The Effect of Private Labels’ Image on Retailer’s Brand Image

Although the importance of private labels – defined as brands which are “owned and controlled by an organization whose primary economic commitment is distribution” (Schutte 1969, p. 9) – has grown over the last decades, private labels’ and retailer’s brand image, as well as potential image transfer effects, have seldom been addressed in previous research (Kremer and Viot 2012; Vahie and Paswan 2006). This, despite the fact that the image of private labels and that of the retailer brand are critical variables with respect to differentiation and loyalty because they influence consumers’ attitudes and, consequently, shopping and patronage behavior (Collins-Dodd and Lindley 2003; Lee 2004; Mazurski and Jacoby 1986). Additionally, analyses have rarely accounted for the fact that most retailers nowadays manage a broad private label portfolio – from no-frills to premium brands. This especially holds true for the research on potential feedback (or reciprocal spillover) effects from private labels’ to retailer’s brand image which have been studied solely at an aggregate level in the past (Kremer and Viot 2012). Therefore, we investigated if the image of differently positioned FMCG private labels exerts an impact on retailer’s brand image. Furthermore, we analyzed if retailer’s brand image affects retailer loyalty.

To test our hypotheses, which were derived from categorization and associative network theory (Anderson 1983; Rosch et al. 1976), as well as from the results of previous research (Kremer and Viot 2012; Osman 1993), two pre-tests with 60 respondents in each, and a main study with 255 participants were conducted. As far as the stimuli are concerned, we focused on the image of a leading Austrian food retailer who currently owns more than 60 private labels, and we examined potential feedback effects from a discount private label’s, a premium store brand’s, and a value-added private label’s image.

With respect to retailer’s brand and private labels’ image, exploratory factor analyses revealed a three-factor solution. In line with Kremer and Viot (2012), these factors were labeled “price”, “supply”, and “values”. As hypothesized, analysis using structural equation modeling revealed that the image of value-added private labels reinforces retailer’s brand image which, in turn, positively affects retailer loyalty. The image of discount and premium private labels, on the other hand, did not exert an impact on retailer’s brand image. Thus, the findings indicate that image transfer effects of private labels’ on retailer’s brand image vary according to the positioning of the store brands. Though, when the analyses were conducted with respect to the different image dimensions, the price dimension, the supply dimension, and the values dimension of the discount private label’s image and of the premium private label’s image affected the corresponding image dimensions of the retailer brand. Therefore, retailers should not only promote those store brands which have a congruent image with the retailer brand but should also highlight those image dimensions of the private labels that could reinforce the intended image of the retailer.