drivers of store choice in an evolving market: an … (big bazaar, vishal, amartex). the data was...

International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 195 ISSN 2278-7763

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Drivers of Store Choice in an Evolving Market: An empirical study

Dr Anupama Prashar Associate Professor (Operations & Management Science), IILM Institute for Business and Management, Gurgaon, India; Email: [email protected] ABSTRACT Retailing in India is at a crossroads. Currently, retailers are experimenting and trying different retail format based on local con-ditions. However, most of these formats are fetching moderate to lukewarm success. In such a scenario, it is important for retail-ers to understand the customer preferences of store atmospherics and their impact on store choice. The purpose of this study is to explore the store attributes as perceived by customers that act as motivators in store choice in food & grocery retailing. Mall intercept survey method using structured questionnaire is used for data collection. Descriptive (mean and standard deviation) and inferential statistical tools (Factor analysis) are used to analyse the data collected from 250 food and grocery retail customers from convenience stores, supermarkets and hypermarkets in tier-2 cities in Punjab in India. The findings suggest that customers value availability and variety of products at store, store ambience, service and facilities, and value for money offered at store. Further, the finding that the store location is overshadowed by other store atmospherics is in opposition to the common belief that Indian customer look for proximity while shopping for food & grocery. The present study provides an understanding of shoppers’ preferences related to store environment in an evolving Indian retail market. The findings may help the food & gro-cery retailers to use store atmospherics as a fertile opportunity of market differentiation. Due to lack of research in the field of drivers of store choice, this study may serve as a departure point for future studies in this area of concern. Keywords : Retail format; Store choice; Food & Grocery; Factor analysis; Store atmospherics; Evolving market

1 INTRODUCTION he pace of development in the Indian retail market has been fast since the wave of reforms triggered by the Gov-ernment to incentivize Foreign Direct Investment (FDI).

The Indian retail industry experienced a growth of 10.6% be-tween 2010 and 2012 and is expected to grow faster to USD 750-850 billion by 2015. Food & Grocery is the largest category within the retail sector with 60 % share followed by Apparel and Mobile segment (Deloitte, 2013).The paradigm shift in the customers’ socio-economic, demographic and psychographic characteristics is the driving force behind this transition in Indian retail scene from traditional family-owned mom & pop stores towards organised retail formats (Prasad and Ansari, 2010; Roy and Goswami, 2007; Sinha, 2003).

Currently, retailers are experimenting and trying several formats such as malls, cash & carry stores, convenience stores, discount (value) stores, supermarkets and hypermarkets. These formats are essentially a representation of retailing con-cepts to fit into the consumer mind space (Prasad and Reddy, 2007; Sinha and Kar, 2007). Though this experimentation for an appropriate format based on local conditions is significant, yet broadly the consumer perception about most of these new formats is of insufficient additional value (Sinha, & Banerjee, 2004). In such a scenario, when retailers are finding it difficult to create a differential advantage, store atmospherics are going to offer the fertile opportunity of market differentiation (Baker et al, 1992; Sinha and Uniyal, 2005).

The subject of retail store environment and store patronage has been widely studied across the world (Martineau, 1958;

Malhotra, 1983; Baker et al, 1992,). This fact is also gaining greater significance in the Indian retail market with the open-ing of multiple store formats by domestic and foreign retail players. Yet the research in this field is limited largely to the shopper’s demographic profile, consumption and purchasing patterns at these stores (Sinha, 2003). In this volatile climate, it is important to explore how customers perceive and choose among available retail formats.

Presently, the Indian retailers are keenly eyeing the tier-2 cities to cater to wider consumer base and to take advantage of rising consumer income levels there (Jones Lang LaSalle, 2012). Given the fact that the consumer preferences and satis-faction drivers in these cities may be different than those in metros, studying the preferences of customers in these cities can be vital in designing an appropriate and customized store environment. The present study is an attempt in this direction. Food and grocery retailing, which is currently attracting the entry of many domestic and foreign retail giants is chosen for exploration. So, the purpose of the study is to identify, at a macro level, the store attributes as perceived by customers that act as motivators in store choice in food & grocery retailing. The geographical scope of the study is limited to tier-2 cities of Punjab, a state in northern India. The study proposes a framework to evaluate the effectiveness of newer retail for-mats on the basis of consumer perceived value proposition.

2 REVIEW OF LITERATURE The role of store attributes in understanding the consumer

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patronage behavior is widely explored across the world. Mar-tineau (1958) categorized store attributes into two main cate-gories: functional and psychological. The functional category included attributes viz., location, assortment of products and store layout. The psychological category represented the feel-ings generated by the functional elements of the store. The study highlighted that functional category gains more atten-tion in the store choice than the psychological category. Fisk (1961) identified attributes such as location accessibility, mer-chandise suitability, value for price, sales efforts and store ser-vice. In a subsequent study, Berry (1969) identified three gen-eral factors that predominantly influenced consumer's store choice regardless of store type viz., quality and variety of mer-chandise, sales staff, and store atmosphere. A prominent and widely-cited work on the topic of store image was of Lind-quist (1974). Based on a review of 19 research articles, he syn-thesized the framework of these studies into a set of nine groups: merchandise, service, clientele, physical facilities, promotion, accessibility, store atmosphere, institutional and post-transaction satisfaction. Doyle & Fenwick (1975), pro-posed that price, product variety, one-stop shopping, quality, location of the store, advertisement, general appearance of the store and convenience are some of major attributes looked upon by the customers while evaluating a grocery store. Bearden (1977) distinguished seven attributes as potentially significant for store patronage viz. price, quality of merchan-dise, assortment, atmosphere, location, parking facilities and friendliness of staff. Arnold et al. (1983) extended the accessi-bility attribute to the ease of mobility through the store and fast checkout. Baker et al (1992) extended the literature on re-tail store atmospherics for providing an experimental method that can be utilized by retailers to examine the various aspects of store environment and its impact on store patronage. They proposed that the affective states of pleasure and arousal have a positive relationship with customer’s willingness to buy at a store. Mason et al (1994) proposed that reasonable prices in a retail store induce customer satisfaction as well as build cus-tomer loyalty. The study found that in the retailing sector, the store having reasonable prices will often capture a large mar-ket share. Hasty and Reardon (1997) classified store attributes into three general categories viz., accessibility (e.g., location, layout, appearance, and knowledgeable staff), facilitation of sales (e.g., low-priced specials, promotional offers and accept-ed methods of payments) and auxiliary attributes (e.g., play areas for children and food court). Bawa and Ghosh (1999) proposed a model to understand the factors that account for variations in shopping behaviour across households. The re-sults showed that the relationship between household charac-teristics and shopping behavior is complex. Shopping may have a recreational aspect for some households. However, for others it competes directly with wage earning activity. Sol-gaard and Hansen (2003) identified several store attributes that were considered important for the consumer's evaluation of stores. These attributes include merchandise, assortment, merchandise quality, personnel, store layout, accessibility, cleanliness and atmosphere. Sinha and Banerjee (2004) at-tempted to correlate the distinct store features as perceived by respondents with the true motivations of various customers in

patronising various stores. Sinha (2003) attempted to under-stand shoppers from their disposition towards shopping. The study found that there are differences in orientation of Indian shoppers from shoppers of developed countries in the way that they value entertainment more than the functional value. Carpenter and Moore (2006) studied the grocery shoppers’ retail format choice in the context of US. The study identified the demographic groups who frequent specific formats and examined the store attributes as drivers of format choice. Sin-ha and Uniyal, (2005) proposed a methodology for segmenting the shoppers. The study found that the segments were differ-entiated largely on the basis of the type of products the stores sold and the format of the stores. The study pointed out that in an evolving retail market a store could add value through store format design to create differentiation in the market place.

3 RESEARCH METHODOLOGY Literature indicates that consumer perception about the store significantly impact the store choice behavior. Further, con-sumer store perception is substantially driven by store attrib-utes. Keeping this in view, it was decided to design an explor-atory study to identify the store attributes as perceived by cus-tomers that act as motivators in store choice. The following research question was developed for the exploratory research: “What are the attributes in store environment that act as motivators

in store choice?”

The study involved a mall intercept survey conducted across the tier-2 cities of Punjab. The population frame for the study (27 million) was the retail customers of food & grocery in the state of Punjab. The sampling frame for the study comprised adult retail customers of food & grocery formats in cities of Ludhiana, Patiala, Mohali, Jalandhar, and Amritsar. These cities are economically and commercially more vibrant with presence of most domestic and foreign retail brands such as Reliance Retail, Spencer’s, Aditya Birla group, Rahejas, ITC, RPG enterprises, A. G. Metro, Bharti Wal-Mart, and The Fu-ture Group.

The data was collected at food & grocery retail stores across the five selected cities. These stores belong to retail format category of convenience stores, supermarkets and hypermar-kets. These formats were classified on the basis of floor area and services offered by the stores (Sinha and Kansal, 2005; Warren and Mark, 2005).The retail format classification is giv-en in Table 1. Table 1: Retail formats

The data was collected at 10 convenience stores (6-Ten), 30 supermarkets (Reliance Fresh, MORE, Easy Day) and

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10hypermarkets (Big Bazaar, Vishal, Amartex). The data was collected by mall intercept survey using structured question-naire (Sinha and Banerjee, 2004).The respondents were cus-tomers who had completed their shopping in retail store and were willing to respond to the questions. The respondents were carefully selected so that they belonged to the higher socio-economic classes (SEC) in order to ensure that the sam-ple had similar representation in terms of respondent profile (Sinha, 2003).The responses were recorded using a set of 30variables measured on a 5-point Likert scale. These varia-bles were derived from the review of literature (Sinha, Banerjee and Uniyal, 2002; Lindquist, 1974; Arnold et al. 1983; Baker et al 1992; Solgaard and Hansen 2003; Dabholkar, Thorpe & Rentz, 1996).The internal consistency of the ques-tionnaire was tested through reliability analysis using Cronbach’s alpha. The value of Cronbach’s alpha was found to be 0.71, which was considered to be acceptable. For the pur-pose of pre-testing the questionnaires, a pilot survey was con-ducted in the city of Mohali. As an outcome of the pilot study, some of the variables were amended and improved. The mod-ified versions of questionnaires were finally administered on the respondents. A total of 250 valid responses were obtained from the survey.

4 ANALYSIS Exploratory factor analysis was conducted to reduce the 30 variables on consumer preference related to shopping of Food and grocery (Questionnaire annexed in Annexure II). The data was processed using SPSS (version 16) software. The Extrac-tion Method used was the Principal Component Analysis. Ro-tation Method used was Varimax with Kaiser Normalization. Prior to running the factor analysis, the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy and Bartlett's test of sphericity were performed. The generated score of KMO was 0.71(> 0.5), reasonably supporting the appropriateness of us-ing factor analysis (Malhotra, 2006; Hair et al. 1998). The Bart-lett's test of sphericity was highly significant (p<0.000), which revealed that variables were not correlated in the population (Table 2). Table 2: KMO and Bartlett’s Test of Sphericity

5 RESULTS 5.1 Profile of respondents A total of 250 valid responses were obtained from the survey conducted at 50 retail stores across the five cities of Punjab. Out of these, 15% of respondents were in the age category of 18-25 years, 24% in the age group of 26-35 years, 26% were in age category of 36-50 years, 22% in age category of 51-65 years,

and the remaining are in the age category of ‘more than 65 years’. 66% of respondents who participated in the survey had income between INR 40,000 and INR 60,000.52% were male respondents and 42% female respondents. 29% of respondents were postgraduates, 30% were graduates, 6% were high school pass outs, and 35% had other qualifications. 39% of respond-ents who participated in the survey were in private jobs, 19% were in public services, 10% were in business, and 32% were in other occupations. The profile of the respondents is sum-marized in Table 3. Table 3: Profile of respondents

5.2 Customer perceived drivers of store patronage

Factor analysis output generated extracted only those factors which had the Eigen values greater than 1. Factors were labeled on the basis of their salient loadings. The total variance explained by the eight factors was 65.033%. The list of extracted factors is given in Table 4.

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Table 4: List of extracted factors

Rotation Method used was Varimax with Kaiser Normaliza-tion. The rotated matrix gave a clear picture of the variable groupings. Factor loading above 0.450 was retained for further analysis. Table 5 shows the factor loadings of variables.

Table 5: Factor loadings of variables

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The results of factor analysis revealed the following store at-tributes as perceived by customers that acts as motivators in store choice in food & grocery retailing: 5.2.1 Availability and Variety The factor with maximum variance of 11.873% of total vari-ance with Eigen value of 5.404 was named as ‘availability and variety of products’. Four variables had high factor loading on this factor: V1 (Products never out of stock with highest factor loading of 0.821), V6 (Brands are available for every grocery item with a factor loading of 0.647), V4 (Variety of grocery items is available with a factor loading of 0.634, V14 (Every-thing under one roof with 0.601). 5.2.2 Store Ambience The next factor with maximum variance of 10.340% of total variance with Eigen value of 3.319 was labeled as ‘store ambi-ence’. This factor had high coefficients on five variables which included variable: V23 (clean and free from clutter has the highest factor loading of 0.792, V27 (Good music with sooth-ing colours on walls with a loading of 0.688), V12 (Shop in stores with comfortable air conditioned environment with a factor loading of 0.643), V29 (Sufficient lighting with a factor loading of 0.573), V22 (displays are attractive with 0.498).

5.2.3 Store Service and Facilities available The third factor with variance of 9.087% of total variance with Eigen value of 2.936 was tagged as ‘store service and facilities available’. This factor had high coefficients on nine variables: V15 (Insufficient parking spaces with 0.601), V18 (Stores which are open till late hours with factor loading 0.531), V25 (Stores where baskets and trolley with factor loading of 0.512), V8 (Salespersons are there to help with 0.511), V11 (Salespersons are helpful with factor loading of 0.502), V5 (Home delivery with factor loading of0.494, V26(Billing counters for faster check out with 0.489),V21(Products are easy to locate with 0.482),V17(Stores which offer return or replacement policy with 0.479). 5.2.4 Value for Money The factor with maximum variance of 8.193% with Eigen value of 2.271 was labeled as ‘value of money’. This factor had high coefficients on five variables: V7 (Stock quality food & grocery items with factor loading of 0.728), V20 (Billing system is reli-able with factor loading of 0.512), V24 (Offer attractive dis-count offers with factor loading of 0.711, V30 (Visit stores which offer best prices in the town with factor loading of 0.801). 5.2.5 Store Recommendation This factor with maximum variance of 7.573% with Eigen val-ue of 1.711 was tagged as ‘store recommendations’. The varia-bles with high factor loading on this factor includes ‘store ad-vertisements’ (V3 with factor loading of 0.617) and ‘store rec-ommendation by friends and relatives’ (V10 with factor load-

ing of 0.794). 5.2.6 Store Location The next factor with variance of 6.660% with Eigen value of 1.512 was labeled as ‘store location’ explained. Two variables had high loading on this factor: V2 (neighbourhood stores for purchasing food and grocery items with factor loading of 0.649), V13: (convenient location with factor loading of 0.588). 5.2.7 Pride associated with Purchase from Store This factor with variance of 5.993% of total variance with Eig-en value of 1.241 was named as ‘pride associated with pur-chase from store’. The following variables had high loading on this factor: V9 (Matter of pride with factor loading of 0.781), V28 (Elite class of society with factor loading of 0.632). 5.2.8 Fun associated with Purchase from Store The factor with maximum variance of 5.313% of total variation with Eigen value of 1.116 was named as ‘fun associated with purchase from store’. Two variables with high factor loading on this factor were variable V16 with factor loading of 0.794 and variable V19 with 0.593.

7 SUMMARY AND IMPLICATIONS Retailing in India is at a crossroads. The Indian retail scenario is presently facing the similar situations as the ‘mom and pop’ stores in the developing nations faced at the emergence of big box retailers. The new expansions of retail formats are adapta-tions of western formats fetching moderate to lukewarm suc-cess. The challenge lies in retailer’s understanding of custom-er’s needs, and most importantly, such perceptible dimensions of the store attribute which acts as motivators for store patron-age. The study is an effort in this direction.

The study found that the respondents value availability and variety of products at store, store ambience, service and facilities, and value for money offered at store. These findings are in consistence with the findings of a number of previous studies appeared in the literature (Ghosh, 1990; Grewal and Sharma, 1991; Baker et al, 2002; Mattila and Wirtz, 2001). Fur-ther, the finding that the store location is overshadowed by other store atmospherics is in opposition to the common belief that Indian customer look for proximity while shopping for food & grocery. The study brought out a multitude of dimen-sions with low eigen values (such as store recommendation, pride associated with purchase from store, fun associated with purchase from store). This could be attributed to the constitu-tion of the Indian retail industry. Since the customers are ex-posed to limited choice of retail formats, they do not seem to expect distinctive characteristics of different stores.

The implication of the above findings is critical for the new store formats emerging in the market. The results indicate the nascent preferences of Indian customers related to store at-mospherics which could act as a differentiation ground for the upcoming retailers.

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7 APPENDICES

APPENDIX A: QUESTIONNAIRE

APPENDIX B: FACTOR ANALYSIS

COMMUNALITIES TABLE

Continued…

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TOTAL CUMULATIVE VARIANCE

Continued…

ROTATED COMPONENT MATRIX

Continued…

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