GmbH

own brands (private labels – see Appendix B) They are targeted by different levels,such as Aro is considered as price entry (C-level) of food and partly non-food productswhile Fine Food is positioned as umbrella brand (B-level brand of price and A-levelbrand of quality) of food products only1 They are therefore set to compete tocorresponding levels of national brands.

entry)

4

1.4 Research objectives

As previously mentioned, private labels are new phenomenon in Vietnam To retailers,

it plays an important role and becomes 6th out of retailers’ top ten critical issues(Fraser, 2009; MCCVN – Ownbrand training, 2009) Not only a key motivation tocreate competitive advantages through store differentiation which helps retailers toenhance store patronage and store loyalty, to create brand loyalty as well as to attractmore consumers from other retailers through high-quality private labels; it is alsoconsidered as a means to improve profitability, through both higher retail margins andincreased bargaining power with national brand manufacturers (Fraser, 2009)

Vietnam is a developing market The role of brand image is more and more important.However, there is little research examined brand image in Vietnam, or they are notperfectly fit in well with Vietnam case (Nguyen & Nguyen, 2008) The dissertationexamines consumer attitudes towards private labels with reference to store attributes,only more recently has there been research of their roles on attitudes towards privatelabels, tested in other countries outside Vietnam With the purpose to contribute anempirical study on this issue, the overall objective of this dissertation is to explore theimpact of store attributes on consumer attitudes towards private labels Specifically, itexamines the impacts of:

f Convenience on consumer attitudes towards private labels

1.5 Significance of the study

The study would help supermarkets, hypermarkets, convenience store chains,marketing companies, market research companies, marketing researchers and students

to have clearer view on what private labels are and how they are important as well asthe influence of store attributes:

− To supermarkets, hypermarkets and convenience store chains: to draw theirstrategies on improving their competence and revenue as much effective as possible

in reference to the role of private labels

attributes of the store on consumer attitudes towards private labels as well as ways

to measure them From that point, they would deploy efficient market researchprojects as well as give solutions to improve private label images and/or storeimage to their clients

− To marketing researchers and students: this study would somehow draw anempirical study on the role of store attributes on consumer attitudes towards privatelabels It is a useful reference for researchers and/or students who would havedeeper studies on this subject in Vietnam

1.6. Research question

The research problem is addressed in the following question:

How do store attributes influence consumer attitudes towards private labels in terms of Metro Cash and Carry Vietnam?

Private labels chosen to examine here are Metro private labels, based on the known brands by consumers; including Aro, Fine Food, H-Line, Luxana, HorecaSelect, Sigma, Fairline, Authentic, L.Lambertazzi, Rioba, Watson and TarringtonHouse.

well-According to Chowdhury et al (1998), there are six attributes of the store: productvariety, product quality, price, service, atmosphere and convenience The research usesthese attributes to test their influence on consumer attitudes towards private labels andthey are called independent variables There are twenty-four items in which variety (3items), quality (5 items), price (3 items), service (5 items), atmosphere (5 items) andconvenience (3 items) And the dependent variable “consumer attitude” consists 6items

There are six hypotheses developed to test the role of store attributes on consumerattitudes towards private labels:

(H1): Product variety positively influences consumer attitudes towards private labels(H2): Product quality positively influences consumer attitudes towards private labels(H3): Price positively influences consumer attitudes towards private labels

(H4): Service positively influences consumer attitudes towards private labels

(H5): Store atmosphere positively influences consumer attitudes towards private labels(H6): Convenience positively influences consumer attitudes towards private labelsThe questionnaire is built base on these hypotheses (see Appendix C) And the five-point Likert scales with the anchors from strongly disagree (1) to strongly agree (5) are

used to measure the items in the study This approach would simplify data entry andinterpretation, as higher scores mean higher ratings.

1.7 Structure of the thesis

This dissertation is organized in five chapters The introduction chapter outlines theresearch objectives and empirical significance of the study in line with a brief ofresearch problem and hypotheses Some terminologies’ definitions and explanationsare also provided in the next section, followed by the summary in the last part of thechapter

Chapter two presents the literature review, starts with an overview of retailermotivations for which private labels are introduced Also does retailer positioning ofthese brands provide in a brief, followed by an another deep discussion of therelationship between store attributes and private labels as well as the effects of storeattributes on consumer attitudes towards private labels

Chapter three develops the methodology that is used to collect and analyze the data forthe research In line with the quantitative methodology to be followed, six hypothesesare developed in the association between store attributes and private labels Researchmethods used to collect and measure the data include the development of the scales,questionnaire design and data collection The data is also to be collected using anintercept survey and a self-administered questionnaire

Chapter four summarizes the result of data analysis, including the qualitativeexamination through focus group, respondent profiles and the quantitative examinationthrough questionnaire of which presented descriptive statistics results, the assessment

of reliability, validity and the results of the hypothesis tests The examination indicatesthat most of store variables which hypothesized to affect consumer attitudes towardsprivate labels are significantly correlated with attitude dependent variable Six

hypotheses are tested using multiple regression analysis According to the result,consumer attitudes are strongly affected by perceptions of store attributes in reference

of product quality, price, service, atmosphere and convenience, except product variety.Chapter five presents significance of findings, the implications for researchers andmanagers and limitations of the study as well as opens new trends of further research.The research concludes that store attributes play an important role in consumerattitudes towards private labels, and that private label positioning should be uniquelyrelated to the unique positioning of the store Concurrently, investment in the storeatmosphere could have a positive impact on consumers’ perceptions about private labelquality Above all, the retailers are suggested to implement other marketing decisionsthan store attributes to attract new buyers of private labels and to increase theirnegotiation powers to manufacturers Albeit the scale and scope limited with only twostores in HCMC of Metro Cash and Carry Vietnam examined, the study opens furtherareas for the additional research in the future

1.8. Definitions

Since the private label is a new concept in Vietnam, it’s necessary to have anexplanation of what that term is and how it is used in this study Private labels aredefined as consumer products that are designed, produced, controlled by, and whichcarry the name of the store or a name owned by the store; also known as store brands

or dealer brands (Supply Chain Insight, 2007) An example would be MCCVN’s

“Aro” products Sometimes we see another terms used for private labels such as ownbrands, own labels (Fraser, 2009), house brands, distributor brands According toMCCVN, private labels are called own brands And they are defined as private labelshandled by modern retailers whose goods and/or services are produced by themselvesand/or a multiple third parties It can be named by the retailer’s name, or a separate

private labels while Woolworth includes both Signature Range and Woolworths Selectbrands.

Moreover, the term “retail brand” or “retailer brand” may either refer to the overallbrand or name of the retailer Also, generics are one kind of private labels that refer tono-name, unbranded or brand-free products They are usually packaged in white orsingle color surroundings with minimum required product information listed on thepackage with price set well under the brands’ In fact, there is unofficially agreedterminology for private labels and other terms to be used in the literature, although theyall refer to the same phenomenon (Fraser, 2009) For the purposes of this study, theterm private labels is used to comprise all different private label types and variousterms used for them

The national brand is another considered terminology That is the brand name of aproduct distributed nationally under a brand name owned by the producer ordistributor, as opposed to local brands (products distributed only in some areas of thecountry), and private label brands (products that carry the brand of the retailer rather

Omo, P/S, Coca-Cola, X-men, Minh Long ceramics… These products are also sold insupermarkets but their brands don’t belong to stores

1.9. Scope of the study

Since Vietnam is in the first stage of private label establishment and development, thefindings would differ from other countries with which the variety of private labeldevelopment level as well as the difference of retail concentration and consumerattitudes The important point should be underlined is MCCVN’s customer types Onlyone kind of its customer types (SCO) is examined The stores chosen in the researchare MCCVN’s stores (An Phu and Hiep Phu in HCMC) to examine consumer attitudes

towards its private labels As a result, the findings may not be typically general results

to all MCCVN's stores nationwide, to other stores outside MCCVN system in Vietnam(for example Big C, Coopmart, Maximark…) and to all private labels

1.10 Summary

The chapter is divided intro 10 sections to introduce the basis of the dissertation.Starting with a brief background, the research question and hypotheses are set out Thenext section outlines the theory bodies which would be reviewed deeply in the chaptertwo, together with the methodology, which would be treated as a large part to bediscussed separately in the chapter three Then the outline of the whole dissertation isclearly drawn to easier follow up its flow of deployment The private label and nationalbrand definitions are provided as useful contributions The last part identifies thedelimitations of the study Base on the address of the research question “How do storeattributes influence consumer attitudes towards private labels in terms of MCCVN?”,the study begins in detail with the chapter two of relevant literature review

Chapter 2: LITERATURE REVIEW AND HYPOTHESES 2.1. Introduction

Recognizing the more and more importance of private labels to both retailers andnational brand manufacturers, as well as the variation of their market penetration fromcountries to countries, retailers to retailers, categories to categories… as mentioned inthe chapter one, there are numbers of private label literature streams to examine theconsumers, retailers and market factors for their success According to Grewal et al.(1998), positive store attributes are considered as some of key factors for retailers toachieve and sustain their success in an increasingly competitive marketplace Retailerswho manage their image effectively can influence consumers’ store patronagedecisions and improve their competitiveness Similarly, private labels - that are unique

to the store - may increase consumer traffic, generate greater store loyalty andcontribute to profitability (Dick et al 1996)

In the marketing literature store attributes are identified and studied by manyresearchers In line with those studies, this chapter would base of the previousempirical studies of Dodd and Lindley (2003); Beyza and Leyla (2007) and Fraser(2009) to dig into the influence of a set of store attributes on consumers’ perceptions ofprivate labels

The first part of this literature review presents private labels’ motivations and benefits

to retailers Those explain why retailers try to introduce private labels in the role of notmerchants but marketers Following is the evolution and repositioning of private labels.Subsequently, the next two parts outline store attributes in line with the effect of storeattributes on consumer attitudes towards private labels Main outcomes from theseliterature reviews is also summarized before the research question once again indicated

in the final section to thoroughly develop in the following chapters

2.2. Retailer motivations for private labels

Retailers always try to increase as much gross margin as possible in doing business.However, the competition among retailers on the same national brands depressesretailers’ margin emergence They thus have to find out another way to easier controltheir margin Base on industry sources, to Hoch and Banerji (1993), gross margin toretailers on private labels is from 20 to 30 percent higher than on national brands (ToMCCVN, private labels’ gross margin is set 10-20% higher averagely) On the otherhand, the market share taken by private labels also creates actual or potential threats tonational brand manufacturers, enhances retailers’ bargaining power as well as lessenswholesales prices of national brand products (MCCVN – Ownbrand training_v2.ppt).This finding has largely been confirmed in private label literature The manufacturers

in this case may response depending on consumer loyalty to national brands(Gabrielsen and Sorgard, 2007)

While gross margin is one of the earliest reasons for retailers to introduce privatelabels, another key motivation is to create competitive advantage through storedifferentiation By offering products unique to the stores, the retailers expect toenhance store patronage and store loyalty (eg Quelch and Harding, 1996) However,there are mixed evidences on whether store loyalty is created by private labels inpractice Some confirm that private labels do create store loyalty According toRichards et al (2007), private labels play an important role in attracting consumersfrom other retailers Similarly, Anselmsson and Johansson (2007) report that the moreprivate labels bought, the more loyal consumers are to the store Sudhir and Talukdar(2004) study that store patronage is enhanced through store differentiation by privatelabels while Corstjens and Lal (2000) find that high-quality private labels create storeloyalty and differentiation through consumer “inertia” (Fraser, 2009)

Private labels are also proved to compete with leading national brands by creatingbrand loyalty It means that market share is taken by private labels from nationalbrands Private label brand loyalty, nevertheless, is determined at least in part by storeloyalty.

2.3. The evolution and repositioning of private labels

Laaksonen and Reynolds (1994) develop a typology showing how retailers haverepositioned their retail brands over time According to this typology, private labelstend to evolve through four stages or “generations” The first generation is lowerquality and low price – “generics”, while the next generation comprises private labels

of slightly higher quality but still lower quality than national brands, where price is stillimportant The next stage of development is third generation – “me too” private labels

of comparable quality to national brands but which have slightly lower prices thannational brands and are perceived as value for money The more advanced fourthgeneration private labels offer innovative, unique products of the same or better qualitythan national brands and prices that are equal to or higher than national brand leaders.While this typology is developed largely in relation to developments in the UnitedKingdom and Europe, retailers in North America have also started to introduce privatelabels of equal or even better quality than national brands although still at lower prices(Quelch and Harding, 1996)

2.4. The store attributes

Knowing which attributes of the store contribute positively to consumer attitudestowards private labels can provide retailers strategic advantages By investing in thosespecific attributes, they can gain the advantage of store on the one hand and on theother hand transfer these positive attributes to consumer attitudes towards their privatelabels, by which private labels are generally perceived as low quality compared to the

national brands (Dick et al 1996) A private label can be successful in one categorywhereas not in other category This may be because of the variances in promotionalactivities, design of package, and the perceived quality of private labels in differentproduct categories.

Store attributes are regarded as critical subjects to the retail success because of theirinfluences They are believed to have positive impacts on store patronage behavior andhence profitability (Hansen and Solgaard, 2004) In order to maintain and enhanceretailers’ positions under today’s tough competition environment, retailers can use storeattributes as strategic tools, which have a positive effect on profitability and storeperformance Additionally, store attributes can increase the consumers’ likelihood toshop in the store again, length of stay in the store and quantity of purchase (Fraser,2009)

Within the scope of this study, store attributes are adapted from the related literature(Chowdhury et al., 1998; Dodd and Lindley, 2003) Store attributes thus commonlymentioned by those studies are product variety, product quality, price, storeatmosphere, employee service and location/convenience

2.5 The relationship between store attributes and consumer attitudes

towards private labels

Consumer inferences about the quality of merchandise (brands) and service areantecedents of the store Meanwhile, they discover some factors that have effects onprivate labels As confirmed, favorable store atmosphere in relating to store design notonly increases favorable perceptions of merchandise quality but also leads consumers

to believe that merchandise price is higher Furthermore, the store assortment (variety)

is also another factor that offers consumers the convenience of one-stop shopping topurchase products with wide cross-categories (Ailawadi and Keller, 2004) As

confirmed by Sayman and Raju (2004), the bigger the number of private labels present

in the store, the more favorable the consumers regard the private labels in a givencategory

On the other hand, the store reputation is a cue to product quality Following thefindings of Grewal et al (1998), store name positively affects on the store and storeattributes till their turns affect on purchase intentions for a product However,consumers’ purchase decisions are not only rely on the store name but also the brandname and price because of wide competing products sold over a broad quality rangewhile the retailer reputation is not specific to a product quality

Consumer perceived quality of private labels is often examined in the literature withinthe context of perceived risks There is an extended model of risk which is alsorelevant to private labels In this model, consumers assess their overall perceived risksbased on prior knowledge, involvement, purchase goals and usage, uncertainty andconsequences relating to relevant product attributes The product attributes in turn arelinked to functional, monetary, social, and psychological risks These risks can bedefined in terms of potential losses: the functional risk relates to the potential lossresulting from inadequate product quality, the financial or monetary risk relates to thepotential financial loss resulting from a bad purchase, while the social risk relates to thepotential loss of image or prestige resulting from the purchase or use of a product,especially if used in public

There are reciprocal influences between store attributes and private labels Citing fromSemejin et al (2004), consumer perceptions of private labels are influenced by theirjudgment of store attributes And store attributes can play a role of “risk reducer” byreducing functional and psychosocial risks associated with buying private labels incertain categories or according to Liu and Wang (2008), store attributes are strong

predictors of general attitudes towards private labels in Taiwan In a Spanish study,Guerrero et al (2000) confirm that the perception of private label quality depends onthe store, or again confirm the role of store attributes on consumer attitudes towardsprivate labels Another recent study by Zielke and Dobbelstein‘s (2007) on specificbrands have given an important highlight that “the attitude towards specific privatelabels is more important than general attitudes towards private labels in terms ofwillingness to buy new private label products” (Fraser, 2009) Prior to the study ofDodd and Lindley (2003), they posit that consumer perceptions of specific privatelabels and store attributes are positively associated, even though perceptions of specificprivate labels differ from stores.

Simultaneously, private labels can also have an important role in positioning theretailer in consumers’ minds Private Label Manufacturer’s Association in 1999 provedthat image is considered as one of the most important reasons for introducing privatelabels Earlier, Dhar and Hoch (1997) find that it is a positive factor to use store name

on private label products in explaining variances in private label penetration acrossretailers Later studies also confirm that private labels are important in enhancing retailstore differentiation

2.6 The effects of store attributes on consumer attitudes towards private

labels

As mentioned above, store attributes lead consumers to form an overall evaluation thatnot only affect their attitudes towards the store as a whole but also their attitudestowards private labels The more positive thinking of consumers to the store, the morepositive evaluations they appraise its private labels (Semeijn et al., 2004) Dodd andLindley (2003) also found the effect of products’ quality that the store offers to itsconsumers on the attitudes towards the private labels It has been shown that

merchandise (variety and quality) influences positively consumer attitudes towards theprivate labels (Semeijn et al., 2004) So, we hypothesize that:

H1 Product variety positively influences consumer attitudes towards private labels H2 Product quality positively influences consumer attitudes towards private labels.

With respect to the price attribute of the store, Dodd and Lindley (2003) report that lowprices in the supermarkets do not have any impact on consumer attitudes to privatelabels It may be because of the product specific nature of price’s effects on qualityperceptions (Wheatley and Chiu, 1977) Product’s price solely is an indicator ofperceived quality (Dick et al 1994) whereas price level in the store is not However, inthe early stage of Vietnam, consumers perceive the quality of private labels lower thannational brands and that perception is likely to stem from consumer’s proneness toassociate quality with price That’s why we keep hypothesizing an effect of priceattribute of the store on private labels:

H3 Price positively influences consumer attitudes towards private labels.

Semeijn et al (2004) show that service (knowledgeable, courteous and helpfulemployees, no problems when returning items, convenient opening hours…) couldinfluence consumer attitudes to private labels Consumers may believe that a storeoffering services of good quality (essentially, by the intermediary of its salespeople) islikely to stock and recommend products of quality:

H4 Service positively influences consumer attitudes towards private labels.

According to the environmental psychology, environmental factors such as interiordesign, store layout, lighting, color, music, overall cleanliness of the store, etc.influence the consumer responses (Dick et al., 1996) The shopper may believe that the

private labels of a positively featured store may have good quality (Dick et al., 1996).Dodd and Lindley (2003) found that the store atmosphere has a positive influence onprivate labels’ quality In addition, Dick et al (1996) shows that private label quality isperceived as higher in an aesthetically attractive store than in an aestheticallyunattractive one The aesthetically attractive stores are described as stores with wideaisles, creative layout, bright colors, modern fixtures, and a clean retail environment:

H5 Store atmosphere positively influences consumer attitudes towards private labels.

As indicated above, the scale of store attributes in the original study is derived fromChowdhury et al (1998) and Dodd and Lindley (2003), the attribute of conveniencewas not used in assessing the effect of the store on consumer attitudes towards privatelabels It was maybe because the survey had been deployed as face-to-face interviews

at the stores examined and collected by means of an intercept survey In Vietnam, most

of Metro stores are placed far from the center of cities Therefore, the conveniencefactor is also critical concern to consumers Stemming from that reality, the study isdecided to be included the convenience factor So we hypothesize an effect ofconvenience attribute of the store on private labels:

H6 Convenience positively influences consumer attitudes towards private labels.

Productquality

H2Price/

H6Convenience

2.7. Summary

This chapter would outline the relationship between store attributes and private labels

as well as verifying the effects of store attributes on consumer attitudes towards privatelabels First of all, retailer motivations for private labels and store attributes areintroduced Also the relationship and effects of store attributes on consumer attitudestowards private labels are latterly discussed in depth, along with relevant hypothesesinterpretation

Stemming from the expectations of increasing margin as much as possible and creatingcompetitive advantage through the store differentiation, retailers would urge privatelabel introduction They would also improve their bargaining power, enhance storepatronage and store loyalty to lead to an alternative solution for national brands by

creating brand loyalty as well The retailers have changed their positioning strategyfrom merchants to marketers And the private labels have been positioned through fourstages, from generics with low both quality and price to premium quality ones withinnovations.

Along with this development, the effect of store attributes on private labels is more andmore clear-cut It is considered as “risk reducer” by reducing functional andpsychosocial risks It also has a positive association with specific private labels inconsumer minds and affects on the consumer decision of private label purchasethrough its six attributes: product variety, product quality, price, store atmosphere,employee service and location/convenience As confirmed by Sayman and Raju (2004),the bigger the number of private labels present in the store, the more favorable theconsumers regard the private labels in a given category

2.8. The research gap

Most of studies on private labels are examined in United States and European markets.They are rarely made for not-well established markets or in early stage of developmentmarkets as Vietnam Stemming from this limitation, in this study, store attributes’effects on private label products is investigated in the context of food and non-foodcategories, specifying to private labels of Metro Cash and Carry Vietnam

Chapter 3: METHODOLOGY 3.1. Introduction

The previous chapter presented the literature review and the conceptual model In thischapter, the purpose is to describe the research methodology used to collect the data totest the model and hypotheses

The chapter includes three sections in which the first one is the introduction, followed

by the research methodology, consisting also of the development of measurement scale,questionnaire design, measurement, data collection and sample size and type The datahandling and analysis are mentioned later on The last part is the summary of thechapter

3.2. Research Methodology

The research comprised two phases, a pilot study (qualitative examination of the datathrough focus group) and a main survey (quantitative examination of the data throughquestionnaire) These phases were both deployed in Ho Chi Minh City, the principalbusiness center of Vietnam Private label products chosen here were MCCVN's ownbrands which had wide range of product assortment, including both food and non-foodcategories The methodology used qualitative and quantitative approaches andstatistical analysis of data collection through a convenient consumer survey to testhypotheses empirically

The pilot study was undertaken by using the technique of focus group of eight givenprivate label prone consumers with ages from 26 to 33 Its results were thus used tomodify and refine the scale items

The main survey was conducted mainly through face-to-face survey at Metro An Phu(District 2) & Hiep Phu (District 12) and a very small part through onlinequestionnaire Instructions of how to complete the questionnaire were provided withthe note that all answers respected (there were no wrong or right ones mentioned) Thepurpose of this main survey was to assess the scales and test the models.

3.2.1 The development of the scales

The scales used to measure store attributes were based as far as possible onthose developed by Dodd and Lindley (2003) Those scales in turn were derivedfrom measures identified in Chowdhury et al (1998) study which was outlined

in chapter two The measuring scale used is the five-point Likert scales with theanchors from strongly disagree (1) to strongly agree (5) The items evaluated thefollowing attributes: product variety (3 items), product quality (5 items), price (3items), service (5 items), store atmosphere (5 items) and convenience (3 items).Those items were adapted from previous studies of store attributes and listed inthe following table 2 In addition, product category of the purchased privatelabels (food, non-food), and socio-demographic variables (age, gender,education, income) were also considered in the questionnaire

Table 2: The item list of store attributes

Variable

VA-1 MCCVN carries many brands

VA-2 MCCVN has a large variety of products

VA-3 MCCVN is one-stop solution for everything I need

QA-1 MCCVN sells only high quality products

QA-2 MCCVN products are fresh

QA-3

I can count on the products I buy at MCCVN being excellent

I'm satisfied with the products I bought at MCCVN

I can buy products for less at MCCVN

I get value for my money at MCCVN

The prices at MCCVN are fair

MCCVN employees are friendly

MCCVN employees are helpful

The service of MCCVN is professional

I am pleased with the service I receive at MCCVN

Sales promotions are attractive

The appearance of MCCVN is appealing

I like music played in the store

I like colors used in the store

MCCVN is always clean

MCCVN is modern

MCCVN is not too far from my house

I can go for shopping at MCCVN frequently

I like shopping at MCCVN

According to Churchill and Iacobucci (2002), thereliability of a scale increased with the number ofitems used to measure it The result was thus a scale ofstore attributes comprising six main variables: productvariety, product quality, price, service, atmosphere andconvenience, consisting of twenty-four items (multi-item variables)

3.2.2 The questionnaire design

The measuring tool for store attributes was a

self-questionnaire inwhichthe twopartsmentiondeclarationsrelating

to store

24

attributes (the independent variables) and consumer attitudes towards MCCVN'sprivate labels (the dependent variables) correspondingly The respondents wererequired to circle their answer numbered from (1) to (5) on the five-point Likertscale.

The third section was drawn to find out participants’ percentage of spend atdifferent stores It was included in the original study to check if attitudes wereaffected by the store respondents shopped at most The next section keptchecking the share between MCCVN's private labels vs other supermarkets’ orhypermarkets’ private labels and national brands The following section verifiedconsumer percentage spends on food/ non-food private label products The lastpart was to get participants’ information to enable demographic profiles ofrespondents as well as to check whether they were right consumer type toconcentrate on It was also to investigate somehow the relations between privatelabels prone purchase and demographic characteristics as previously mentioned

in chapter two

3.2.3 Measurement

With respect to the type of scales used to measure the items in the study, thefive-point Likert scales, anchored by (1) strongly disagree and (5) stronglyagree, were used to measure store attributes This approach would simplify dataentry and interpretation, as higher scores mean higher ratings Respondentswould be required to circle the number on the five-point Likert scales to indicatetheir opinions on each statement

3.2.4 Data Collection

The questionnaire would be completed by direct approaching consumerrandomly after their shopping at the Metro store exit gate then asking for their

self-completion Instructions of how to complete the questionnaire wereprovided by the interviewers as well Some would be collected through emailingbut limited to prevent its limitation of misunderstanding or non-answeringquestions This multi-sampling frame would create chance to approach morerespondents than intercept survey that concentrating only on consumersshopping at the store on the designated day and time.

The two stores selected were in Metro store chain and in relatively closeproximity to each other within Ho Chi Minh City of Vietnam It meaned theyhave similar socio-economics profiles, and respondents were not too far to havetoo different perceptions on stores and products Pursuant to Bell et al (1998),location also played a major role in store choice Finally, the survey wasintended to complete in two weeks with the support of MCCVN store staff at AnPhu and Hiep Phu

3.2.5 Sample Size and Type

Since multiple regression was used to test the hypotheses relating to the effect ofstore attributes on consumer attitudes towards private labels, high sample size

statistical significance at a chosen significant level

On the other hand, sample size also affected the result generalization Inexploratory factor analysis (Hair et al., 2006), we had:

n = 5t

Where:

n: size of sample

n: size of samplem: number of independent variables

⇒ n ≥ 8*6 + 50 or n ≥ 98The statistically significant level of sample size was the maximum between theexploratory factor analysis and the multiple regression, or preferably 120 Therewere two stores to be applied multiple regression analysis, with reference tounusable responses and missing data, the sample size was finally set at 125 pereach store, or total sample size was of 250

3.3. Summary

The chapter described the methodology that was used to collect and analyze the datafor the research In line with the pilot study (a qualitative examination of the datathrough focus group), the main survey (a quantitative examination of the data throughquestionnaire) was conducted at Metro An Phu & Hiep Phu and a small part throughonline questionnaire Followings were the development of the scales, questionnairedesign, the measurement and data collection The data was to be collected using anintercept survey and a self-administered questionnaire Sampling control issues were

discussed after that The desired size of the sample – 250 shoppers – was explained in terms of statistical power and generalization.

Chapter 4: DATA ANALYSIS 4.1. Introduction

This chapter presents the results of the statistical analysis of the collected data,following the methodology outlined in Chapter 3 The primary purpose of this chapter

is to present the results as they relate to the hypotheses of the study, which were testedusing multiple regression analysis after preliminarily qualitative research through focusgroup The data is then examined for reliability and validity in terms of the scales used

in the research The final section of the chapter discusses the results of the statisticalanalyses used to test the hypotheses

4.2 Preliminarily qualitative examination of the data through focus group

(pilot study)

Stemming from the difference in culture, consuming habits and the degree of economicdevelopment among countries, the scale was decided to be tested through focus group

to fit in well with Vietnamese environment

This research was thus executed to explore, adjust and amend the store variables aswell as their relevant items which were established in chapter three It used thetechnique of focus group of eight given private label prone consumers with ages from

26 to 33 It was carried out in Ho Chi Minh City August 2010

There were six constructs to be used in the research that were also six attributes of thestore: variety, abbreviated to VA, with 3 items (VA-1 to VA-3); quality (QA) with 5items (QA-1 to QA-5); price (PR) with 3 items (PR-1 to PR-3); service (SV) with 5items (SV-1 to SV-5); atmosphere (AP) 5 items (AP-1 to AP-5) and convenience (CV)with 3 items (CV-1 to CV-3) They were all measured by the 5-point Likert interval-scaled measurement

According to the consumers from focus group, there were two adjustments listed below, the rest was acceptable and understandable:

“Have you ever shopped at Metro?” It was from the fact that one Metro membercard could be used for maximum three people to enter the gate at the same time.There are numbers of people who don’t have Metro member card but theysometime shop at Metro

− With the main questions, one more statement called AP-6 “Merchandising atMCCVN helps easily finding products” was added Most of members in the focusgroup agreed that Metro was large with thousands of items, the skilled productarrangement on shelves was important to attract consumers

The total independent variables were thus 25 instead of 24 Through qualitativemeasurement, the consumers agreed that the Metro store was influenced by sixattributes mentioned above: variety, quality, price, service, atmosphere andconvenience The research therefore would be tested by regression analysis thatpresented in the following section

4.3 Respondent profile

The questionnaire had been administered by partly online throughhttps://spreadsheets.google.com/viewform?hl=enandpli=1andformkey=dDVYeWlheUl

the survey (Selected consumers were persons that have been shopped at Metro andhave used Metro private labels Even if they have used Metro private labels, they mightnot recognize that because of either their neglect or no concept of such new topic asprivate labels), there were only thirty-four people participated in the online survey In

order to achieve 250 samples, it was decided to do face-to-face survey at An Phu andHiep Phu stores (Metro stores in District 2 and District 12) on a sample of 280 Metroconsumers interviewed from August 9 to August 25, 2010 The number of surveysample was higher than the given sample number of 250 to prevent misunderstanding

or non-answering questions or any possible response bias This survey was completedwith the support of four university graduates and a Metro colleague To universitygraduates, half-day training was conducted with introduction about Metro, its privatelabels and the survey questionnaire as well as ways to approach and interviewconsumers (see appendix D – the interview toolkits) The respondents were selected atrandom and surveyed after they had finished their shopping in the store The responserate in the current study was estimated at around 70% Many shoppers did not wish toparticipate in the survey after finishing their shopping Anecdotally, those waiting fortheir cars or motorbikes and those with large grocery purchases were less willing toparticipate In summary, the total participants were 292 in which 70% were womenwith income most less than or equal to vnd5,000,000

The demographic profile of all respondents was provided in table 3, including interests

in gender, age, income and education

Table 3: Demographic profile of all respondents