Academic journal article Journal of Business Economics and Management

Possible Causes Inhibiting the Purchase of Chinese Grocery Own Brands: A Preliminary Study

Academic journal article Journal of Business Economics and Management

Possible Causes Inhibiting the Purchase of Chinese Grocery Own Brands: A Preliminary Study

Article excerpt

1. Introduction

Consumers' "own brand" buying behavior has been extensively researched in the Western literature, e.g., Halstead and Ward (1995); Dick et al. (1996); Steenkamp and Dekimpe (1997); Veloutsou et al. (2004); Kumar and Steenkamp (2007); Richardson (1997); Hansen and Singh (2008); Ailawadi et al. (2008); Ailawadi, Harlam (2004); Martos-Partal and Gonzalez-Benito (2009); Groznik and Heese (2010); Hyman et al. (2010) while the literature on own brands in Asia is limited. In particular, the causes that contribute to unsuccessful Chinese grocery own brands from the consumers' perspective are less discussed in the extant literature. Own Brands, as retailers' brands; have made significant penetration into supermarkets. Based on estimates by AC Nielsen (2009), own brands in Western markets continue to grow; many are now well established and enjoy some degree of recognition for quality and reliability. This is especially so in such markets as the USA, Canada and the UK (Nishikawa, Perrin 2005; Kumar, Steenkamp 2007).

AC Nielsen's own brand report (2009) shows that own brands have taken a significant share of Western markets with 46 percent of the market in Switzerland, 44 percent in the UK, 17 percent in US, and 14 percent in Australia. However, in emerging markets such as Asia their presence is noticeably low, with market shares in the order of 5 percent in Hong Kong, 3 percent in Singapore and only 1 percent in China (AC Nielsen 2009). Moreover, research has shown that consumers' acceptance level of own brands in emerging markets is lower than in the more developed markets, as evidenced in data from recent studies, e.g., research conducted by Veloutsou et al., from the Greek market in 2004; the comparative study undertaken by Anchor and Kourilova (2009) comparing UK and Czech Republic markets, based on consumer perception of the Tesco own brands. In addition, more recent work by Mandhachitara, Shannon, and Hadjicharalambous (2007) comparing US and Thai markets reveals that consumers in Thailand are less well disposed than their US counterparts toward own brands. It has been well documented that some lines of own brands have been introduced in the Asian grocery sector by the major retail chains but as yet they "have not been commercially successful"; a major reason for this is that consumers from Asia are prone to favor national and international brands (Mandhachitara et al. 2007). It is therefore an interesting conundrum to establish why, in spite of their remarkable success in the developed markets, own brands appear not to be succeeding in Asia, and particularly in China, which has a rapidly growing and diversifying consumer market.

Since the1990s the structure of the Chinese retail grocery sector has changed considerably, from a local store format to a modern international supermarket system. The major global retail chains have led and accelerated the transformation of the Chinese retail grocery sector. Based on AC Nielsen's Retail Census of 2008, there were more than 3.3 million retail stores, with an 18 percent increase in both store units and revenue turnover in comparison to 2007 (AC Nielsen 2009). AC Nielsen predicts that Chinese retail business will reach a market share of 60 percent of total fast moving consumer goods by 2015 (AC Nielsen 2009). Over the last fifteen years, Chinese own brands have emerged as a new phenomenon in the retail market. All major retail grocery chains in China have developed own brands in the hope of building store loyalty and increase their competitiveness. However, consumer confidence in own brands remains low, with only a 0.3 percent share of the personal care segment and a 1 percent share of all fast moving consumer goods products (FMCG), thus representing the lowest value share, per AC Nielsen report (2009), especially in the food sub-sector.

The definition of the term "own brand" can be simplified to mean products produced, packaged and sold with labeling that makes it proprietary to a retailer's ownership and its name on the package (Burt 2000; Berges-Sennou et al. …

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