UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
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NGUYEN THI KIEU CHI

FACTORS INFLUENCING CONSUMER
PURCHASE INTENTION: A STUDY
PRIVATE LABEL IN HO CHI MINH CITY

MASTER OF BUSINESS (Honours)
SUPERVISOR: Dr.VO THI NGOC THUY

Ho Chi Minh City – Year 2015


TABLE OF CONTENTS

Table of Contents
ABSTRACT ..............................................................................................................................1
Chapter 1: INTRODUCTION .................................................................................................2
1.1 Research background .......................................................................................................2
1.2 Management problem.......................................................................................................3
1.3 Research problem.............................................................................................................4
1.4 Research objectives ..........................................................................................................5
1.5 Significance/value/implications ........................................................................................5
1.6 Research scope .................................................................................................................5
1.7 Research structure ............................................................................................................6
Chapter 2: LITERATURE REVIEW, HYPOTHESES AND RESEARCH MODEL..........7
2.1 Introduction......................................................................................................................7
2.2 Literature review ..............................................................................................................7

4.1 Introduction....................................................................................................................37
4.2 Data statistical analysis ..................................................................................................37
4.3 Measurement scales test and modifying .........................................................................39
4.4 Confirmatory Factor Analysis (CFA) result ....................................................................40
4.4.1 Model fit indices .....................................................................................................40
4.4.2 Saturated model ......................................................................................................41
4.5 Research model test........................................................................................................44
4.5.1 Theoretical model without moderating effect test by SEM ......................................45
4.5.2 Theoretical model with moderating effect test by SEM ...........................................47
4.5.3 Theoretical model test by Bootstrap ........................................................................50
4.5.4 Hypotheses testing ..................................................................................................51
4.6 Conclusion .....................................................................................................................53

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Chapter 5: CONCLUSION....................................................................................................54
5.1 Introduction....................................................................................................................54
5.2 Research results: ............................................................................................................55
5.2.1 The results of measurement scale ............................................................................55
5.2.2 The results of theoretical model ..............................................................................55
5.3 Managerial implications .................................................................................................59
5.4 Limitations and directions for further research ...............................................................61
REFERENCES .......................................................................................................................63
APPENDICES ........................................................................................................................72
Appendix A: Interview Question ..........................................................................................72
Appendix B: Questionnaire ..................................................................................................73
Appendix C: Bảng Câu Hỏi Khảo Sát ..................................................................................76
Appendix D: Cronbach's Alpha Testing ..............................................................................79
Appendix E: Exploratory Factor Analysis ...........................................................................80


ABSTRACT
The appearance of private labels brings plenty of benefits for retailers and consumers
during the past period. Although this trend is much appreciated and successful in Western
countries, Asian buyers are not motivated to purchase private label due to the uncertain feeling.
Based on previous studies and findings, this research intends to investigate how several
predictors including financial risk, performance risk, physical risk, store image, familiarity
affect on perceived quality and consumer purchase intention towards private labels. Besides,
the mediating and moderating effects are also evaluated with the purpose of accessing deeply
knowledge about this brand extension strategy. The research model is designed to test in
HCMC retailing market with sample size being 380 participants and collected data is analyzed
by SEM method.
The results reveal that excepting financial risk, the other factors have significant meaning
in explaining the variance of dependent variables. Specifically, performance risk, physical risk
and store image influence remarkably on perceived quality and on purchase intention indirectly
whereas only direct effect of familiarity on purchase intention is fully proved. More
interestingly, the moderating role of store image, which modifies the relationship between
performance risk, physical risk and perceived quality, is strongly determined. Hence, store
image is considered as a symbol of quality and risk reducer. The research finding provides
useful reference for retailers and marketers to give effective strategies associated with private
labels. Among them, quality guaranty and maintaining store reputation and image must receive
more attention.
The current study also contains some limitations involving sample size, lack of diversity
on product category as well as measurement scale of store image, which need to evaluate
carefully. Thus, it is approval to fulfill these drawbacks by further research.
Keywords: Private labels, perceived risk, perceived quality, familiarity, store image, and
purchase intention.

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of 79.1 billion dollars in 2012 and it is lower than that in Western Europe at 13%. Nevertheless,
the vast US consumers evaluate the quality of private labels as well as national brand whereas
they are perceived negatively in Asia Pacific, the Middle East and Africa (Euromonitor
International, 2013).
1.2 Management problem
The penetration of private label is appreciated and developed in most of the Western
countries and regions, however, Asian-Pacific consumers are still resisting in buying private
labels in spites of the promotional efforts (Sheau- Fen et al., 2012). The report of AC Nielsen in
2005 shows that market share of private label in this area is only 4%. Compared to some
nations, New Zealand and Australia are the two countries which have the highest rates of
private label market share whereas this number in others countries such as Thailand, Malaysia
or Vietnam is not significant.
Turning to Vietnam, even though the market size is quite smaller than other countries in
the same region, Vietnamese retailing market is still expected to have vast growth owing to the
large population, the majority of young generation in population structure, high economic
growth and the continuous improvement on residents’ living standard. It is evaluated as an
attractive destination of multinational retailing corporations. With regard to Ho Chi Minh Citythe biggest economic and commercial center, it has diverse distribution channels from
traditional markets, supermarkets to convenience stores that offer a variety of good categories,
quality and price. This distribution system not only provides better approach to attract and
serve customers, but also becomes one of competitive advantages of each retailer.
Compared to other distribution types, supermarkets account 30% in the first quarter of
2014 (Savills, 2014). In addition, consumers gradually change their habits into choosing
supermarkets or hypermarkets instead of traditional markets due to comfortable shopping
environment and the portfolios of products or brand names. From that, establishment and
development of this modern distribution channel in Vietnamese market is speculated in full
yield.

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risk, perceived quality, familiarity, store image and consumers purchase intention towards
private labels.
1.4 Research objectives
Based on these issues above, the overall objective of this study is to identify some key
factor affecting consumer purchase intention towards private labels. Specifically,
- To test the effect of financial risk, performance risk, physical risk and store image on
perceived quality.
- To test the indirect effect of financial risk, performance risk, physical risk and store
image on consumer purchase intention through perceived quality.
- To test the direct effect of familiarity on consumer purchase intention and the indirect
effect through perceived quality.
- To test the moderating role of store image, which modifies the relationship between
financial risk, performance risk, physical risk and perceived quality.
1.5 Significance/value/implications
This research intends to access and gain more knowledge about private label proneness
offered by supermarkets by measuring the significant role of financial risk, performance risk,
physical risk, perceived quality, familiarity and store image that consumers use to judge their
purchase intention. From the research finding, managers or marketers gain good understanding
of Vietnamese consumer behavior towards private labels in order to have appropriate decisions
and strategies to improve the product's standards, increase sales volume and enhance the
customer evaluation.
1.6 Research scope
The research focuses mainly on investigating consumers who usually shop in
supermarkets located in Ho Chi Minh City.
The period of collecting the data including qualitative and quantitative methods are
conducted from 4th August, 2014 to 15th of September, 2014.

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Chapter 2
LITERATURE REVIEW, HYPOTHESES AND RESEARCH MODEL
2.1 Introduction
Chapter 2 focuses on reviewing and discussing the literature, hypotheses development and
research model related to private label context. Firstly, the definitions of brand and private
label are mainly summarized which is considered as theoretical fundament to get more
knowledge about private label and to distinguish with national brand. Following that, the
concept of consumer purchase intention is also reviewed prior discussing factors influencing on
it. Thereafter, various existing research and studied involved to private label are mentioned to
provide to wide overview of private label in both Western and Eastern context. Based on them,
the hypotheses are built having seven components including financial risk, performance risk,
physical risk, familiarity, store image, perceived quality and purchase intention. Finally, the
research model is illustrated specifically in this chapter.
2.2 Literature review
2.2.1 The concept of brand
In business, brand is considered as an important factor influencing on customers purchase
decision and behavior because it “provides the primary points of differentiation between
competitive offerings” (Wood, 2000, p.662). Brand is also an interesting concern which
conducted by various theories from brand definition, brand’s role to brand strategy. Despite of
being used widely marketing field, its meaning remains confused. American Marketing
Association (AMA) gives the original definition of brand as a name, term, sign, symbol or
design that can help to distinguish goods or services of sellers and to classify them from
competitors (1960). Apart from that, Kotler traditionally defines a brand as “the name,
associated with one or more items in the product line, that is used to identify the source of
character of the item” (2000, p.396).
These days, brand is perceived as not only a name or symbol but also an importance
determinant of the link between businesses and consumers. A good brand name can inspire


automobile equipment, agricultural goods, pharmacy and so on to compete with national brand.

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In fact, while national brands have usually a mass production with huge facilities and
marketing efforts, private labels have advantages in reducing intermediaries, distribution,
packing and promotional expenses, which creates higher gross margin. In addition, Schutte
supports that price is the primary difference between national and private brand, thus, it leads to
use the term of private brand to illustrate a low-price brand (1969, p.8).
Compared to national brand, private label products are offered at a competitive or lower
price, but they sometimes get unfavorable evaluation from the consumers because of risk
taking. Actually, Richardson et al. mention, “despite lower prices, quality guarantees, and even
the advertising of these products, consumers continue to prefer national to private label grocery
items in a wide margin” (1994, p.28). In some cases, consumers use the price as a main
indicator to judge the quality of the products that causes the negative influence on the image of
private labels. Thus, it is likely that buyers become more risk-conscious and they tend to trust
national brands more (Mieres et al., 2006).
However, some studies have proved that consumers gradually change their subjective
belief and accept private label as another choice. Take De Wulf (2005) research as an example,
he indicates that private labels are no longer considered as poor quality products since they can
provide the same or better quality than national brands, even at a lower price. Actually,
although manufacturers offer promotions or retailers offer private labels, the common
motivation of both is to provide value to the consumers (Ailawadi et al., 2001, p.71). More
importantly, like some types of national brands, private labels are also produced by most the
same ingredients and packed with brand name so that the buyers can easily to recognize the
component which gain the perception of safety (Chen, 2008).
For retailers, interestingly private labels provide opportunities to gain customer loyalty,
store traffic and differentiated themselves from others because private label products are
proprietary to the certain chains whereas national brands can be purchased at virtually at any

al., 2011, Fandos and Flavian, 2006). Espejel et al. (2008) show that this intention is gradually
developed by a learning process and influenced by familiar influences, social group, received

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information, experiences and personality. Actually, the more purchase intention obtains, the
more possibly purchase decision takes place.
2.3 Hypotheses development
2.3.1 Summary of existing research related to private label context
The penetration of private labels attracts foremost attention of theorists and marketers in
which the investigation of consumer behavior in general and consumer purchase intention
towards private labels in particular or the comparison between national brands and private
labels are early conducted. Richardson et al. (1996) also mention that the literature to date
identified a number of factors correlated to private label proneness such as socioeconomic
factors, perceptual factors and the extrinsic cues, individual difference variables.
Several studies also point out perceived risk, perceived value for money, perceived
quality, price-consciousness, trust, familiarity as key determined factors that affect consumer
attitude and purchase behavior towards private labels (Zeithaml, 1988; Dick et al., 1996;
Baltas, 1997; Chaniotakis et al., 2010, Diallo et al., 2013). Bettman’s research early indicates
that perceived risk, informational, and perceived- product- quality variables are seen as parts of
the information- processing attitude structural properties that influence purchasing behavior
(1974). Following that, Burton et al. mention that customer attitudes towards private labels
relate to their perception of price (1998). Differently, Hoch and Banerji (1993) argue in the
competition with national brands, the higher quality of private labels seems more important
than lower price. Similarly, Sheau- Fen et al. (2012) recently support that non-price factors may
better explain the private label prone of consumers rather than price indicator.
Richardson et al. (1994) investigate the role of extrinsic and intrinsic cue, which
determines quality perception of private label from 1564 shoppers with five products.
Surprisingly, consumers primarily tend to evaluate the private label throughout extrinsic cue

the relationship between the brand image and consumer purchase intention.
Another empirical finding investigated by Sheau-Fen at al. (2012) in Malaysia suggests
that risk factors, familiarity have both influence on perceived quality and purchase intention.
More importantly, age moderates the effect of performance risk, physical risk, familiarity and

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perceived quality. Jaafar et al. (2012) also provide the evidence about consumer purchase
intention towards private label food products, which are associated with several factors namely
intrinsic, extrinsic and consumer attitude variables. Noticeably, consumer’s attitude and
perceived price are the most important factors.
More attractively, with the purpose of investigation in depth, some recent researchers turn
to look for complex relationship between the predictors and the outcome in private label
circumstance. Consequently, mediating effect and moderating effects are considered as
promising fields to research. Compared to the other, testing appearance of moderator in private
label’s research model currently remains limited with few studies. Particularly, Semeijn et al
(2004) conclude that effects of perceived risk on consumer’s evaluation are eliminated by the
occurrence of store image, which provides an interesting suggestion for later investigation of
Rzem and Debabi (2012). Actually, in their study, store image is successfully observed to
moderate the relationships between perceived risk, perceived quality, price consciousness,
perceived value and consumer attitude in Tunisian market. On stark contrast, the research of
Ural (2008) finds that perceived risk namely functional risk and financial risk to be powerful
indicators, which affect the relationship between store image and consumer evaluation towards
private labels.
To sum up, as mentioned above, there are diverse studies tested private label proneness
through numerous determinants. Beside original variables such as quality, price, benefits or
product cues, risk perception and store image now has been focused due to the purpose of
enriching the fresh understanding and knowledge in this field, especially in Asia context. Based
on some prior studies and mainly on the study of Sheau-Fen at al. (2012) with research model

"perceived quality refers to customer's evaluation of a product or a brand that meet an
individual's expectation" (2011, p.273). As Sheau- Fen et al. mention that the role of perceived
quality in affecting to the purchase intention and customer behavior is strongly proved (2012).
Zeithaml (1988) also emphasizes the differences between objective quality and subjective
quality. While objective quality term is understood as measurable and verifiable superiority on
predetermined ideal standard, the other is defined as consumer’s judgment about the quality
related to their expectation. Based on the prior writers’ argument, the subjective quality is
investigated solely in this research due to the difficulties to evaluate the objective quality levels
of the products.

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Hoch and Banerji (1993) indicate that quality not price is the key success in the battle
with national brand than price cross categories. In another study, Mieres et al. (2006) show the
significant differences when the buyers perceived quality between national and private label,
which are accessed from familiarity and extrinsic attributes. In the line of this, Wu et al. (2011)
find that quality of service had a positive effect on purchase intention, which is investigated in
Taiwan context. As mentioned above, the finding of De Wulf (2005) again confirms that the
quality of private labels is equal or even higher than national brand regarding to a blind and
non-blind taste test of five orange juice brands.
Furthermore, some scholars conducted in Malaysia show that perceived quality is one of
the most important criteria in consumer purchase intention toward private label products and
also has direct and indirect influence on private label loyalty (Yang and Wang, 2010; Jaafar
and Lalp, 2012). Hence, if all brands simultaneously provide same type of products with the
similar quality, buyers increase their usage of private label products according to Gogoi (2013).
In common, private label products are usually sold in low price but they still meet the
basic need of major number of consumers. Sheau- Fen et al. (2012) demonstrate the significant
role of perceived quality in the association with likelihood to purchase private labels. They also
state that price is no longer an effective indicator of quality.

something. This is to say, because the outcomes of purchasing are potential, risk is perceived
when the consumer have to deal uncertainty in which he or she may not attain their buying
goals (Mitchell, 1998). Moreover, the different types of products produce different level
perceptions of risk, thus, it becomes more difficult to appraise a product to be whether low or
high risky. From that, perceived risk can be considered as an important factor that directly or
indirectly influence on decision-making process. Specifically, when an individual feels more
risky, this person may decrease purchase intention.
This phenomenon can be created by much lower price, less well-known brand name or
the unattractive packages. Appreciating its importance role, Mitchell (1999, p.163) stresses,
“Perceived risk is more powerful at explaining consumers’ behavior since consumers are more

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often motivated to avoid mistake than to maximize utility in purchasing”. Besides, better
understanding of risk can help the marketers and managers have appropriate strategies to
minimize and eliminate risk.
Concerning private label context, the effect of perceived risk associated consumer
purchase behavior is widely examined. Dick et al. (1995) find that in comparison between
private label buyers and non- private label buyers, the non-buyers believe that buying private
label is risky. Consumers who are less experienced in private label products tend to judge them
as risky choices. Similarly, Mieres et al. (2006) carry out that “while the private labels surpass
the generic brand with regard to the consumer’s favorable perception of them, they are still
considered inferior alternatives having greater risk than the national brand” (p.63).
Prior studies traditionally view overall perceived risk as multidimensional framework.
Stone and Gronhaug (1993) measure it by six dimensions namely financial, performance,
physical, psychological, social and time-related risks while Bettman (1973) hypothesizes its
two components including handled risk and inherent risk. Particularly, handle risk is known as
a number of conflicts which retailer’s product class stimulate when the clients have to make
buying decision from these product classes whereas inherent risk is the dormant risk a product