Perceived Risk

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Antecedents of the difference in perceived risk between store brands and national brands Celina Gonza´lez Mieres, Ana Marı´a Dı´az Martı´n and Juan Antonio Trespalacios Gutie´rrez Department of Business Administration, Facultad de Ciencias Econo´micas, University of Oviedo, Oviedo, Spain

Store brands and national brands

61 Received February 2004 Revised October 2004, March 2005

Abstract Purpose – The present study sets out to analyze the effects that a set of variables related to purchasing behaviour has on the difference in perceived risk between store brands and national brands. Design/methodology/approach – The methodology proposed to achieve the objective consists of analyzing the existing relationship between different aspects relating to purchasing behaviour of the consumer and the difference in perceived risk between the two types of brands through a causal and integrated model. Such a model covers both the direct effects and the indirect effects caused by these variables jointly. In order to do so data were obtained from two groups of people, which has allowed for cross-validation of the methodology used, which, in turn, permitted a greater generalization of the results. Findings – The variables which have proven to be most relevant when explaining this difference are the perceived quality of the store as opposed to that of the national brands, familiarity with the store brands and confidence in the extrinsic attributes of the product to assess its quality. Originality/value – Previous empirical research has focused primarily on the individual effects of these variables. A causal model is proposed capable of demonstrating that, besides the direct effect of a variable on the difference in perceived risk between store brands and national brands, there may be other ways for this variable to exercise its influence. This is important because of the implications for retailers when managing their own brands. Keywords Risk management, Generics, Consumer behaviour Paper type Research paper

Introduction Since the introduction of store brands into the Spanish market in the 1980s, we have witnessed to a substantial increase in the availability of such products. At present, most of the distribution chains that operate in Spain offer own brand alternatives for an ever-increasing range of products. In fact, in sectors such as food and cleaning materials/perfumery, store brands reached market shares of 20.3 per cent and 16.2 per cent in 2002, respectively, representing an increase of more than 10 per cent from the beginning of the 1990s, making Spain the European country with the second best development with respect to own brand products at present. This continuous growth in store brands is in part due to the constant evolution that they have undergone since their initial appearance in the market. Retailers have tried to convert their own brands into just one more brand within the range of alternatives available to the consumer (Nandan and Dickinson, 1994). They have improved the

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quality of their own brands, they have repositioned their products, and they have tried to boost the image of their own brands in such a way that they are not perceived as simply a copy or imitation of national brands in order that they might acquire their own identity in the marketplace. However, the idea that store brands are a second-rate alternative still persists among a large sector of consumers who perceive them as inferior to the corresponding national brands (Bellizi et al., 1981; Cunningham et al., 1982; Milla´n, 1997; Richardson et al., 1994). A perceived risk is one of the key factors leading to consumer apprehension of inferiority. In fact, various studies have shown that the risk associated with buying a store brand product is significantly higher than that of buying a national brand alternative (Bettman, 1974; Dick et al., 1995; Livesey and Lennon, 1978; Richardson et al., 1996). The present study can be classified within this field of research. Its main objective is to analyze in greater depth the difference in the risk perceived by consumers when purchasing store brands as opposed to national brands, and to try to evaluate the relevance of those variables which help to explain this difference. The methodology proposed to achieve our objective consists of analyzing the existing relationship between different aspects relating to the purchasing behaviour of the consumer (such as familiarity with the product, confidence in selecting and evaluating it, and the perceived quality of store brands as opposed to national brands) and the difference in perceived risk between the two types of brands. One of the contributions of this work is, thus, considering the perceived risk difference between store brands and national brands. Previous empirical research has focused primarily on the perceived risk associated with store brands individually. Since risk can be perceived by consumers in any kind of brand, we consider that what is really relevant is the difference between brands. This difference is what will make the consumer to choose between a store brand and a national brand. In order to analyze the above relationship the present study proposes a causal and integrated model which covers both the direct effects and the indirect effects caused by these variables jointly. In fact, this is another contribution of the work since very little research has been done on analyzing the indirect effects. We propose a causal model capable of demonstrating that, besides the direct effect of a variable on the difference in perceived risk between store brands and national brands, there may be other ways for this variable to exercise its influence. On the other hand, if the direct effect of a variable is not empirically supported, the indirect effects can justify the necessity to continue considering this variable when managing store brands. Therefore, the contribution of the paper is not only to identify the origin of perceived risk in store brands but to evaluate the relevance of the variables considered when explaining this concept. We believe this is important and worthy of investigation because of the implications for retailers when managing their own brands. This study permits to know which are the key variables on which retailers have to stress so that the store brands are not perceived riskier than the national brands. First, a brief bibliographic review is presented on the difference in risk between store brands and national brands. Then, the causal model is proposed and the hypotheses derived from it are described. Thereafter, we explain the methodology followed and set out the results obtained. Finally, the main conclusions and implications of the study are commented on, the limitations of the study are described, and future lines of research are suggested.

Difference in perceived risk between store brands and national brands Since the outcome of a choice decision can only be known in the future, the consumer is force to deal with uncertainty and, to the extent that consumers realize they may not attain all of their buying goals, risk is perceived (Mitchell, 1998). The existing relationship between the consumer’s perceived risk and the choice of store brands or generic brands as opposed to national brands has been the object of numerous studies in the last two decades. The first studies carried out in this area present a comparative analysis of the perceived risk of generic brand and national brand products and all conclude that consumers perceive more risk in generic alternatives than in manufacturer brands. Subsequently, store brands were incorporated into the above-mentioned comparisons. While the store brands surpass the generic brands with regard to the consumer’s favourable perception of them, they are still considered inferior alternatives having greater risk than the national brands. Table I lists the main studies which have analyzed the perceived risk in generic products and in store brands as opposed to national brands. They have constituted a key reference when designing the model described in the following section on which this study is based. Proposed model: justification and hypothesis As explained in the previous section, store brands are generally considered to be riskier alternatives by end consumers. Once this conclusion has been reached, the next step is to determine what causes this difference in risk between store brands and national brands. According to the literature review on this topic, among the variables which have proven to be most relevant when explaining why store brands are perceived as riskier alternatives than national brands are the following (see Figure 1): difference in perceived quality between store brands and national brands, experience with the product category, familiarity with store brands, consumer self-confidence and reliance on the extrinsic attributes of the product to evaluate its quality. Effect of the perceived quality of store brands as opposed to national brands Zeithaml (1988, p. 3) defines perceived quality as the consumer’s judgement about a product’s overall excellence or superiority. Considerable evidence from previous research suggests that significant differences exist between store brands and national brands regarding quality, revealing the consumer’s higher perception of the latter (Bellizi et al., 1981; Cunningham et al., 1982; Hawes et al., 1982; Milla´n, 1997; Richardson et al., 1994). This perceived inferiority of the store brands is a source of uncertainty for end consumers on the level of satisfaction that they can obtain with the purchase of this type of brand and, therefore, increases the risk associated with its purchase. In fact, Hoch and Banerji (1993) determined that store brands have a smaller market share in those product categories in which there is a greater difference in quality between store brands and national brands. On the other hand, Richardson et al. (1996) proved that the difference in perceived quality between store brands and national brands reduces the perceived value of the store brands through the risk associated with their purchase as the latter is increased. Finally, Batra and Sinha (2000) observed that the difference in quality had a positive, direct and significant effect on the possibility of making a bad

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Table I. Perceived risk in store and generic brands as opposed to national brands

Author

Product category

Comparison

Result

Bearden and Mason (1978)

Medicines

Generic brands vs national brands

Greater perceived risk in generic brands

Toh and Heeren (1982)

Tinned food, beauty products, stationery, drinks, detergents and frozen food

Generic brands vs national brands

Greater perceived risk in generic brands

Harrison et al. (1983)

Rice, precooked dishes, kitchen rolls, tinned tuna, bread loaves and coffee

Generic brands vs national brands

Greater perceived risk in generic brands

Wu et al. (1984)

Tinned food, dry food, beauty products, stationery, soft drinks, detergents and frozen food

Generic brands vs national brands

Greater perceived risk in generic brands

Dunn et al. (1986)

Detergent, softener, ice-cream and pastries

Generic brands, store brands and national brands

Generic brands have the greatest functional risk and the lowest financial risk National brands have the greatest financial risk but the lowest functional risk Store brands in an intermediate position

Dick et al. (1995)

28 categories of convenience products

Buyers and non-buyers of The non-buyers perceive store brands a greater functional and financial risk in store brands

Richardson et al. (1996)

28 categories of convenience products

Store brands vs national brands

Greater perceived risk in store brands

purchase choice, and a negative and indirect effect, through this last variable, on the decision to purchase store brands. As a consequence, we consider that the greater the perceived equality is between store brands and national brands in terms of quality, the less the difference will be in perceived risk between the two types of brands, setting the first of the hypotheses of the study out in the following terms: H1. The closer the quality perceptions between store brands and national brands, the lower the difference in perceived risk between the two types of brands. Although this relationship may seem obvious, its contrast is crucial in the proposed model given the indirect effects that other variables have on the difference in perceived risk through the perceived quality.

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Figure 1. Model of the antecedents of the difference in perceived risk between store brands and national brands

Effect of the reliance on extrinsic attributes of a product to evaluate its quality When it is difficult for consumers to evaluate a product from its intrinsic characteristics and, moreover, they do not have much confidence in their own capacity to select the most appropriate alternative, they usually rely on a series of extrinsic attributes of the product, such as price (Rao and Monroe, 1989; Sethuraman and Cole, 1997) and brand name (DelVecchio, 2001), from which to infer the quality of the product. The confidence that the consumer places in these kinds of attributes has a clear influence on the perception of store brands, since this type of brand has traditionally followed a low cost strategy. Retailers reduce advertising and promotional costs with respect to their own brands to thereby keep the price of the product down. However, this relative advantage derived from very competitive, low prices is at the same time a handicap with regard to national brands. National brands, and above all the market leaders, have developed their brand reputation and prestige based on large advertising campaigns (Aaker, 1996; Kirmani and Wright, 1989), and these have conferred on them a degree of security and protection against risk perceived by the consumer. Therefore, those that use extrinsic attributes as criteria for selecting a brand tend to consider store brands as higher risk alternatives. Consequently, we consider that reliance on the extrinsic attributes of the product to evaluate its quality has a direct effect on the difference in perceived risk between store brands and national brands. Furthermore, the confidence in the extrinsic attributes also causes a greater difference between the two types of brands in terms of perceived quality (Richardson et al., 1996), so it has an indirect effect on the difference in perceived risk through this last variable.

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Taking the above-mentioned considerations into account, we propose the following hypotheses: H2. Reliance on the extrinsic attributes of a product to evaluate its quality has an influence on the difference in perceived risk between store brands and national brands: (a) positive and direct. (b) positive and indirect through the perceived quality of store brands as opposed to national brands. Effect of the individual’s specific self-confidence Consumer self-confidence is defined as the extent to which an individual feels capable and assured with respect to his or her market place decisions and behaviours. As such, consumer self-confidence reflects subjetive evaluations of one’s ability to generate positive experiences as a consumer in the market place (Adelman, 1987). When the effect of this variable on the perceived risk is analyzed, a distinction must be made between two types of self-confidence (Cox and Bauer, 1964): general self-confidence, which is comparable to self-esteem and can be considered as a personality characteristic (its general nature makes it difficult to adapt it to specific situations or choices), and specific self-confidence, which reflects the ability of the individual to face a specific task or situation. In the case of the individual’s purchasing behaviour, this last type of self-confidence refers to the individual’s confidence in their own ability to properly select a specific product, brand or commercial establishment. In the present study, given that we evaluate the difference in risk associated with buying store brands as opposed to national brands, specific self-confidence will be the variable included in the proposed model. Regarding the relationship between this variable and the perceived risk when buying a product, Schaninger (1976) determined a negative effect of specific self-confidence on it. More specifically, Bailey (1999) observed that those consumers with a higher level of self-confidence perceived a lower risk associated with buying store brands. In light of these results it can be concluded that the greater the specific self-confidence of the individual the less the risk associated with buying store brands since the uncertainty that the consumer may have is reduced. When consumers consider that whichever choice they make will be the correct one given their own ability to evaluate the product, they feel less need to seek security in national brands. Therefore, the difference in risk between store brands and national brands is reduced. In fact, specific self-confidence also has an indirect effect on the difference in perceived risk through the confidence placed in the extrinsic attributes to evaluate the quality of a product. The more confidence consumers have in their own ability to make a good choice of brand, the less the need to rely on attributes such as price or brand name to evaluate the quality of a specific alternative. The formal expression of the above-mentioned considerations leads to the following hypotheses: H3. The specific self-confidence of the individual has an influence on the difference in perceived risk between store brands and national brands: (a) negative and direct. (b) negative and indirect through reliance on the extrinsic attributes of a product to evaluate its quality.

Effect of the familiarity with store brands Alba and Hutchinson (1987) argue that as consumers become more familiar with a brand, the structure of their knowledge of it changes due to a reduction in the uncertainty that the consumer perceives when buying it. In the specific case of store brands, Monroe (1976) determined that for goods purchased in supermarkets, as the level of use or consumption of this type of brand increases, the risk associated with buying it decreases and, as a consequence, consumers change their preferences regarding the brand. That is to say, the national brands lose out as experience with store brands increases so long as the experience has been positive. Bailey (1999) and Richardson et al. (1996) reached similar conclusions, giving empirical evidence on the direct and negative effect of familiarity with store brands on the perceived risk associated with its purchase. On the other hand, familiarity also has an indirect influence on the difference in risk through two variables: confidence in extrinsic attributes and perceived quality of store brands as opposed to national brands. Regarding the confidence placed in the extrinsic attributes of a product to evaluate its quality, familiarity with store brands contributes to reducing reliance on those attributes since the consumer is more capable of evaluating it from a wider range of attributes, not simply relying on price or brand name as indicators of quality (Raju, 1977; Valenzi and Eldridge, 1973; Wheatley et al., 1977). As regards the perceived quality of store brands, it has been shown that the greater the knowledge of this type of brand the smaller the difference in terms of perceived quality with respect to national brands (Richardson et al., 1996). That is to say, familiarity with store brands makes the consumer consider them higher quality alternatives than they would have if they had not had knowledge of them. The following hypotheses are proposed based on these different considerations: H4. Familiarity with store brands has an influence on the difference in perceived risk between store brands and national brands: (a) negative and direct. (b) negative and indirect through the reliance on the extrinsic attributes of a product to evaluate its quality. (c) negative and indirect through the perceived quality of store brands as opposed to national brands. Effect of experience with the product category Roselius (1971) considers relying on past experience with respect to the use and consumption of a product a basic strategy for risk reduction. Being familiar with a product reduces the risk associated with buying it and increases the probability that consumers buy those brands that have met their quality standards in the past (Nelson, 1970). This occurs due to the fact that previous purchases by the consumer result in a kind of learning process which leads to the consumer perceiving less risk (Seth and Venkatesan, 1968). Through the experience of buying a specific product category consumers gain understanding when making their choice and this has a positive influence on the buyer in terms of knowing what to evaluate in a product and how to do it so that the end result will be satisfactory (Grønhaug, 1972). In the case of store brands, it is more likely that consumers with great experience in buying a specific product will have tried store brands and, if their quality is

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satisfactory (i.e. equal or even higher than that of national brands), it is very probable that they will start buying those brands regularly and, thereby, reduce the cost of buying the product. Bailey (1999) empirically proved that those individuals with little experience in buying a product perceive a greater risk in store brands than those with more experience. Therefore, we can conclude that experience with the product category contributes to reducing the difference in perceived risk between store brands and national brands. Besides this direct effect, we consider that this variable also has an indirect effect through a series of aspects which we will now describe. First of all, the fact of having experience in the use and consumption of a product causes consumers to feel more confident in their own capacity to make a good purchase choice. That is to say, experience has a positive effect on specific self-confidence of the individual. On the other hand, greater knowledge of the product reduces the need for the consumer to have to rely on its extrinsic attributes, such as price or brand name, to evaluate its quality; knowledge of the product is sufficient in order to evaluate it based on its intrinsic attributes. As a consequence, experience with the product category reduces the reliance of the consumer on extrinsic attributes to make a choice. Lastly, greater experience with the product increases the possibility that the consumer will try store brands, thereby, increasing familiarity with this type of brand. At the same time, this greater knowledge also allows the consumer to discover that the quality of store brands can be similar or even higher in some cases than that of national brands. These different arguments lead us to propose the following hypotheses on experience with a product category: H5. Experience with the product category has an influence on the difference in perceived risk between store brands and national brands: (a) negative and direct. (b) negative and indirect through the consumer’s specific self-confidence. (c) negative and indirect through reliance on the extrinsic attributes of the product to evaluate its quality. (d) negative and indirect through familiarity with store brands. (e) negative and indirect through the perceived quality of store brands as opposed to national brands.

Methodology Sample description and information gathering With the aim of analyzing the suitability of the causal model proposed to explain the difference in perceived risk between store brands and national brands and to empirically test the proposed hypotheses, two product categories were selected on which to gather information: kitchen rolls and shampoo. Each of these products were evaluated by a different sample of consumers which allowed us to carry out cross-validation of the proposed model; that is to say, using one of the samples as a measuring model and the other to validate it. The selection of the product categories was carried out according to the following criteria[1]:

.

.

.

The products are bought regularly by consumers, which makes it easier for them to evaluate aspects and perceptions related to its purchase. They are product categories in which the store brands have significant market shares[2]. They are product categories which have different levels of involvement in their purchase on behalf of the consumer (Kapferer and Laurent, 1986; Murphy and Enis, 1986), which may have an influence on the risk associated with its purchase, allowing the generalization of the conclusions obtained to other product categories. The different level of involvement is reflected in the fact that they are categories with prevalence of characteristics of different nature; while kitchen rolls are perceived as a search product, shampoo is perceived as an experience product[3]. This makes the selected product categories different enough from each other to permit the results to be considered significant and generalizable.

On the other hand, and given that one of the aims of the study is to determine the difference in perceived risk between store brands and national brands, for each product category consumers were asked to evaluate the two types of brands. Therefore, a comparison was made between the store brand of the commercial establishment where individuals usually buy the product category under study and the national brand which they most frequently buy in this category. Once the product categories were selected, in accordance with the objectives of the research we started gathering information through a personal questionnaire. Data were obtained through personal interviews with individuals in charge of doing their shopping for grocery products at the distribution chains with the highest market share in the north of Spain. The choice of the sample was made through a multistage stratified process according to the market share of the different distribution chains considered. A total of 436 valid questionnaires were obtained in the case of kitchen rolls, and of 422 in the case of shampoo. The main sociodemographic characteristics of the samples for both product categories are shown in Table II. Measures used All the items which make up the corresponding scales of the different explanatory variables of the model are based on literature review carried out in connection with the present study. A Likert seven-point scale has been used in all cases. The attributes include in each of the scales and the studies which they come from, as well as their Cronbach’s alpha coefficient which shows the reliability of each of the measurements, can be seen in Table III. Regarding the variable “difference in perceived risk between store brands and national brands”, it was calculated from the levels of risk associated with each of the two types of brands. Generally, consumers perceive store brands as opposed to national brands and for this reason we decided to use a difference measure instead of assessing the perceived risk associated with store brands individually. Risk evaluation was carried out using a scale made up of 23 items which refer to each of the underlying dimensions of overall risk: functional, financial, social, physical, psychological and time (Jacoby and Kaplan, 1972; Roselius, 1971). The traditional methodology measures risk through its double component: uncertainty and

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Table II. Socio-demographic characteristics of the samples

Variables

Kitchen rolls (%)

Shampoo (%)

Sex Men Women

18.8 81.2

24.4 75.6

Age From 18 to 40 Between 41 and 65 More than 65

51.0 41.7 7.3

59.2 35.9 4.9

Studies Primary Secondary University

26.7 43.4 29.9

18.6 48.0 33.4

Civil status Single Married-with couple Divorced-widowed

32.9 56.1 11.0

46.5 48.9 4,6

Income (monthly) Less than 1,000e Between 1,000 and 2,500e More than 2,500e

22.8 66.9 10.3

19.2 68.9 11.9

consequences. However, in the present study we have opted for a more innovative methodology than that followed especially during the past decade which we consider more appropriate and precise, since measuring perceived risk through multi-attribute scales allows one to take into account in a more specific way all the differences between the different risk dimensions, as well as to verify the reliability and validity of the scale. The measurement instrument was derived from the review of specific literature on this subject, with the studies done by Stone and Grønhaug (1993) and Dholakia (1997) being fundamental. The evaluation was conducted using a Likert seven-point scale, both in the case of store brands and national brands[4], and for the two product categories on which the research is based, kitchen rolls and shampoo[5]. The items used in detail, as well as Cronbach’s corresponding alpha coefficients can be seen in Table IV. Results Antecedents scales A confirmatory factor analysis was carried out using structural equations to verify the reliability and validity of the scales. This analysis was done for both the kitchen rolls and the shampoo, thereby, allowing for cross-validation of the measurement model. This cross-validation procedure contributes to establishing the validity of the model, separating the evaluation from its estimation and, thus, preventing the possibility of the fit of the model being dependent on the characteristics of the sample. In both cases, the goodness-of-fit indexes of the model can be considered satisfactory, reaching or approaching the minimum recommended values (Bagozzi and Yi, 1988; Bentler and Bonnet, 1980). More to the point, the Comparative Fit Index (CFI) is 0.902 for kitchen

Kitchen rolls 0.916 Shampoo 0.862

Kitchen rolls 0.900 Shampoo 0.870

Kitchen rolls 0.837 Shampoo 0.870

Perceived quality of store brands as opposed to national brandsa

Reliance on the extrinsic attributes of a product

Specific self-confidence

The national brand and the store brand of the store I commonly purchase from are practically the same quality I do not think that the store brand of the store I commonly purchase from is of lower quality than a national brand There is not much difference in terms of quality between the national brand and the store brand of the store I commonly purchase from I think that the store brand of the store I commonly purchase from is of a higher quality than some national brands The more expensive the product, the better the quality If you want quality, you have to pay for it A cheap product makes me suspicious of the result The better-known the brand name, the better the quality The absence of a well-known brand name makes me suspicious of the result The more attractive and appealing the packaging, the better the quality The absence of attractive and appealing packaging makes me suspicious of the result I consider myself capable of choosing a good brand I feel quite satisfied with the choice of brands I make When deciding on a brand, I feel confident of my choice When I choose a brand, I do not usually doubt my choice Compared with most buyers, I consider myself a good buyer I have plenty of experience in using store brands I know the available store brands well I am quite familiar with store brands I have often bought store brands I am very familiar with this category product I know this category well I am well-informed about it I know the different available brands well

Items For an item such as kitchen rolls/shampoo:

Bailey (1999) Dick et al. (1995) Sethuraman and Cole (1997) Bailey (1999) Machleit et al. (1993)

Grønhaug (1972) Dick et al. (1995) Sethuraman and Cole (1997)

Dick et al. (1997) Sethuraman and Cole (1997)

Batra and Sinha (2000) Dick et al. (1995)

Secondary sources

Note: a The aim is for those surveyed to compare the quality of the store brand of the store they usually purchase from and that of the national brand that they most frequently buy in the product category analyzed. Therefore, the higher the average level given, the more equal the perception of quality of the two types of brands

Experience with the product Kitchen rolls 0.881 category Shampoo 0.875

Familiarity with store brands Kitchen rolls 0.944 Shampoo 0.907

Cronbach’s Alpha

Scales

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Table III. Measurement scales of the explanatory variables of the difference in perceived risk between store brands and national brands

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Coefficient Alpha Kitchen rolls Shampoo Store National Store National brand brand brand brand Items

Functional risk

0.908

0.882

0.869

0.781

You are suspicious of the quality You are afraid that its resistance level may not be sufficient (kitchen roll)/You are afraid that it may not leave your hair in good condition (shampoo) You are afraid that its absorption level may not be sufficient (kitchen roll)/You are suspicious of the ingredients used in its manufacturing (shampoo) You think that it is not going to give you a good result

Financial risk

0.886

0.904

0.875

0.813

You think that buying it is a waste of money You are worried that it is not worth the money spent You think that it is not a wise way of spending money

Social risk

0.955

0.955

0.932

0.948

You are worried that, if you buy it, the esteem your family or friends have for you may drop You are afraid that, if you buy it, it may negatively affect what others think of you You think that, if you buy it, others will not see you the way you want them to You are afraid that, if you buy it, others may look down on you

Physical risk 0.900

0.890

0.928

0.916

You are afraid that it may not be safe for you or your family You are afraid that it may damage your health You think that it may cause you some physical harm You consider that it may be dangerous for you or some member of your family

0.902

0.890

0.895 Buying it will make you feel

0.942

0.918

0.933

0.860

Time risk

Table IV. Measurement scale of perceived risk

0.944

Psychological risk uncomfortable with yourself Buying it makes you feel unhappy or frustrated It does not fit in well with the concept you have of yourself It makes you doubt whether you were right in buying it You are afraid that it may be a waste of time due to its bad result You are afraid that buying it will be a waste of time if you have to change it for another brand You are afraid that you may waste time with possible complaints and refunds as a consequence of buying the product You consider that buying the product may be a nuisance due to wasted time as a consequence of buying something that may be worthless

rolls and 0.894 for shampoo. Likewise, the Root Mean Squared Error of Approximation (RMSEA) has values of 0.080 and 0.078, respectively. To evaluate the reliability of the scales, the composed reliability index and average variance extracted (AVE) were calculated. The results obtained confirm that the scales are reliable, as for all the considered variables these coefficients surpass the minimum recommended values of 0.7 and 0.5, respectively (Bollen, 1989). The convergent validity of scales was also verified since all the standardized lambda parameters had values greater than 0.5 and were statistically significant (Bagozzi and Yi, 1988). Finally, to evaluate the discriminant validity of the scale, the approach proposed by Anderson and Gerbing (1988) was followed consisting of estimating the confidence interval of the correlation between variables and checking that none of them contain the value one. Perceived risk scale The confirmatory factor analysis technique using structural equations was also used to validate this scale. The application of this analysis was carried out for both the store brands and the national brands and for each of the evaluated product categories, once again allowing for cross-validation of the model. Initially, a confirmatory first order factor model was estimated to evaluate the reliability and validity of the proposed scale, and then a confirmatory second order factor model was tested with the aim of contrasting the multidimensionality of the overall perceived risk. Regarding the confirmatory first order factor analysis, in both product categories and for both types of brands, satisfactory goodness-of-fit indices were obtained. The CFI is 0.944 and 0.945 in the case of the kitchen rolls for store brands and national brands, respectively. In the case of the shampoo, the value is 0.952 for store brands and 0.929 for national brands. Similarly, the RMSEA have values of 0.074 and 0.070 for store brands and national brands, respectively in the case of the kitchen rolls, and 0.065 and 0.079 in the case of the shampoo. The composed reliability coefficients and the AVE are greater than 0.7 and 0.5, respectively, in all cases, confirming the reliability of the scale. Regarding the convergent validity, it has been shown that all the standardized lambda parameters were statistically significant and greater than 0.5 for both the store brands and the national brands and for the two product categories analyzed. Regarding the discriminant validity, it was shown that none of the confidence intervals of the correlation between each pair of latent variables or dimensions of risk contain the value one. Therefore, it can be said that this scale is reliable and valid. The next step was to verify whether the six specific dimensions converged in a second order factor, considered the overall risk. The goodness-of-fit indexes obtained show an acceptable fit to the model, both for the store brands and the national brands and for both product categories. The CFI is 0.931 and 0.932 in the case of kitchen rolls for store brands and national brands, respectively. In the case of the shampoo, the values are 0.949 and 0.929. On the other hand, the RMSEA is 0.080 and 0.077 for store brands and national brands, respectively, in the case of the kitchen rolls, and 0.066 and 0.079 in the case of the shampoo. Likewise, the lambda parameters that define the second order factor from the six first order dimensions or risk dimensions are all significantly different from zero, which confirms the multidimensionality of the perceived risk. Therefore, to asses the associated overall risk for both the store brands

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and the national brands, the scales corresponding to each of the risk dimensions were jointly used, which allowed for a more complete and precise measurement of this concept. Results of the causal model and test of hypotheses To evaluate the effect that each of the variables previously mentioned has on the difference in perceived risk between store brands and national brands, the abovementioned causal model was tested. The possibility of carrying out a cross-validation of such a model allows us to generalize the conclusions beyond the intrinsic characteristics of the sample. Table V shows the results relating to the fit of the causal model and to the proposed hypotheses for both the kitchen rolls and the shampoo. Since goodness-of-fit indexes surpass or approach the recommended value of 0.9 for both the kitchen rolls and the shampoo, the proposed causal model can be considered satisfactory. With respect to the RMSEA index, this has a value of 0.061 and 0.067 in each case. Regarding the casual relationships hypothesized in the model, seven of them were statistically significant in the suggested direction for both product categories analyzed. Therefore, the perceived quality of store brands as opposed to national brands has a negative effect on the difference in perceived risk (H1). In the same way, the reliance on the extrinsic attributes of the product has a positive influence on the difference in risk (H2a) and a negative effect on the perceived quality for store brands as opposed to national brands (H2b), so it exercises an indirect and positive effect through this last variable on the difference of risk. Familiarity with store brands has a negative influence on the difference in perceived risk (H4a) and on the reliance on extrinsic attributes of the product (H4b), as well as a positive influence on the perceived quality of store brands as opposed to national brands (H4c), so indirectly it exercises a negative effect on the difference of perceived risk through these two last variables. Finally, experience with the product category has a positive influence on specific self-confidence of the individual (H5b), exercising in this way an indirect and positive effect on the difference of risk through this variable. H5d, which proposes a positive effect of experience with the product category on familiarity with store brands, has obtained statistically significant empirical support in only one of the product categories analyzed; i.e. kitchen rolls. Therefore, in that case experience with the product category exercises a negative effect on the difference of risk through this last variable. On the other hand, two other causal relationships included in the tested model were also statistically significant for both product categories analyzed, but in an opposite direction than that suggested: H3a (effect of specific self-confidence on the difference in risk) and H5e (effect of experience with the product category on the perceived quality of store brands as opposed to national brands). Therefore, the experience exercises an indirect and positive effect on the difference of risk between store brands and national brands through the perceived quality of the first ones opposed to the second ones. An effect contrary to that proposed was also observed in the case of experience with the product category on the difference in risk (H5a), but was statistically significant in only one of the product categories, that of the shampoo.

Note: * p , 0:01; t . 2:6

H1. Perceived quality ! Difference in perceived risk H2a. Reliance on extrinsic attributes ! Difference in perceived risk H2b. Reliance on extrinsic attributes ! Perceived quality H3a. Specific self-confidence ! Difference in perceived risk H3b. Specific self-confidence ! Reliance on extrinsic attributes H4a. Familiarity with store brands ! Difference in perceived risk H4b. Familiarity with store brands ! Reliance on extrinsic attributes H4c. Familiarity with store brands ! Perceived quality H5a. Experience with the product category ! Difference in perceived risk H5b. Experience with the product category ! Specific self-confidence H5c. Experience with the product category ! Reliance on extrinsic attributes H5d. Experience with the product category ! Familiarity with store brands H5e. Experience with the product category ! Perceived quality

Model fit statistics for kitchen rolls S-Bx2(141) 456.87 (p ¼ 0:000) Model fit statistics for shampoo S-Bx2(141) 408.31 (p ¼ 0:000) Structural relationships hypothesized paths Negative Positive Negative Negative Negative Negative Negative Positive Negative Positive Negative Positive Positive

Proposed relationship

BBNFI 0.926 BBNFI 0.913

2 0.32 0.25 2 0.26 0.13 0.01 2 0.30 2 0.28 0.47 0.02 0.52 0.03 0.33 2 0.17 20.33 0.13 20.22 0.13 20.09 20.28 20.16 0.47 0.16 0.43 0.11 0.00 20.18

BBNNFI CFI 0.936 0.947 BBNNFI CFI 0.928 0.941 Standarized coefficients Kitchen rolls Shampoo

AGFI 0.862 AGFI 0.869

2 6.84* 4.94* 2 4.95* 2.76* 0.127 2 6.30* 2 5.07* 9.77* 0.445 9.41* 0.09 6.59* 2 3.56*

2 6.45* 3.24* 2 4.90* 2.78* 2 1.54 2 5.77* 2 3.18* 9.50* 3.13* 7.38* 1.93 0.03 2 4.09*

t-value Kitchen rolls Shampoo

GFI 0.898 GFI 0.902

RMSEA 0.072 RMSEA 0.067

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Table V. Model fit and tests of proposed relationships in the model

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The effects of the two remaining hypotheses (H3b and H5c) were not statistically significant in either of the product categories. Finally, it is necessary to comment on the lack of explanatory capability of the socio-demographic variables with regard to the difference of risk between store brands and national brands. The only such explanatory capability detected showed that women perceived a slight higher difference than men and that result was only statistically significant with respect to the sample of the shampoo. These results are in line with previous works (Burton et al., 1998; Miquel et al., 2000; Omar, 1996) in which researchers have shown that these types of variables are not very useful in analyzing the store brands market. In fact, this is the reason researchers began to use variables related to purchasing behaviour, as we do in the present paper. Discussion and conclusions The present study has tested a model that integrates a series of variables relating to purchasing behaviour, in which the difference in the risk that consumers perceive between store brands and national brands is explained. One of the main contributions of this research relates to the use of two different samples of individuals to gather information. The data relating to each one of the product categories analyzed (kitchen rolls and shampoo) were obtained from different samples, which allowed for cross-validation of the proposed methodology. Thus, the conclusions reached are relevant not only because a fit of the model to the data corresponding to a specific product category was achieved but also because the validity is generalized through a sample which evaluates products in different categories and takes into account that the category products are of a different nature and that they are perceived by consumers in a different way. The validation of the causal model proposed in this study has allowed us to draw the following conclusions. First, it has been verified that the more equal the perception of quality between store brands and national brands, the more the difference in perceived risk is reduced between the two types of brands. In fact, it has confirmed the great importance of this variable when managing perceived risk since practically all of the considered variables have influence on the perceived risk through perceived quality. On the other hand, it has been confirmed that the more consumers rely on the extrinsic attributes of a product to evaluate its quality, the greater the difference between store brands and national brands in terms of risk. Moreover, the reliance on these types of attributes also contributes to indirectly increasing this difference through the effect it has on perceived quality of store brands as opposed to national brands. Our data has shown that the greater the familiarity with store brands, the less the difference between these and national brands in terms of perceived risk, independent of the product category considered. Moreover, familiarity with store brands has also an indirect and negative effect on the difference in risk, both through reliance on extrinsic attributes of the product to evaluate its quality and through the perceived quality of store brands as opposed to national brands, so the total effect of this variable on the difference of perceived risk between store brands and national brands is rather important.

However, contrary to our hypothesis, it has been observed that specific self-confidence of the individual has a positive influence on the difference in risk between store brands and national brands. It seems that as consumers become more conscious of the implications of their purchasing decisions they begin to associate a greater risk with their purchase and to trust national brands more. Gronhaug (1972) reached similar conclusions, determining that the greater the level of self-confidence of individuals when buying a specific product the more emotionally they were involved in the purchasing decision and, therefore the risk associated with it increased. Moreover, we have not been able to verify an effect of specific self-confidence on the difference in risk through the reliance on the extrinsic attributes of the product to evaluate its quality since the results in this regard were not statistically significant. The fact that the capacity of the individual to face a determined purchasing choice increases does not reduce their reliance on the extrinsic attributes of the product to evaluate its quality. Lastly, regarding the effect that experience with a product category has on the difference in perceived risk between store brands and national brands, results which differ in certain aspects depending on the product category have been obtained. In the case of kitchen rolls, experience in itself does not have a significant effect on the difference in risk between both types of brands. Nevertheless, and contrary to our hypothesis, it indirectly contributes to increasing this difference through the effect it has on the specific self-confidence of the individual and the perceived quality of store brands as opposed to national brands. On the other hand, when there is familiarity with the store brands, the effect becomes negative; that is to say, it helps to reduce the difference in the perceived risk. Regarding the shampoo, experience with the product category does have a direct influence on the difference in perceived risk between store brands and national brands, but contributes to increasing it. In this product category it seems that a greater knowledge distances the consumer from the store brands, since this greater experience does not translate, as is the case with the kitchen rolls, into an increase in familiarity with store brands and, moreover, it also contributes to an increase in the difference in perceived risk when its effect is exercised through specific self-confidence and the perceived quality of the store brands as opposed to national brands. This result may be related to the fact that the consumer considers that the consequences of making a bad purchasing choice are more serious in the case of the shampoo than in the case of the kitchen rolls, and therefore feels a greater need to seek the guarantee and reputation offered by market-leading brands. Therefore, in the case of experience with a product category the importance of considering the relationships between this variable and the rest of those included in the proposed model has become clear since the indirect effects are those which justify its consideration as an important factor when analyzing the difference in perceived risk between store brands and national brands. Managerial implications All the results described above can be very useful when managing store brands. Retailers must keep in mind that despite the changes in approach with relation to their own brands in the last few years, they are still seen as inferior alternatives to the national brands and are considered to pose a greater purchasing risk. In this regard, it has been shown that reliance on the extrinsic attributes of a product to evaluate its quality, such as brand name and price, is a key element for the

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consumer when making the decision to buy national brands as opposed to store brands, making the latter riskier alternatives. Therefore, retailers must try to improve the consumer’s perception of their own brands. The development of commercial policies orientated to reinforcing their brand image or corporate identity can contribute to increasing the familiarity with and prestige of store brands and to prevent them from being considered second rate alternatives. On the other hand, the traditionally lower price of this type of brand compared with that of national brands, which is indeed an appealing factor for those consumers who consider price to be the main deciding factor, at the same time becomes a dissuasive factor for those consumers who establish a direct relationship between price and quality. It is essential that retailers banish the idea from the consumer’s mind that store brands are of inferior quality merely because they are cheaper than national brands. It would be advisable for retailers to make it clear to consumers that the lower prices of their brands are not a consequence of inferior quality but rather result from great cost savings in, for example, the way they are marketed. In this sense, we should remember that perceived quality influences directly and very significantly on the level of the risk that consumers associate with the purchase of store brands and it also acts as a channel for the influence that many other variables exercise on this difference. On the other hand, it is possible that store brands have not been able to transmit to the consumers, in the same way that national brands (especially leader brands) have, the symbolic benefits that they seek in a brand[6]. Again, the traditional price and communication policies that have been developed for this type of brands can be the reason. The signs sent to the market can be interpreted by consumers as an indicator of the lack of capability of store brands to reach the level of prestige or self-expression that they wish[7]. Finally, given that a greater knowledge and familiarity with store brands contributes to a reduction in the consumer’s perceived risk, it is of great importance to promote trials of store brands among consumers so that they can thereby evaluate them not only based on the external aspects of the brand, such as their price or image, but also on their intrinsic attributes (reliability, quality, taste). In this regard, various promotional activities, such as offering free samples or tasting at the point of sale, could be put into practice. Regarding manufacturers, it is clear that if they want to maintain their leadership position they must continue to stress those aspects on which the consumer relies in evaluating the quality of a product. Their relatively higher prices, their more attractive presentation and their greater marketing campaigns, amongst other aspects, have up to now contributed to generating a more favourable perception by consumers of their brands as opposed to store brands, and to considering them less risky purchasing alternatives. Limitations and future lines of research The main limitation of the present study lies in the fact that we have restricted ourselves to a comparison between two product categories (kitchen rolls and shampoo), both involving to the same sector, that of grocery. Nevertheless, as we have noted above, they are two clearly different product categories as regards consumer buying behaviour which allows for a generalization of the results obtained.

In this regard, new research opportunities arise which may contribute to improving the line of research undertaken. The use of the model applied in the present study to other product categories with different characteristics would allow one to test whether the intensity and direction of the effect that the analyzed variables have on the difference in perceived risk between store brands and national brands vary when considering, for example, more durable products or higher price-tag products. It would also be interesting to incorporate new variables into the model related to the consumer’s buying behaviour, such as their involvement in the purchase, their motivation or their attitude towards store brands. In this way, a more complete view could be obtained of the aspects which may contribute to an increase or reduction in the perceived risk between store brands and national brands, and other lines of action would be open to retailers and manufacturers to reduce or maintain this difference, respectively. A significant contribution could be made by an in depth study of the symbolic or functional character of store brands in order to verify the extent to which retailers are reaching the desired positioning for their own brands and the level of influence that has on the selection of store brands as opposed to national brands by consumers. Lastly, future research should empirically study the influence exercised by the difference in perceived risk between store brands and national brands on the purchasing intention or consumption level of store brands with the aim of evaluating to what extent the risk associated with a purchase inhibits the consumer from purchasing a specific brand. Notes 1. This information was obtained through consulting secondary sources and through focus groups held with individuals who regularly do shopping for grocery products for the home. 2. During 2002, the market share of store brands in Spain was 41 per cent for kitchen rolls and 12 per cent for shampoo (A.C. Nielsen, 2002). 3. Search characteristics referred to the attributes that can be evaluated prior to the purchase through the inspection of the product or other sources such as its colour or ingredients. Experience characteristics can only be verified after the consumption or use of the product (Nelson, 1974). 4. To evaluate the items, each statement started as follows: “With respect to kitchen rolls/shampoo sold under store/national brand: . . . ” 5. In the case of functional risk, the wording of the items was adapted to the characteristics of each product for a better and more exact evaluation of this dimension. 6. Bhat and Reddy (1998) define a symbolic brand as one which satisfies symbolic needs such those for self-expression, prestige or status. They are needs related to self-image and social identification (Park et al., 1986). 7. Dimensions of perceived risk as social or psychological risk can reach higher values when they are associated with the purchase of store brands, contributing to an increase in the difference between them and national brands. References A.C. Nielsen (2002), Annual Report, New York, NY. Aaker, D. (1996), Building Strong Brands, The Free Press, New York, NY.

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