Private label electrical goods and Indian...

245PRIVATE LABEL ELECTRICAL GOODS AND INDIAN CONSUMERSGupta

ABSTRACT. Organised Retailers use private label brands to compete with the national brands by setting competitive price for products. Determining customer perception towards private label brands is an essential part of a retailer’s marketing strategy formulation process. To gain this understanding with respect to Indian customers, present study was conducted by using the personal survey method on respondents from the northern part of India. Study conducted through structured undisguised questionnaire, using 5 - point Likert scale. Hypothesis framed for the research work have been tested with the help of t-test and Chi-square test. Study reveals that parameters like scheme, brand design and price shows different opinion of respondents.

KEYWORDS: Customer perception, Private label brand, Scheme, Warranty

Private label electrical goods and Indian consumers

Rahoul Gupta, Invertis University Bareilly, Uttar Pradesh, India

Received: 10 March 2014Revised: 10 June 2014

1. Introduction

History of private label brands in the organized retailing could be traced back over hundred years, the growth is remarkable during last few decades (Tarzijan, 2004). Private label brands are owned, manufactured, managed through inbound & out bound supply chain and sold exclusively by a retailer (Baltas, 1997), with the private label brands retailers focus on building strong retail brands by providing customers a greater balance of price with quality, consistency, convenience, innovation and enhanced in-store experience. In order to get success and mark its presence at the marketplace retailers have powerful proprietary portfolio, that they control and manage, when retailer invest its time and vigour they expect better rewards for themselves by making their merchandise and their retail store as a brand. Present study attempts to analyze the customer’s perception towards private label brands in India. Retailers have created a new standard of quality by devoting a great concern in developing their merchandise and retail stores as private label brands or retailers’ own brands; retailers are working hard to make them as consumers’ preferred brand seeking profitability,

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control over self space, bargaining power over manufacturers and control on supply chain management (Richardson, Jain, Dick, 1996). Consumers have their own reasons to buy these brands mainly price and quality, moreover high quality is more important in determining private label brands success than lower price (Sethuraman, 1992; Hoch, Banerji, 1993). Private label brand is phenomenon which has not only been adopted by Indian retailers but it is popularised all over world, Table 1 shows the percentage of private label sold in many countries. Success of private label brands could be measured through the proportion of amount sold in terms of monetary value or the quantity of merchandise. Private labels have garnered market share and higher retail margins in comparison to the national brands by adding diversity to the product lines (Ashley, 1998; Raju et al., 1995). Initially private labels had a low-priced strategy, retailers made efforts for serious quality improvements in recent years, added benefits accrued to the retailer in terms of differentiating its offerings from competing retailers as well as having greater leverage with national brands available at retail store, present study confines Electrical goods as major product category.

Review literature

Private label brands have come to be regarded as an important competitive tool in the arsenal of retailers (Putsis, Dhar, 1998; Kadiyali, Chintagunta, Vilcassim, 1998). In fact, they are cited as one of the reasons for a purported shift in power from manufacturers towards retailers (Farris, Ailawadi, 1992). Private label brands are attractive to the consumers mainly because of their low price. The average private labels sells for about 30% less than a national brand (Sethuraman, 1992).Therefore, one way in which national brands can compete against private label brands is to attract the price conscious consumer by offering deals on national brands (Lal 1990a; Lal 1990b). Research shows that Private label brands growth is highly uneven among different categories of products (Hoch, Banerji, 1993). While studying the growth of private label brands researchers have studied investment in technology, size of product category, level and activity of endorsement required for the success of those


brands (Hoch, Banerji, 1993; Sethhuraman, 1992). Previous studies indicate that private label brands share greater pie among category, margins and give competition to national brands that lacks in national level marketing. The gap between private label brands and national brands is also because of the technological requirements varies for different categories of manufacturing (Hoch, Banerji, 1993). Richardson, Jain and Dick (1996) studied aggregate data for all product categories but lack in studying the variations among them.The decisive factor for the choice among private label brands and national brands are price, availability and quality of the merchandise. Price of private label brands is a key factor which influences customers to prefer it over national brands, and price consciousness of consumers persuade them to go for private label brands, it is defined as the degree to which the consumer focuses exclusively for low prices (Lichtenstein, Ridgway, Netemeyer, 1993). The price consciousness rises among lower income group consumers (Gabor, Granger, 1979) and even higher among deal prone customers (Babucaus, Tat, Cunningham, 1988), and these consumers believe less in price quality associations (Lichtensttein, Bloch, Black, 1988). Perceived risk is a crucial factor for purchase decision of private label brands (Bettman, 1974; Richardson, Jain, Dick, 1996), however this can be checked by measuring the financial and social criteria performance (Dunn, Murphy, Skelly, 1986). Narasimhan and Wilcox (1998) studied that the consumers will prefer national brands over private label brands when the perceived risk for private label brands is high.As far as the product categories are concerned certain product categories have higher risk, such as baby food is considered riskier over toiletries and groceries, and the consequences of making a mistake for baby food is naturally more severe. Social risk also affects the choice of private labels; the English consumers serve national brands tea to guests, but consume less expensive private label brands tea among them (Livesey, Lennon, 1978). The other side of the consequences of making a mistake deal with likelihood of doing that mistake, and the outcome of that decision is obviously the result of its consequences times its likelihood (Dunn, Murphy, Skelly, 1986). The degree of perceived risk increases with degree of perceived quality variation across that category (Narasimhan, Wilcox, 1998), quality variability of store brands effect the share


of private label brands and it is lower if such a case occurs (Hoch, Banerji, 1993).The products features also influence the customer’s choice of private label brands, Erdem and Swait, (1998) found that it is search versus know-how nature of attribute of products. The customers rate national brands higher then private label brands for packaging, taste, aroma, colour, texture, tempting, appealing, purity, freshness, uniformity, familiarity, confidence in use as studied by Bellizi et al. (1981). The national brands are priced on elevated side when they were higher on consumption delight, instead of functional (Sethuraman, Cole, 1997). The quality of Store (private) level brands has increased considerably in past. The adequate quality offered by retailer on affordable prices to the consumers has alarmed many national brands to rethink on their quality, design and packaging. Shoppers acceptance for these brands have grown, with many consumers believing they represent good value for money and having as much as confidence in store brands as in the national brands. A private label brands not only depicts a physical product but a long term relationship with its customer. This relationship is personalised by the name of organization such as: Big Bazaar, or by the product itself ‘V guard’ a electrical brand of Vishal Mega Mart; the present study is to explore the shoppers’ preferences for different categories of products and their frequency to purchase private label. Few Private label brands are given in Table 1.

Objective of the study

The present study will try to explore, examine the following objective:

• To analyze the awareness of private label brands among Indian Customers.

• To analyze purchase pattern among customer demographics for private labels brands for electrical goods


Research hypothesis

For analyzing the awareness of private label brands among Indian Customers, we attempts to identify the association between consumers’ awareness for private label Electronic Goods, their preference for the purchase with their demographics characteristics.

H01: Customers demographic profiles does not affect the awareness of private label brands

H01: µ1 ≤ µ 01

H02: Customers demographic profiles does not affect the satisfaction for private label brands and their purchase pattern for private label brands with their electrical goods shopping

Research methodology

Data for the present study was collected from the respondents from different shoppers at retail stores having private level brands at Lucknow city, U.P. India, through a structured undisguised questionnaire, using mainly the questions based on the 5 - point Likert scale (e.g. 1. Strongly Disagree, 2. Disagree, 3. Do not know, 4. Agree, 5. Strongly Agree). Our population area is the different retail stores at Lucknow city, since they attract customers from different places and constitute of all age groups, educational background and different income classes for their purchases. The sample size for the present study is 310 respondents; the questionnaires were administered personally to the respondents.

Reliability and validity

The questionnaire was reviewed by experts in the field and suggestions given by them were incorporated. The result of pilot testing among 50 respondents was studied and necessary amendments were done in order to make questionnaire more valid. The present study had adopted internal consistency analyses, to


conduct reliability testing Cronbach ɑ came out to be .807, and the value is significantly high.

Data analysis and methods

Information gathered from different sources after filtration generates relevant data, which is edited and coded subsequently. The data was analyzed and interpreted with the help of SPSS. Hypothesis framed for the research work have been tested with the help of t-test and Chi-square test.

Study to analyse the awareness of private label brand among Indian customers

H01: Customers demographic profiles does not affect the awareness of private label brands

H01: µ1 ≤ µ 01

As per Table 2 male respondents were higher in no. Chi-Square value (0.12) is insignificant at 0.01 level, age wise most of our respondents are of middle age, Chi-Square value (5.77) is insignificant at 0.01 level, there were more married respondent in our sample, Chi-Square value (2.98) is insignificant at 0.01 level, family member wise maximum families were having more than 5 members, Chi-Square value (0.268) is insignificant at 0.01 level, income wise maximum respondents were from middle income group, Chi-Square value (1.66) is insignificant at 0.01 level, all these cases indicates that awareness for private label brands is not contingent upon the demographic profile of respondents so we accept our Null Hypothesis.


Study to analyze purchase pattern among customer demographics for private label brands for electronic goods

H02: Customers demographic profiles does not affect the satisfaction for private label brands and their purchase pattern for private label brands with their electrical goods

H01: µ 2 ≤ µ 02

As far as the genders of the respondents are concern for their opinion for electronics we find significant association between perception of private level brands and the opinion of male and female are same as far as their means are concern except for sales staff available respondents differ significantly, it is evident from the value of t which is .401 at .05 level of significant. The age of respondent significantly affects customer satisfaction for range and staff available for electronics items. Table 8 depicts those customers with less than 25 yrs responded differently than those who were between 26yrs to 40 yrs and 41 yrs and above. As far as staff available for electronics items are concern respondents of the age group 26yrs to 40 yrs also responded differently than those who were 41 yrs and above. On all other parameters shown in Table 8 we could not find any significant difference among respondents of different age group. For marital statuses of the respondents we found a significant difference as far as warranty/ guaranty of the electronics is concern and the opinion of married and unmarried respondents differ significantly, it is evident from the value of t which is 1.68 at .05 level of significant. The family size significantly affects customer satisfaction for price and quality of electronics items. Table 10 depicts those customers who were with less than 2 family members responded differently than those who were living with 2 to 5 members and more than 5 members. For scheme, sales staff available, appearance and preference of electronics items the opinion of respondents differ significantly those who are having 2 to 5 members and more than 5 members. On all other parameters shown in Table 10 we could not find any significant difference among respondents categorized on the basis of family size. The level of income significantly affects customer satisfaction for different after sales services for electronics items. Table 11 depicts those


customers who were earning Rs. 20 001 to Rs. 50 000 responded differently than those who were earning more than Rs. 50 001 and for warranty, scheme and range the opinion of respondent with income less than Rs. 20 000 differ significantly with respondent earning Rs. 20 001 to Rs. 50 000. On all other parameters shown in Table 11 we could not find any significant difference among respondents categorized on the basis of their level of income, so we accept our Null Hypothesis.

Conclusion

The study conducted on various demographic factors among Indian consumers’ perception for Electronics with comparison to national brands. Although inter category differences have been studied earlier as the important source of difference in private label brand among various categories and retailers (Dhar, Hoch, 1996), our study offers an insight into customers’ perception among three categories of private label brands. For studying inter category variations the gender, age, marital status, number of members residing in the family has been taken into consideration. Our findings are useful in formulating strategies in order to make private label brand as an acceptable category among customers. As understanding their customers with respect to customers’ expectation from retailer is the vital part of retailers strategy as customers brand loyalty towards product and retailer itself is volatile.Customers are influenced by retailers efforts and are not ready to pay premium for national brand when they are satisfied by the private label brand at lesser premium and this is quite acceptable and true in country like India and at par with the other developing as well as developed (for price conscious customers) country. In our study the awareness level among respondents are not significantly different and the demographics like gender, age, marital status, income does not show difference in their opinion but the education certainly makes respondents aware about private label brands the graduates who mostly are young respondents in our study shows significant difference are aware about private label brand, (refer Table 12) for the cross tab of age and education that graduates are maximum 26 years to 40 years and these young respondents are aware about trends in the market.


For studying the preference for electronics after sales service, quality and scheme for education level after sale service for different income group price; this is in continuation with the study of Lichtenstein, Ridgway, Netemeyer, 1993. Gabor and Darden (1979) found the price consciousness for income groups and we also found price consciousness among income group for electronics among different family size, and quality for family size, scheme and availability of sales staff for occupation, range and sales staff for different age group, sales staff for gender but warranty for marital status since married respondent are worried about warranty of products they purchase.We conclude that retailers will gain by increasing the product quality and if they are able to do so the national brands will have a hard time combating private level brand as customers across different product categories will perceive on higher scale though it could still give retailer a product category to increase sales and raise their profit margin.

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APPENDIX

Private Labels at different Categories of Retailers in India

Electronics & Consumer Durables

Home Solution Retail India Ltd. Koryo, Sensi Air Conditioner, Flat TV, Home theatres, DVD, Microwave, Irons

Infiniti Retail Croma Home Entertainment, small appliances, computer, music

Star India Bazaar Millennia Consumer Durables

Vivek & Co. Napro, Cool air VCDs and DVDs, Coolers

Vishal Megamart V guard Electrical & Electronics

Wal Mart Home Trends, Mainstays Home furnishing

Wal Mart Faded Glory and Athletic Works

Equipment

Source: Chavadi, Shilpa, (2007) and other names added taken directly from retail stores

Awareness for Private Brand

Gender Total N = 310

Male Female

Yes 126 (58) 91(42) 217 (30)

No 56 (42) 37 (40) 93 (30)

Total 182 (59) 128 (41) 310 (100)

Chi Square = .12 NS, significant at .01 levelNote: Figures in the parenthesis are in percentage


Age Total N = 310

Up to 25 Yrs

26 Yrs to 40 Yrs

41 Yrs and above

Yes 33 (15) 122 (56) 62 (29) 217(70)

No 16 (17) 39 (42) 38 (41) 93 (30)

Total 49 (16) 161 (52) 100 (32) 310 (100)

Chi Square = .268, NS Significant at .01 level, Note: Figures in the parenthesis are in percentage

Table 1. Private Labels at different Categories of Retailers in India

Table 2. Gender

Table 3. Age



Marital Status Total N = 310

Married Unmarried

Yes 117 (54) 100 (46) 217 (70)

No 60 (65) 33 (56) 93 (30)

Total 177 (57) 133 (43) 310 (100)

Chi Square = 2.98, NS significant at .01 levelNote: Figures in the parenthesis are in percentage


Family Size Total N = 310

2 Members 3 – 5 Members More than 5 Members

Yes 50 (23) 80 (37) 87 (40) 217 (70)

No 19 (20) 36 (39) 38 (41) 93 (30)

Total 69 (22) 116 (37) 125 (40) 310 (100)

Chi Square = .268, NS Significant at .01 level, Note: Figures in the parenthesis are in percentage


Income Total N = 310

Up to 20,000

20,001 – 50,000 50,001 – Above

Yes 67 (31) 111 (51) 39 (18) 217 (70)

No 22 (24) 53 (57) 18 (19) 93 (30)

Total 89 (29) 164 (53) 57 (18) 310 (100)

Chi Square =1 .66, NS Significant at .01 levelNote: Figures in the parenthesis are in percentage

Table 4. Marital status

Table 5. Family Size

Table 6. Income


Analysis for Electronics among Gender, DUNCAN’S Mean test

A1 (Male) A2 (FeMale)

Sd Mean Sd Test-set t value

1 Price 3.42 .976 3.53 .813 -1.061

2 After Sale Service 3.34 1.004 3.61 .806 -2.662

3 Warranty/Guarantee

3.51 1.096 3.70 .769 -1.792

4 Scheme/ Discounts

3.63 .829 3.60 .881 .309

5 Range 3.42 1.020 3.52 .972 -.802

6 Quality 3.63 .875 3.63 .813 .014

7 Brands 3.45 1.027 3.16 1.015 2.449

8 Sales Staff Available

3.51 .985 3.46 .930 .401*

9 Appearance 3.48 .968 3.54 .930 -.506

10 Preference 3.20 1.179 3.27 1.207 -.454

*Significant at .05 level

Analysis for Electronics among Age, DUNCAN’S Mean test

A1 (<25) A2 (25 - 40) A3 (>41)

Mean Sd Mean Sd Mean Sd

A1

Vs

A2

A1

Vs

A3

A2

Vs

A3

f Value

1 Price 3.33 1.04 3.47 .922 3.54 .822 - - - .900

2 After Sale

Service

3.63 .972 3.37 .993 3.48 .810 - - - 1.539

3 Warranty 3.51 1.10 3.54 1.05 3.69 .761 - - - .887

4 Scheme 3.63 .906 3.62 .851 3.61 .827 - - - .026

5 Range 3.10 1.19 3.58 .985 3.45 .880 * * - 4.350

6 Quality 3.65 .925 3.56 .941 3.72 .621 - - - 1.141

7 Brands 3.22 1.08 3.29 1.08 3.43 .902 - - - .834

8 Staff Available 3.10 1.41 3.44 1.00 3.75 .687 * * * 8.226

9 Appearance 3.71 .736 3.47 1.00 3.46 .947 - - - 1.398

10 Preference 3.10 1.48 3.22 1.20 3.31 .982 - - - .518


Table 7. Analysis for Electronics among Gender, DUNCAN’S Mean test

Table 8. Analysis for Electronics among Age, DUNCAN’S Mean test


Analysis for Electronics among Age, DUNCAN’S Mean test A1 (Married) A2 (Unmarried) Mean Sd Mean Sd f Value

1 Price 3.44 .884 3.51 .950 -.728

2 After Sale Service

3.48 .847 3.41 1.045 .670

3 Warranty 3.67 .890 3.47 1.077 1.68*

4 Scheme 3.65 .770 3.58 .947 .704

5 Range 3.49 .924 3.42 1.096 .599

6 Quality 3.73 .687 3.49 1.026 2.358

7 Brands 3.31 1.017 3.35 1.052 -.297

8 Staff Available

3.60 .828 3.34 1.100 2.288

9 Appearance 3.44 .981 3.60 .904 -1.529

10 Preference 3.16 1.134 3.32 1.258 -1.098


Analysis for Electronics among Family Size, DUNCAN’S Mean test

A1 (<2) A2 (3-5) A3 (>5)


A1

Vs

A2

A1

Vs

A3

A2

Vs

A3

f Value

1 Price 3.17 1.26 3.49 .850 3.61 .802 * * - 5.235

2 After Sale

Service

3.41 .960 3.45 .907 3.47 .955 - - - .111

3 Warranty 3.64 .785 3.56 .944 3.58 1.102 - - - .141

4 Scheme 3.61 .669 3.50 .880 3.74 .899 - - * 2.348

5 Range 3.46 1.02 3.56 .837 3.37 1.118 - - - 1.114

6 Quality 3.36 .923 3.76 .730 3.65 .882 * * - 4.909

7 Brands 3.43 1.02 3.47 .946 3.14 1.08 - * - 3.634

8 Staff Available 3.51 1.00 3.64 .889 3.34 .983 - - * 3.027

9 Appearance 3.48 .815 3.65 .944 3.39 1.01 - - * 2.211

10 Preference 3.30 1.14 3.37 1.25 3.37 1.13 - - * 2.572


Table 9. Analysis for Electronics among Marital

Status, DUNCAN’S Mean test

Table 10. Analysis for Electronics among Family Size,

DUNCAN’S Mean test


Analysis of purchase of Electronics among Income group A1- less than 20,000, A2 - 20 - 50,000, A3 - more than 50,000

DUNCAN’S Mean test

A1 (<20000) A2 (20-50,000) A3 (>50,000)


A1

Vs

A2

A1

Vs

A3

A2

Vs

A3

f Value

1 Price 3.53 .854 3.45 .942 3.42 .925 - - - .295

2 After Sale

Service

3.44 .953 3.38 .961 3.67 .809 - - * 2.03

3 Warranty 3.81 .782 3.49 1.08 3.51 .869 * - - 3.37

4 Scheme 3.48 .867 3.73 .786 3.53 .966 * - - 2.80

5 Range 3.30 1.03 3.59 .933 3.35 1.09 * - - 2.75

6 Quality 3.69 .701 3.60 .918 3.61 .861 - - - .314

7 Brands 3.19 1.03 3.36 1.03 3.44 1.00 - - - 1.19

8 Staff Available 3.62 .923 3.38 1.01 3.60 .821 - - - 2.26

9 Appearance 3.39 1.05 3.58 .843 3.47 1.07 - - - 1.14

10 Preference 3.27 1.19 3.25 1.22 3.11 1.08 - - - .385


Age

Study of Education and Age Total N = 310

Graduate Post Graduate Mean

< 25 Yrs 26 (25) 20 (40) 17 (35) 49 (16)

26 to 40 22 (14) 91 (56) 48 (30) 161 (52)

>41 Yrs 8 (8) 48 (48) 44(44) 100 (32)

Total 42 (100) 159(100) 109 (100) 310 (100)

Chi Square = 9.48, significant at .01 level

Note: Figures in the parenthesis are in percentage

Table 11. Analysis of purchase of Electronics among Income group

Table 12. Study of Education and Age


Sintesi

Il private label brand indica i prodotti realizzati e venduti dallo stesso produttore, normalmente un rivenditore o una catena di distribuzione, che in tal modo possono offrire un migliore rapporto tra costo e merce. Misurare la percezione e il gradimento degli acquirenti nei confronti di tali brand è parte integrante delle strategie di vendita. Una ricerca statistica dell’Invertis University ha verificato il grado di consapevolezza degli acquirenti di prodotti elettronici nell’India del nord, applicando la scala Likert , t-test e chi-square-test. Il costo relativamente contenuto dei prodotti a marchio privato si conferma tra i fattori determinanti che spingono i consumatori a preferirli a quelli di marchi nazionali. La produzione privata di beni di consumo, del resto, negli ultimi anni ha incrementano notevolmente la qualità dell’offerta – in particolare nel settore tecnologico – svolgendo un importante ruolo di stimolo nei confronti dei produttori nazionali. Vari fattori incidono sulla scelta dei compratori, tra i quali la percezione di un possibile rischio nell’acquisto di un prodotto diverso da quello noto (come nel caso degli alimenti per l’infanzia o per la cura della salute) nonché la percezione di una minore o maggiore variabilità qualitativa delle diverse categorie merceologiche. Dal punto di vista dei dati anagrafici e di genere, la variazione nelle scelte di acquisto non è significativa, eccetto per l’età degli acquirenti e il loro grado di istruzione che determinano una maggiore consapevolezza nella scelta degli acquisti. Tale consapevolezza e il livello economico degli acquirenti sono altri due fattori determinanti la scelta, ma in generale si osserva un ampliamento del mercato dei prodotti a marchio privato e una crescente fiducia dei consumatori.

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