The Effect Of Assortment Value On The Willingness To Pay A Price Premium

Over the past decades,―branding‖has become a very important research topic and direction. In recent years, with the trend of multimedia and multi-channel development in retail markets as well as the escalating competition, branding is not only a key strategic driver which the manufacturing managers'have to consider, but also a significant factor for managers in service industries including retailing to make a decision.The importance of implementing a branding strategy is a successful brand can offer customers more value than general products; as a result, consumers are willing to pay more(i.e., to pay a price premium) for this brand. The differential responses from consumers to a brand are a brand equity, which is one of important intangible assets for enterprises.Several studies have interpreted and empirically examined the sources and composition of brand equity; however, most of these studies focus on manufacturers'brands or product's brands. These studies hold brand equity mainly comes from consumer's perceived value which is based on product quality. Although a small number of studies focus on retail brands, they still just consider retail brands as an extension or application of product brand theories and think consumer's willingness to pay a price premium(WPP) derives from the perception to the merchandise's quality and price, i.e. merchandise value. But there's not much there. In fact, there is a significant difference between retailers'brands and manufacturers'brands, of which, the crucial point is that the merchandise value that retailers manage is largely determined by manufacturers rather than retailers because most retailers do not produce their own goods except for few large retailers of vertical integration. As a result, merchandise value is insufficient to interpret the formation mechanism of retailers'brand equity.This study suggests that the most important source of value provided to consumers in retail branding doesn't only rely on the goods itself, but also on the collection of various goods (merchandise assortment) from different manufacturers. In market distribution system, retailers do not directly produce goods, but collect and sort a number of products from production process and then―selectively‖provide merchandise assortment of―specific value‖to consumers according to market needs and wants. A series of business activities around the merchandise assortment, such as merchandise planning, purchasing, selling and inventory management etc., are the main business of retailers'.Unfortunately, few studies explain such questions as what is on earth the perceived value which is brought by assortment to consumers, through which route and how it effects brand equity, or are there any differences across different retail types from a perspective of the formation of brand equity though the importance of merchandise assortment has been known by scholars, and a lot of studies have been conducted around the assortment scale (or variety) as well as consumer's perception and option, which have verified the effect of assortment scale on consumer's preference, choice and even the willingness to pay a price premium. These questions are directly connected with the building of retail brand theories and the implementation and management of branding strategy, therefore, have a significant theoretical and practical value.Based on the previous research literature review, this study defins assortment value from the perspective of perceived value as an evaluation result between utilities (benefits) and efforts (cost) that consumers obtain from a store's assortment. Then, it analyzes the sources of perceived value of cross-category assortment and within category assortment respectively in terms of the features of consumer's purchasing behavior. And then it suggests that assortment value comes from the convenience it brings to consumers in their first product searching, multipurpose shopping and cross-buying, comparative buying and variety-seeking. Furthermore, taking into account consumers can obtain the product information and products separately from different channels in the multichannel retail environment, the study concludes assortment value into two different forms of information acquisition value (IAV) and merchandise acquisition value (MAV). Among them, (1) IAV includes: better supply assorted searching information and products information consumers are interested in, comparison information of similar products and the convenience of choice, making it easier for consumer to obtain information on new products, fashion information, and other useful information; (2) MAV includes: convenient one-stop shopping, easily to get favorable products and the satisfaction to unplanned purchase.Since the concept of assortment value has been defined and explained, the study establishes a research model with IAV and MAV as two exogenous variables and store affect, attitudinal loyalty, behavioral loyalty and WPP as four endogenous variables, and is tested empirically by structural equation modeling, to explain the formation mechanism of retail brand equity. The empirical study contains two parts: Study 1 is tested with overall samples while Study 2 is tested with department store's samples and hypermarket's samples.Study 1 show that firstly, assortment value is indeed an important antecedent of brand equity. Both IAV and MAV positively relate with store affect, and through mediating effects of store affect, assortment value indirectly affects consumer's behavioral and attitudinal loyalty, and eventually brings WPP. Secondly, assuming assortment value as an antecedent, both behavioral and attitudinal loyalty can positively affect consumer's willingness to pay a price premium to the store. In addition, the study has also examined the positive relationship between attitudinal loyalty and behavioral loyalty.Study 2 tests the invariance of the model among the different retail types. Results show that two sub-samples'models have the invariance of factor structure and factor loading(i.e., metric invariance) but the relationship of latent variables are varied. Specifically, in two retail types, although IAV always has significant direct effects on store affect, but MAV does not have the same effects. For department store, MAV can't directly influence store affect while the hypermarket's MAV can. Moreover, for the sub-sample of department store, not only attitudinal loyalty can't directly influence behavioral loyalty, but also behavioral loyalty have stronger direct effect on WPP than attitudinal loyalty.Based on the above analysis, this research suggests that for retailers, assortment is an unique source of value, and the mechanism of―how can value brings a price premium‖is that consumers are willing to pay resources in order to retain a long term transaction relationship with the store. From the long-term benefits, retailers should pay more attention to the creation of IAV, and strive to improve the affect experience to stores, so that they can more effectively gain brand equity for the store. In addition, stores with different retail types also need to differentially consider the trade-offs between the operation of IAV and MAV. At the end, the theoretical and practical implications are given and the limitation and future research directions are discussed.