Examination of Factors Moderating the

Success of Private Label Brands: A Study of

the Packaged Food Market in China
Huei-Chen Hsu
Chi-Shiun Lai

ABSTRACT. The major objective of this study is to explore how differ-

ent dclcrminanls of perceived risk help explain variations in purchasing
prcfcrciKcs lor national hrands versus private lahel brands (PI,B) of the
packaged food market in urban China. We selected the Chinese packaged
food market because il is "one of the niosi rapidly fastest growinjz markets"
in the world (Wu & Deng. 2{)()2). Following a description of the Chinese
market, we build our conceptual framework by combining the PLB litera-
ture with .searching versus experience, price conscit)usness. and produel
quality literature. Using the data we collected in GuangZhou, Shen/hen. and
Shanghai cities, we Unil both their direct and indirect effects. Supporting
theory-based expectations, we find that (I) PLB purchase in a category
increases when consumers perceive reduced consequences of making a
mistake in brand choice in thai category; (2) when that category has more
"search" than "experience" characteristics: and (3) consumer's degree of
price consciousness in that category, through which we brought in PLB-
favoring variables such as lower incomes, high deal-proneness. and a
decreased belief in price-quality associations. We tliscuss our results in
light of the managerial and theoretical implications, especially the important

iluci-Chen Hsu is atfiliated with the Department ot" Managcniciit hilormation

Systems. Transworld Institute of Teehnology. Taiwan.
Chi-Shiun Lai is alTiliated with the Institute of Business Administration at the
National Yunlin University of Science and Technology. Taiwan.
Address correspondence to: Huei-Chen Hsu, Department of Management
Infnrtnation Systetiis. Transworld Institute ot Technology, 1221, Zhen-nan Road,
Touliu. Yunlin 640, Taiwan. (E-mail: Maggie@tit.edu.tw).
Journal of Pood Products Marketing. Vol. 14(4) 2(M)8
Available online at http://www.haworihpress.com
© 2008 by The Haworth Press. All rights reserved.
doi : 10.1080/10454440801986256 /
 JOURNAL OF FOOD PRODUCTS MARKETING

role played by "experience" attributes in leading consumers to favor

national brands over PLBs.

K E Y W O R D S . Ptirchase risk, private label brant! (PLB). price

consciousness, consequences ol making mistakes, quality variability

INTRODUCTION
The packaged food market in China remains highly fragmented. Ting
Hsin Inlemalional Group, a Taiwan-based entity, continues to be the
leading company, capturing just under 4.b77c of the market value share in
2006 (Nielsen, 2007). The low figure reflects the intense competition that
prevailed in the market. In spite of this, a few large-scale state-owned
domestic corporations, such as Shanghai Kerry Oils & Grains Industrial
Company, Ltd., and Inner Mongolia Yili Industrial Company, Ltd.,
managed to record a marginal rise in share value. Private label products
gained further penetration, with the share being most prominent in the
packaged food market.
The robust performance of the packaged food market in China will
continue into 2008. Overall growth in current value terms of more than
8.757r is expected in 2008, with total sales reaching RMB487 billion
(Nielsen, 2007). The rapid expansion of the Chinese economy contributed
substantially to the brisk sales of packaged food. Rising [KT capita
income, particularly in the developed regions of the country, stimulated
demand for higher-value packaged food. In tandem with the improvement
in living standards, consumers in urban cities became more concerned
about hygiene standards, shifting their consumption from loose
unbranded food to more expensive packaged branded items.
One of the sectors benefiting greatly from the shift in consumer prefer-
ences has been oils and fats, with value sales forecast to grow by M9( and
volume by 25% in 2007. In China, oils and fats consist primarily of vege-
table and seed oil. The dynamic growth will also be the result of higher
raw material prices. Bakery products, which are becoming almost like a
staple food due to their convenience, will replace sauces, dressings, and
condiments as the largest sector in value terms in 2007, generating
RMB71 billion in sales or a 19% market share (Nielsen, 2007).
The extreme disparity in the level of economic developments in China
has given rise to two distinct patterns of consumption in the food market.
 Huei-Cken Hsu and Chi-Shiiim IMÍ _ 3

In the more developed regions of east, south, and north and northeast
China, growing affluence and sophistication is helping consumers to trade
tip U) packaged and branded food. In contrast, restrained by low income,
consumers living in the less-developed regions, namely mid, southwe.st
and northwest China, are still relying on loose unbranded food. In the
urban cities, the busy lifestyles led to the population being more receptive
to Westem-slyle and healthier packaged food that offers convenience,
such as canned and frozen ready meals. Such a trend was not discernible
in the rural areas.
Sales of private label brands, also called "store brands," have been
growing rapidly in recent years. Previous studies .shows ihat retailers like
PLBs because of their potential to increase store loyalty, chain profitabil-
ity, control over shelf space, bargaining power over manufacturers, and so
forth (Richardson, Jain. & Dick, 1996). Among consumers, one obvious
reason for their popularity and growth is their price advantage (averaging
21%) over national brands. High quality seems to be more important in
determining PLB success than lower price (Hoch & Baneiji, 1993).
Previous research investigating across-category differences has looked at
them mostly from the manufacturer and retailer perspectives (Hoch &
Banerji, 1993). They find that PLBs have higher shares in large categories
offering high margins, and where they compete against fewer national
manufacturers who spend less on national advertising. The gap between
national brands and PLBs in the level of quality also depends on the
technology rec|tiirements in manufacturing that vary across categories.
Research has been more limited on the consumer-level factors that
make PLBs differentially successful across prodtict categories. Some
researchers studying consumer-level factors for PLB proneness-stich as
Richardson et al. (1996) have not studied across-category variations at
all. They have chosen instead to aggregate data across categories. Those
few studies that have looked at cross-category differences from a con-
sumer-factor perspective have sometimes omitted important variables.
Sethuraman and Cole (1997), for instance, did not measure and model
the crucial effect of the level of perceived risk in the product category
(Richardson et al., 1996; Narasimhan & Wilcox, 1998). Other previous
review on the literature has revealed the foeus more limited to the
discussion of across-category differences toward the Website.
(McMillan & Hwang. 2003). What are the correct managerial strategies
for national brand retailers to induce consumers to shop? The potential
for Chinese marketing is unlikely to be fully realized without being
examined from a Chinese customer's viewpoint.
4 JOURNAL OF FOOD PRODUCTS MARKETING

In this research, we focus upon these consumer-level perceptions of

inter-category differences. We examine the role played by different
determinants of perceived risk in explaining PLB acceptability across
product categories, especially the role of "search" versus "experience"
attributes in shaping the degree of such perceived risk in the product
category. By doing so, we hope to shed light on what has made PLBs
successful overall, drawing implications both for retailers marketing
PLBs in China as the national brands that compete with them.

LITERATURE REVIEW AND HYPOTHESES

As the Chinese market creates new market opportunities, businesses

can have a better grip of consumer behavior through understanding
purchase items they need. Any examination of the consumer-level
factors that moderate PLB success across product categories should
start with a framework to explain consumer susceptibility to buying
PLBs.

Private Label Brands

Previous research shows that consumers' propensity to purchase PLBs
depends on (!) demographic factors, such as income, family size, age. and
education; (2) individual difference variables, such as the degree of reli-
ance by the consumer on extrinsic cues (those more reliant on such cues
preferring national buys); and (3) consumer perceptions of the particular
category {degree of perceived quality, level of perceived risk, the degree
of consumer knowledge about lhe category, and perceived value of
money) (Richardson et al., 1996).
In their study. Sethuraman and Cole (1997) did model cate gory-level
variables in these factors. They examined the effect on '^willingness to pay
a price premium for a national brand " of ( 1 ) several category-level factors,
such as quality perception of PLBs, average price, purchase frequency, and
the degree to which the category gives "consumption pleasure." (2) indi-
vidual difference perceptual variables including the belief of a price-qualily
relationship, perceived deal frequency, and familiarity with PLBs.
However, as noted above, their list of category-level factors did not include
crucial perceptions of the degree of category perceived risk.
Recognition of consumer-level factors that moderate PLB success
across product categories should start with a framework lo explain
 Huei-Cben Hsu and Chi-Shium ¡Mi 5

consumer susceptibility to buying PLBs. Hoch and Banerji (1993) find

that PLBs have higher shares in large categories ofiering high margins,
and where they compete against fewer national manufacttirers who spend
less on national advertising.
Because the reasons for these inter-category differences in PLB share
might shed light on the reasons for PLB growth overall, these differences
are clearly worth researching in detail. Retailers will benefit by knowing
bt'tter how to expand sales of their high-margin PLBs—and national
brand manufacttirers will benefit by knowing better how to fight PLB
growth. The gap between national brands and PLBs in the level of quality
also depends on the technology requirements in manufacturing that varies
across categories (Hoch & Banerji, 1993).
In this study, the consumer-level variables include category-specific
perceptions of the consequences of making a wrong brand choice, the
degree of factor in quality across brands, the "search" vs. "experience"
nattue of prodtict features, and consumer price consciousness in that
category.

Price Consciousness
The marketing literature is replete with evidence suggesting that an
extrinsic information search presents a motivated and conscious decision
by the consumer to seek new information from the environment (e.g.,
PunJ & Stewart, 1983). Consumers use available information systemati-
cally by forming a preference based on a multi-attribute mode (Azjen &
Fishbein, 1980). Considering buyers are not fully informed about the
quality of sellers' goods or services, in this situation, they would like
information that allows them to distinguish the product of high or low
quality. Economists have investigated the implications of signals such as
price (Milgrom & Roberts, 1986). advertisement (Chen & He, 2(X)3), and
warranties (Lutz, 1989). The role of extrinsic cue is to resolve the
consumer's classification problem in the face of potential deception by
the bad seller.
Price consciousness, defmed as the "degree to which the consumer
focttses exclusively on paying low prices" (Lichtenstein, Ridgway, &
Nctemeycr. 1993), has been found to be a predictor of purchase. We
include it here because it can logically be expected to mediate the effect
of several demographic and attitudinal variables. Previous research has
shown that a consumer's level of price-consciousness rises with lower
incomes (Gabor & Granger, 1979), and is higher among deal-prone
6 JOURNAL OF FOOD FRODUCTS MARKETING
I

coiisutiiers (Babakus, Tat, & Cuntiitigham, 1988). To minimize financial

risk, consumers utilize various kinds of risk-reduction .strategies, sucb as
reliance on marketer-offered money-back guarantees, warranties, free
satnples/pre-purcbase trials. (Schiffmati & Kanuk, 1987). Therefore, we
have the hypothesis as:

HI: Consumers are more prone lo buying PLBs in prodttcl caies^ories

where theyperceive higher price consciousness in their brand
.selection.

Consequences of Purchase Mistake

Perceived risk is the consutner's perception of the uncertainty and con-
comitant adverse consequencesof buying a product or .service (Dowlitig &
Staeiin, 1994). Bauer (I960) in bis seminal work on risk-taking, set forth
the idea that consumer behavior involved risk in the sense tbat any action
of a consutner will produce consequences that she or be views witb sotne
degree of uncertainty.
In the previous literature, perceived risk has been described as consisting
of a set of possibly interrelated components: financial, performance,
physical, psychological, social, and time convenience risks, yielding a
separate measure of overall perceived risk iJacoby & Kaplan, 1972).
These six risk dimensions explain 88.87P of the total risk perception
(Stone & Gronhaug, 1993). Within overall perceived risk, product perfor-
tnance risk is defined as the loss incurred when a product or brand does
not petform as expected. Time/convenience risk relates to the time spent
for the purchase of a product and the time wasted in case a poor product
or service is chosen. Social tisk teliects the disappointment in the individ-
ual by friends in case of a poor product or service choice. Physical risk
relates to the safety and health of the individual. Psychological risk
reflects an individual's disappointment in him.self or herself in case of a
poor product or service choice. Last, financial risk pertains to the loss of
tnoney in the case of a poor product or service choice (Jacoby & Kaplan,
1972).
One of the determinants of such risk, according to Narasimhan & Wilcox
(1998), Murray (1991), and others, is the "degree of inconvenience of making
a mistake." Similar conceptualizations have been offered in the extensive
literature on product category involvement (e.g., Laurent & Kapferer, 1983).
The consequences of making a mistake for the former are obviotisly more
severe. In addition, Livesey and Lennon (1978) argue that social risk
 Huei-Chen Hsu and Chi-Shium ¡MÍ 7

inhibits the selection of PLBs. They find that English consumers serve
national brand tea to guests, but consume less expensive store brand tea
themselves. We thus hypothesize:

H2: Cimsifwers are more prone to htiying PLBs in prodttct categories

where theypercetve lower conseqttemes of making a mistake in
their brand selection.
Information '"Searching" versus Purchasing ^'Experience"
Prior research has established that consumers are less skeptical of search
attribute claims than they are of claims involving experience attributes (Ford,
Smith, & Swasy, 1990). Erde m and S wait (1998)argtie that in prodtict cate-
gories where the attributes are of this "experience" type, instead of being of
the "search" variety, a well-respected brand will have a higher purchase
|)robability because awareness will serve to reduce perceived risk.

Previous marketing theorists conceive that consumers develop ways of

reducing risk by searching for information that enables them to act with a
degree of confidence in situations of uncertainty (e.g., Bauer, 1960; Murray,
1991). Because services appear to create particularly uncertain and risky
ptirchase situations, it is logical to expect that consumers acqtiire informa-
tion as a strategy of risk reduction in the face of this specific uncertainty.
Constimer information sources can be classified into two broad types,
internal and external. Constuners use both types when gathering infonna-
tion and coping with perceived risk. In general, the greater the degree of
perceived risk in a pre-purchase context, the greater is the consumer's pro-
[X'nsity in seeking information about the service and quality. The marketing
literattire is replete with evidence suggesting that an external inforrnalion
search presents a motivated and conscious decision by the consumer to seek
new information from the environment (Punj & Stewart, 1983).

Experience
Knowledge and prior experience have been shown to affect how con-
stuiicrs evaluate the risk inherent in their purchase (Murray & Schlacter,
1990) with more knowledge and experience generally reducing perceived
risk. Corbitt (2003) found the purchasing experience increa.sed the degree
of trust, thtis lessening their perceived risk. Based on our conceptual
development, therefore, we propose that:
8 JOURNAL OF FOOD PRODUCTS MARKETING

H3: // consumers search for more information of the product than

purchasing experience, they will perceive lower variability in
quality levels across brands.
H4: Consumers have loner incidences of purchase mistakes in product
categories if they search for more information of the products.
Degree of Quality Variability in Product Category
Earlier studies, such as Narasimhan and Wilcox (1998) have argued
that the degree of perceived risk increases with the degree of per-
ceived quality variation across brands in product category. Supporting
this notion. Richardson et al. il996) found, in their analysis of aggre-
gate across-category data, that perceived quality variation led to
reduced perceived value-for-money of PLBs both directly and via per-
ceived risk. Hoch and Banerji (1993) found that PLB share was lower
in categories where the quality variability of store brands was high.
We thus hypothesize:

H5: Consumers have lower consequences of purchase mistake in

product categories where they perceived lower variability in
quality levels across brands.

THEORETICAL METHODOLOGY

Research Design
As mentioned previously, using construct definitions and measures
available from the literature, this research is designed to investigate the
factors perception mentioned above regarding how to affect consumers'
purchasing PLB intention. To surmount methods and make a break-
through in consumer behavior research, structural equation modeling
(using LISREL8.3: Joreskog & Sorbom, 1993) is used to guide the
research design and the systematic analysis procedure.
Questionnaire Development
Reviews frotn related literature were previously shown to apply well to
purchase intention (Laurent & Kapferer. 1985) and from the PLB scales
(Batra & Sinha, 2000). Therefore, we adopted both the measurement
scales and made some adjustments.
 Huei-Chen Hsu and Chi-Shium ¡MÍ 9

The urban Chinese were our target population. For the purpose of
consistentcy wilh the Chinese market, we used the dyadic approach
developed by Anderson and Weitz (1992), by parallel wording for the
retailer managers and experts' reports. First, the retailers chosen must
have sales experience. Items of the questionnaire were modified based on
four interviews with retail officials and professors in the univc'isities (two
retail managers, and two professors). We consulted with both of them to
ensure the questions were worded with an appropriate consistency.
Multiple Likcil ilems on seven-point scales were asked for each of our
lour category-level perceptual variables.
Pretest
The twelve product categories of packaged food we chose for the test
were canned food, ready meals, snack bars, milk, ice cream, bakery prod-
ucts, packaged vegetables, vegetable oil. baby food, and instant noodles.
Conducting a pretest, we evaluated the content validity of the items by
subjecting them lo 45 mall consumers at Wal-Roon shopping mall in the
city of Shenzhen. Then, we administered the resulting items to retailer
managers in face-to-face meetings to assess whether the items were as
intended. Finally, we made some additional changes lo the wording of
some of the items. The constnicts we developed are not expected to be
highly correlated (Bollen & Lennox, 1991; Fornell Larcker, 1981).
We conducted the second pretest after one week at different malls in
Shenzhen and S5 consumers were interviewed. A confimialory factor analysis
of the 13 items was tested. All loadings are significiuit. G(X)dness-of-rit statis-
tics for the data are X^ = 56.11 (p value = .00); RMSEA = 0.062; AGFI =
0.89; NFI = 0.87; CFI = 0.9; GFI = 0.87; RMR = 0.49. The fit statistics are
as expected given the formative nature of the scales.
For discriminant validity, we tested to see if all the inter-construct cor-
relations (the phi's) were significantly below 1.0 (Anderson & Gerbing,
1988). This test was met in every item. Thus, we deemed our scale ade-
quate for consistency of this study.
Data Collection
Data collection in this study is still considered a convenience sample.
The sample for this study was conducted across three impoilant cities
(GuangZhou, Shenzhen, & Shanghai) in urban China. Our data come
from a mall-intercepl study of consumers. Every third shopper was queried
at various mails in these big cities. They were asked questions to .select
10 JOURNAL OF FOOD PRODUCTS MARKETING

potential respondents by inquiring whether a specific packaged food cate-

gory had been purchased in Ihe past month. If the answer was affirmative,
a short questionnaire on prodtict category perceptions was discussed and
administered. In this manner, each respondent provided data on two or
three categories selected at random from a list of twelve. In all, 753 usable
questionnaires were obtained across the twelve categories. There were
approximately 60 responses for each of the product categories.

Measures
Table 1 shows the dependent variable, PLB purchase, is a continuous
variable on a five-point interval scale from 1 (exclusively purchase
national brands) to 5 (exclusively purchase PLB brands). Because it is a
single-item construct, it is modeled in otir confirmatory factor analysis
with a measurement error of 1-a rather than zero. This approach is a

TABLE 1. Descriptive statistics (N = 753 samples) of means (standard

deviations)

Category Consequences Search/ Price Quality PLB*

of Purchase Experience Consciousness Variation
Mistake

Canned food 61 4.15(1.35) 3.91(1 .65) 4.01(1 .70) 4,35(1 ,38) 3-88(1,35)
Ready meal 59 4.12(1.85) 4-29(1 .22) 4.65(1 .72) 4,60(1 ,26) 3.99(1,09)
Snack bars 58 3.71(1.20) 3,50(1 ,47) 4.52(1 .56) 3,75{1 ,35) 3,50(1,03)
Vegetables oil 61 4.25(1,65) 3,40(1 .57) 4,09(1 -87) 3,85(1 ,83) 3,95(0,89)
Milk 61 4.39(1.65) 3.77(1 ,32) 4.13(1 .79) 4,26(1 ,16) 4,10(0,92)
Ice cream 60 4.46(1.74) 3.69(1 .76) 4.22(1 .60) 4.11(1 ,55) 3.99(1,23)
Bakery 65 3.32(1.53) 3.23(1 .34) 3,97(1 ,54) 3,75(1 ,75) 4.87(1,21)
products
Packaged 62 3.95(1.26) 3.10(1 ,79) 4-75(1 ,81) 4,25(1 ,68) 3-98(0.91)
vegetables
Instant 61 3.72(1.83) 3.75(1 ,61) 4,01(1 ,06) 4,28(1 ,85) 4.78(0,97)
noodles
Soup 69 4.37(1-71) 3.49(1 .14) 4.12(1 ,25) 4,47(1 ,54) 3,91(0,99)
Baby food 70 4,50(1.55) 4,91(1 .30) 4.82(1 -62) 4,78(1 ,39) 3.39(0,83)
Confectionery 66 4.16(1.45) 3.56(1 .62) 4.02(1 ,23) 3,86(1 ,75) 4-15(1,14)
Overall 753 4.43(1.71) 3.72(1 ,25) 4.26(1 .89) 4,19(1 ,93) 4.04(1.28)

Notes: '1 = Exclusively national brands, 5 = Exclusively Private Label Brands (PLBs),
Higher value in CPM means higher consequence; higher value In Search/Experience means
category has more search attributes; higher value in PC means category has more price
conscious and higher value in QV means category has more quality variation.
 Huei-Chen Hsu and Chi-Shium IMÍ II

standard, but conservative procedure. A reliability of 0.85 is assumed (cf.,

MacKetizie & Lutz, 1989).
The data also ptovides some descriptive statistics from the analy-
sis. It shows that baby food was perceived highest in purchase
tnistakes, with bakery product as the lowest. Baby food also is rated
highest on search versus experience, and bakery product is the lowest.
Baby food is tated highest on price consciousness, and baby food also
rates highest on quality variation. These findings appears to have face
validity.

ANALYSIS AND RESULTS

Measurement Model '.

Prior to testing the hypotheses, the multi-itetn tneasures were subjected
to a series of validity checks. A confirmatory factor analysis for these
items is reported in Table 2.
The covariance matrix was used to run the Lisrel program. The
Maximutn Likelihood (ML) solution was applied to gel the fitted model
and estitnates, The measuretnent model shows satisfactory level (>0.5) of
average variatice extracted (Table 3) (Fomell & Larcket; 1981 ).
For discriminate validity, we tested to see if all the interconstruct
correlations (the phi coefficients)were significantly below LO (Anderson &
Getbing, 1988). This test was met in every instance. A more stringetit
réquirement calls for the average variatice extracted (AVE) for each con-
stt-uct in a pair to exceed the square of the phi coefficient for that pair
(Fornell & Larcker, 1981 ). It also was tuet in every case.
Confirtnatoty factor indicated high ititernal consistency and one-factor
solutions for those data, which together with statistical properties (Table
3. itidicales tbat the six theoretical constructs assess convergent validity
by shared extracted variance (.5) (FotTiell & Larcker, 1981).
Structural Model
The estitnated beta parameters from the structural model are depicted
in Figure 1 atid it fits well. The tnodel had statistics: X' = -^^6.37;
RMSF:A = 0.007; AGFI = 0.96; NFI = 0.97; CFI = 0.97; GKI = 0.97;
KMR = 0.024. The overall fit of the models are thus acceptable (Hair,
1998). The estitnated effects (direct, indirect, and total) of the model are
shown in Table 4.
¡2 JOURNAL OF FOOD PRODUCTS MARKETING

TABLE 2. A confirmatory factor analysis

Items Standardized t value Standard

Loading error

PLB purchase
Y1 .89 11,99 0.30
Y2 .92 15,61 0,21
Y3 .86 6.21 0.36
Consequences of Purchase Mistake
X1 .81 5,61 0,41
X2 .86 6,21 0.36
X3 .84 4,98 0.22
"Search" vs. "Experience
X4 .85 13.82 0.26
X5 .82 13,22 0,37
X6 .86 11,28 0.24
Price Consciousness
X7 ,79 7,62 0.24
XS .81 4,50 0.49
X9 .87 5,61 0.34
Degree of Quality Variation in Category
X10 .79 11,48 0.55
XII .85 12,78 0.26
X12 .87 13.33 0.33
X13 .85 12.82 0,26

(Domposjte Reliability

Items Composite Average Variance

Reliability Extracted

PLB purchase .89 .73

Consequences of .94 .86
Purchase Mistake
"Search" vs. "Experience" .96 .89
Price Consciousness .94 .83
Degree of Quaiity ,95 .84
Variation in Category

Hypothesis Testing
Support for HI is found significant as a direct relationship valtie 0.49
(t value =7.58). That is to say, the Chinese online consumers' price con-
sciousness has a significant effect in this model. This is consistent with
the previous fmding (Batra & Sinha, 2000) with grocery sales.
 Huei-Chen Hsu and Chi-Shium ¡MÍ

TABLE 3. Constructs correlation matrix

Constructs Svs. E PC QV CPM PLB

Svs. E 1.00
PC 0.51" 1.00
QV -0.37* -0.31' 1.00
CPM -0.43" -0.32" 0.37" 1.00
PLB 0.22* 0.39" -0.13' -0.32" 1.00
Variance Extracted 0.89 0.83 0.84 0.86 0.73

'Correlation is significant at the .05 level.

"Correlation is significant at the .01 level.
Notes: S vs. E = Search versus Experience; PC = Price Consciousness; OV = Quality Variability;
CPM = Consequences of Purchase Mistake; PLB = Private Label Brand.

FIGURE 1. Paths Coefficients in Structural Mode.

-0.2S* <-4.28)
-0.37* '-7.29J

As detailed earlier in our hypotheses, we find the hypothesized effects

of consequences of purchase mistakes in H2 lo be supported. The direct
etTect value is -0.28 {t value = -4.28). It means that consumers are more
prone to buying PLBs in product categories where they perceive lower
consequences of making a mistake in their brand selection. H4 is also
supported, the effect of S vs. E on CPM is -0.37 (t value = -7.29).
It means that concerning to miike a purchasing mistake, most of the con-
sLiuiers will look for experience more than searching information, and if the
shopper spends more time surfing for information on product category, he
or she may choose and be more likely to buy private label brand products.
As detailed earlier in our hypothesis H3, we also expected searching
attributes more than experience attributes to lead to higher uncertainty
14 JOURNAL OF FOOD PRODUCTS MARKETING

TABLE 4. The estimated effects of the structural model

Variables Predictors Model

Dependable Dependable Dependable

Variable: QV Variable: CPM Variable: PLB

Direct effects:
CPM -0.28*
SE -0.81* -0,37*
PC 0,49'
QV 0,45*
Indirect effects:
CPM
QV -0,12'
SE 0,10'
Total effects:
CPM -0,28'
QV 0.45* -0.12*
SE -0,81' -0,37' 0,10*
PC 0,49*

about quality. Support for H3 is found significant as a direct relationship

value -0.81 (t value = -12.24). This should, in turn, raise the perceived
consequences of a purchase mistake and reduce the propensity to buy
PLBs. This model thus showed certain mediating processes. Search
versus experience was also modeled as directly influencing consequences
of purchase mistakes. Quality variation was not modeled as directly
influencing the propensity to buy PLBs because this link appeared non-
significant in our model.
H5 is also supported for the value is 0.45 (t value = 8.69). Comparing
our results to previous quality variation studies (e.g., Batra & Sinha,
2000), we find that Chinese consumers employ similar decision-making
processes as those used by their North American counterparts. Faced with
quality description, Chinese consumers categorize the variation into the
same set of consequences of purchase mistakes and make no significantly
different choices.
Our statistics closely follow our theoretical framework. All of the
coefficients in the model are significant and have the expected signs. Thus,
PLB purchases rise when 1 ) lhe consequences of making a purcha.se
mistake are reduced (-0.28); 2) when there is a smaller degree of quality
variation among brands in the category (indirectly via CPM); and 3) when
 Huei-Chen Hsu and Chi-Shium IMÍ 15

the pri^duct categories have more Search than Experience characteristics

(indirectly via both QV and CPM). In addition, category price consciousness
has a significant and positive effect on PLB purchase within a categoty (0.49).
Thus, the stmctural model provides stronger support tor our hypotheses.

DISCUSSION AND MANAGERIAL IMPLICATIONS

Discussion
This study offers both a theoretical and practical contribution to
explain variations in purchasing preferences for national brands versus
PLBs across twelve different packaged food categories. Interesting to find
that Chinese consumers' exposure to PLBs products is relatively new. it
appears that searching product information in reducing purchase mistakes
varies significant and consumers will be more likely to buy PLBs. This
finding concurred with the work of Batra and Sinha (2000) who found
that the determinants of the degree of risk, as perceived by consumers in
making a purchase, varied according to the searching or experience.
Another finding is that PLB buying increases as the "price consciousness"
increases. We included that the consumer's degree of price consciousness
in that category, might bring in PLB-favoring variables such as lower
incomes, high deal-proneness and a decreased belief in price-quality asso-
ciations. For example, from our results regarding brand equity choice, we
find that Chinese consumers have significant positive attitudes and inten-
tions toward well-known PLBs (such as Ting Hsin International Group).
Given that Chinese consumers' exposure to PLB products is relatively
new. it appears that some have trouble in distinguishing between the dif-
ferences. By virtue of their similarity, comparable brand alternatives may
thus hurt each other in the selection process or. in other words, lead cer-
tain brands to benefit from others that are similar, whereas still remaining
for future testing.
Additional analysis, after incorporating control variables in the model,
shows that consumers with higher incomes and higher eduction tend to
buy national brand products.

Managerial Implication
The outlook for packaged food in China remains favorable. There are
abundant opportunities for expanding the market as the economy continues
16 JOURNAL OF FOOD PRODUCTS MARKETING

to develop. The level of growth will remain strong, predicted at an annual

average of 79c in constant value terms over the 2004-2009 periods
(Chinese Statistical Yearbook, 2004), although the pace will slow down
slightly in anticipation of the soft economy and the moderation in detnand
in the developed regions of China. The north, northeast, and the south-
west will witness dynamic growth.
Our findings about search versus experience attributes suggest several
key managerial implications. Previous prescriptions for how national
brands should respond to PLB incursions have ptoperly stressed the tieed
to add more benefits and value, and to raise the level of technology
(Hoch, 1996). Our results suggest that it tiiight also be impotiant for
national brands fighting strong PLBs to raise the consumer's perceived
consequences of making the wrong btand choice. We do this by creating
more anxiety about the consumers' likelihood of making a wrong brand
choice. This may be accomplished by downplaying the "search" nature of
the benefits while highlighting the "experiential" benefits involved.
Tactically, this could call for (1) additig unique ingredients to the
natiotial brand, (2) stressing the hedonic or setisoi-y betiefits of these
ingredients, or (3) creating uncertainty about the quality of the manufac-
turing or assembly process used by the PLB competitor. In essence, the
national brand should find every legititTiate way to create fear, uticer-
tainty, and doubt in the consumer's mind about the quality equivalence
between the national brand and the PLB in the hope that the resulting
anxiety nudges the consumer to prefer the "tried and tru.sted" national
brand over the cheaper PLB.
The implication made to retailers selling PLBs is exactly the opposite.
Retailers need to put as tnuch objective infortnation about product itigre-
dients and manufactitring quality as possible on the package label and
reduce the uncertainty consumers feel about the quality they will experi-
ence on consumption. Such itiformation should include specifications, but
may go beyond this by seeking seals of approval or other, third-party
endorsements.

LIMITATIONS AND DIRECTIONS

FOR FUTURE RESEARCH
The major litnitation of our study concerns our measurement
approach. First, we limit our analysis that can be retrieved through a
questionnaire with a specific number of questions and an assutnption
 Huei-Chen Hsu and Chi-Shium ¡MÍ 17

that these questions are able to capture the rich dimensionality of these
decision processes. Second, we are able to provide only a snapshot of
ongoing processes and not measures of the same process over time. Our
dilemma is that to test the hypothesized model we need to sample a large
ntuiiber in eqtiivalent ways. The previously mentioned concerns and limi-
tations should be considered in understanding the meaning of our fitidings.
By collecting data only in several principal cities and investigatitig only
certain samples, findings are not representative of all Chinese, in this coun-
try where tegional differences abound. More consumer-level variables,
including demographics, attitudes to PLBs, and other perceptions of prod-
tict category characteristics, need to be modeled. Through our findings in
the study, future examination will be important to investigate the relation-
ships among these different determinants of perceived risk to see if there is
a better fitting iiuxlcl. It seems to be a crucial problem faced by a retailer
through the expansion of the consumers' opportunity to find more favorable
options in China.
Faced with multi-brand choices, whether or not, Chinese customers
employ similar decision-making processes, as those sttidies used by North
American counterparts. "Effective international management of sales pro-
motions is crucial to the success of many consumer prodticts/services. It
requires an tinderstanding of how consumers ix'spond to specific promo-
tions in different countries" (Dowling & Staelin, 1994, p. 120). Future
study of the effects of sales promotions (coupon, bundling price, etc.) on
ftK'al and competing brands in consumers' consideration remain to tested.
Since modern Chinese consumers' purchase patterns may differ
depending on where they live and the level of globalization experienced,
it would be advisable to conduct more wide-scale studies. The consumers,
especially the more educated and affluent tirbanites. may also base their
brand choice decisions on the information acquired through advertising
(Zhou. Zhang, & Vertinsky. 2002). To attract stich affluent consumers,
who presumably have gieater disposable income; retailers should have
advertising strategy.

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20 JOURNAL OF FOOD PRODUCTS MARKETING

APPENDIX
Details of measures (source Laurent and Kapferer, 1985)
Constructs Items*

Consequences of Purchase When 1 choose a brand, it is not a big deal if I make

Mistake
"Search" vs- "Experience"
Nature of Category
Price Consciousness
Degree of Quality Variation
in Category
a mistake.
One can't go too wrong if one buys the wrong brand.
I feel upset if buying the wrong brand.
I don't need to actually try a brand to know how good
it is—the information of the product tells me everything
I need to know.
For a category, the written description of the product
covers All the features that are important to how
I choose a brand.
Before buying a product, I'll search for the information.
When buying a brand, I look for the cheapest brand
available.
Price is the most important factor when I am choosing
a brand.
I'll look tor its price before choosing a brand.
All brands are basically the same in quality,
I don't think that there are any significant differences
among different brands in terms of quality.
Brands do not vary a lot in terms of quality.
There are only minor variations among brands in terms
of quality.

*AII items were measured on 7-point scales with 1 : Disagree strongly and 7: Agree strongly.