MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY Nguyn Nh 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. Nguyn ình Th Ho Chi Minh City, 2010 THE INFLUENCE OF STORE ATTRIBUTES ON CONSUMER ATTITUDES TOWARDS PRIVATE LABELS – THE CASE OF METRO CASH & CARRY VIETNAM. ACKNOWLEDGEMENTS 1 ABSTRACT 1 ABBREVIATION 1 Chapter 1: INTRODUCTION 1 1.1. Background to the research 1 1.2. Retail modernization in Vietnam 2 1.3. The Metro Cash and Carry Vietnam 3 1.4. Research objectives 5 1.5. Significance of the study 6 1.6. Research question 6 1.7. Structure of the thesis 8 1.8. Definitions 9 1.9. Scope of the study 10 1.10. Summary 11 Chapter 2: LITERATURE REVIEW AND HYPOTHESES 12 2.1. Introduction 12 2.2. Retailer motivations for private labels 13 2.3. The evolution and repositioning of private labels 14 2.4. The store attributes 14 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 17 2.7. Summary 20 2.8. The research gap 21 Chapter 3: METHODOLOGY 22 3.1. Introduction 22 3.2. Research Methodology 22 3.2.1. The development of the scales 23 3.2.2. The questionnaire design 24 3.2.3. Measurement 25 3.2.4. Data Collection 25 3.2.5. Sample Size and Type 26 3.3. Summary 27 Chapter 4: DATA ANALYSIS 29 4.1. Introduction 29 4.2. Preliminarily qualitative examination of the data through focus group (pilot study)29 4.3. Respondent profile 30 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 TING VIT 48 ENGLISH 48 APPENDIX A: LIST OF TABLES 52 APPENDIX B: MCCVN’S PRIVATE LABELS PORFOLIO 60 APPENDIX C-1: THE SURVEY QUESTIONNAIRE– TING VIT 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 – R 2 value 58 Table 7.2: Regression analysis – Coefficients results 59 Table 8: Hypothesis test results 36 ACKNOWLEDGEMENTS Here are numbers of persons who have played important roles in assisting me finishing this research. I would like to thank Asso. Prof. Dr. Nguyen Dinh Tho who is my sponsor 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 a great understanding towards my working and studying time table, I deeply dug out the matter 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 and gave me lots of encouragement and proactive support over the course. By the way, I couldn’t help acknowledging my classmates and colleagues who gave up their 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 during the progress, become a significant motivation for me to successfully fulfill this master project. I therefore would be grateful to their support and patience indeed. Last, I would thank all consumers who have joined the questionnaire with sincere and active 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. i ABSTRACT The retail market is now growing faster and bigger than ever over the world of which Vietnam 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 phenomenon and of increasing interest to practitioners and academics alike (Hoch and Banerji, 1993; Quelch and Harding, 1996). Private labels have achieved a significant global sales share, especially in grocery market, with a bright future of further development foreseen. Still there is little research on private labels in Vietnam. This dissertation therefore would contribute an empirical study about the influence of store attributes on the consumer attitudes towards private labels, explored specifically to Metro Cash and Carry Vietnam. There are two parts to deeply be deployed in the dissertation: 1) store attributes, their roles and measurement scales; 2) consumer attitudes towards private labels in reference with the influence of store attributes. And the Metro Cash and Carry Vietnam case is chosen to examine. Deploying private labels from 2002, MCCVN enjoyed great success last year with sizeable sales share increased nearly double from 1.8% in 2008 to 3% in 2009 and its target 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 the concept of retailer risen as brand. The study bases on Chowdhury et al. (1998) and Dodd and Lindley (2003) empirical studies of the influence of store attributes on the perceptions of specific private labels with reference to problem approach of Fraser (2009) dissertation, and deep analysis on brand equity of Nguyen & Nguyen (2008). ii From an academic viewpoint, this study contributes by illustrating that store attributes are 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 finding suggests the need to reduce perceived risks of private labels. For manufacturers, the finding indicates that they should highlight the differences between their national brands and private labels, especially in terms of the superior quality. For researchers, the finding also suggests that store attributes should be incorporated in models predicting consumer proneness towards private labels. iii ABBREVIATION GRDI: The Global Retail Development Index Horeca: Hotels, Restaurants and Caterings MCCI: Metro Cash and Carry International MCCVN: Metro Cash and Carry Vietnam MGD: Modern Grocery Distribution SCO: Services, Companies and Offices iv Chapter 1: INTRODUCTION 1.1. Background to the research Private label products, or store brands, have become a major force with more than 268 billions US dollars in sales presented (Perez, 2008). Despite their market penetration varies from countries to countries, from retailers to retailers and from product categories to product categories; these brands, owned and managed by retailers, have grown 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 key motivations for differentiation but also a strategy to improve their profitability, store attributes and brand loyalty (Quelch and Harding, 1996). This dissertation discovers consumer attitudes towards private labels of MCCVN with respect to key attributes of the store. Even though consumer attitudes towards private labels 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 further development prospect predicted in the future. The literature review would deeply draw the whole scene of private labels from the viewpoint of retailers. It also presents private label positioning as well as determinants of consumer attitudes towards private labels in which store attributes impressed and analyzed in detail base on the research of Chowdhury et al. (1998) and Dodd and Lindley (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 Metro Cash and Carry Vietnam in particular is examined. The research question and hypotheses together with the methodology used in the study are introduced in the 1 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 convenient stores (G7 mart, Shop and Go, Vinatex…), 4 hypermarkets (Big C) and 5 warehouse clubs (MCCVN) (Retail and shopper trends – Urban HCMC and Hanoi, AC Nielsen, 2008). Private labels have been established in 2000s, mostly by namely substantial stores as MCCVN, Coop Mart, Big C and Maximark. Although they are considered as one 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 biggest concentrating on private labels from the beginning) private label sales share is only by 3% in 2009. As ranked by global management consulting firm A.T. Kearney (the Global Retail Development Index – GRDI), Vietnam has fell down to 6 th in 2009 from the most attractive retail market in the developing world in 2008 because of inflationary pressures 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 is still considered one of the most attractive industries in Vietnam and continuing to transform Vietnam economics with domestic consumption as a primary focus coinciding with its committable opening doors to international investors, young population and continuously urbanizing process – a trend that should favor continued growth in retail over the long term (Moriarty and Shabat, A.T. Kearney partners). This retail process of modernization and innovation would trigger enhance the bright prospect of the private label development. 2 1.3. The Metro Cash and Carry Vietnam MCCVN has started business in Vietnam since 2002. By 2009, it is voted as the first choice international wholesaler and the market leader in Vietnam with 9 stores nation- wide currently and 5 more plots expansion processing. With sales regularly increase year 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 as hypermarkets, supermarkets and convenient stores (Big C, Saigon Co-op, Maximark, Lotte…), wet markets, importers, black/grey markets and shortly coming international retailers like Tesco, Auchan, Aeon. Its most limitations but opportunities to improve are payment method by cash and limited delivery services. It is also necessary to have a quick glance on MCCVN’s customer types. MCCVN is a solely special business type in Vietnam that mostly concentrates on sales in bulk. Their customer types are professionals, classified into three: Horeca to concentrate on hotel/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. While customer shares among these types are in turn 12.6%, 19% and 68.4%; the turnover shares are slightly alike 15%, 30% and 55% (MCCVN source, 2008). For the scope of this dissertation, SCO consumers are chosen to examine because of its largest ratio in both consumers share and sales share. In another reason, SCO is also the consumer type of other supermarkets, hypermarkets and convenient stores. That not only helps expand the dissertation scope to apply to other store types (supermarket, hypermarket, convenient store…) in somehow but also be adaptable for retailing concept applied for MCCVN in retailing aspect. 3 [...]... consumer attitudes towards private labels Specifically, it examines the impacts of: a Product variety on consumer attitudes towards private labels b Product quality on consumer attitudes towards private labels c Price on consumer attitudes towards private labels d Service on consumer attitudes towards private labels e Atmosphere on consumer attitudes towards private labels 5 f Convenience on consumer attitudes. .. would outline the relationship between store attributes and private labels as well as verifying the effects of store attributes on consumer attitudes towards private labels First of all, retailer motivations for private labels and store attributes are introduced Also the relationship and effects of store attributes on consumer attitudes towards private labels are latterly discussed in depth, along with... items) And the dependent variable consumer attitude” consists 6 items There are six hypotheses developed to test the role of store attributes on consumer attitudes 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. .. 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 labels The questionnaire is built base on these hypotheses (see Appendix C) And the fivepoint Likert scales with the anchors from strongly... towards private labels The more positive thinking of consumers to the store, the more positive evaluations they appraise its private labels (Semeijn et al., 2004) Dodd and Lindley (2003) also found the effect of products’ quality that the store offers to its consumers on the attitudes towards the private labels It has been shown that 17 merchandise (variety and quality) influences positively consumer attitudes. .. 2008) The dissertation examines consumer attitudes towards private labels with reference to store attributes, only more recently has there been research of their roles on attitudes towards private labels, tested in other countries outside Vietnam With the purpose to contribute an empirical study on this issue, the overall objective of this dissertation is to explore the impact of store attributes on consumer. .. association with specific private labels in consumer minds and affects on the consumer decision of private label purchase through 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 the consumers regard the private labels. .. consumer attitudes towards private labels can provide retailers strategic advantages By investing in those specific attributes, they can gain the advantage of store on the one hand and on the other hand transfer these positive attributes to consumer attitudes towards their private labels, by which private labels are generally perceived as low quality compared to the 14 national brands (Dick et al 1996) A private. .. to Liu and Wang (2008), store attributes are strong 16 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 on the store, or again confirm the role of store attributes on consumer attitudes towards private labels Another recent study by Zielke and Dobbelstein‘s (2007) on specific brands... private label penetration across retailers Later studies also confirm that private labels are important in enhancing retail store 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 that not only affect their attitudes towards the store as a whole but also their attitudes towards