Customer Perception Towards Hypermarket

Published Date: 02 Nov 2017

CHAPTER 1

BACKGROUND OF THE STUDY

Retail is the largest single industry in most countries throughout the world with the grocery sector being most important in terms of value and volume. The sale of groceries has traditionally been the venue of the traditional provision shop located in the neighborhood. However, much to the dismay of traditional retailers, most of the grocery products can now be found at many places such as hypermarkets, supercentres, grocery stores, warehouse clubs and convenience stores.

In addition to grocery products, some of the retailers such as hypermarkets and supercentre also do offer a wide variety of other product categories such as apparel, household goods, pharmaceuticals, cosmetics, home furnishing and sporting goods in the same place. This move offers the customers the convenience of one stop shopping as they no longer need to shop at various places or stores for several products. Thus, the customers fulfill as many shopping needs as possible when visiting the same store. As a result, most customers prefer to shop at the new retail formats such as hypermarkets or supercentres.

Generally, retailers are the final business transaction in a distribution channel that links manufacturers with customers. Manufacturers produce products and sell them to wholesalers or retailers. Wholesalers buy the products from manufacturers and re-sell them to retailers while retailers in turn sell them to customers. Wholesalers satisfy retailer’s needs while retailers direct their effort to satisfy needs of the ultimate customers. Figure 1 shows retailer’s position within the distribution channel. Retailers undertake business activities or perform functions that increase the value of the products and services they sell to customers such as providing assortment of products and services, breaking bulk, holding inventory and providing services. (Levy and Weitz, 1995)

Customer

Manufacturer

Wholesaler

Retailer

Figure1 – Distribution Channel

Source: Adapted from Levy and Weitz, 1995, "Retailing Management", 2nd Edition, Richard D. Irwin, Inc.

Background Information of Hypermarkets in Penang

It can be said that the retail environment in Malaysia had undergone a dramatic, exciting and continuous change over the decades. Retailing is such a part of our everyday life that it is often taken for granted. Over recent years, retailing provides considerable value to customers while giving people opportunities for rewarding and challenging careers. The success of retailing in Malaysia has been very much attributed to the fact that hypermarkets have successfully compete against existing businesses such as grocery stores, mini market and supercentres and is also very much depends on how hypermarkets can provide the right offering to the customers.

For this study purpose, three foreign owned hypermarkets in Penang are chosen and they are Giant, Tesco and Carrefour hypermarkets.

Giant Hypermarket – in Malaysia, Giant is synonymous with everyday low prices, big variety with great value and recognized for offering the most vibrant, comfortable and complete shopping environment. Giant which turned 65 in 2009 pioneered the concept of modern supermarket shopping with buying everyday groceries, fresh products and fresh foods all under one roof and in a hygienic environment. As the pioneer, Giant sets the pace and standards for the industry with innovative marketing, store design, pricing and products variety.

(www.giant.co.my/-)

Tesco Hypermarket - Tesco Stores (Malaysia) Sdn. Bhd. was incepted on 29 November 2001 as a strategic alliance with local conglomerate, Sime Darby Berhad. The opening of Tesco changed the customer demand as well as brought new standards in retailing. This spurred both big and small retailers to be efficient and competitive with the end results of benefiting Malaysian customers. Tesco offers Malaysian a complete one stop shopping for their needs from fresh food to groceries to household needs and to apparel. Tesco carries a total of 60.000 lines of products including more than 3,000 Tesco branded items.

(http://www.tesco.com.my/html/tesco_store-details.aspx?ID=115&PID=122)

Carrefour Hypermarket – Carrefour or Aeon big is the number one retailer in Europe and the second largest retailer in the world. In Malaysia, Carrefour is a leading hypermarket chain selling a wide range of household grocery products ranging from frozen goods and fresh products to textiles, garments and shoes as well as electrical goods such as home kitchen items and audio-visual appliances. Carrefour is widely recognized from housewives to students and working professionals. (www.carrefour.com.my/-)

Research Problem

As the retail market becomes saturated, various types of retailers will need to be able to differentiate themselves from their competitors in order to survive. At first glance, identifying competitors appears easy as retailer’s primary competitor among each other is greatest when customers view the money spend buying goods and services as apriority.

It is important for hypermarkets to gain competitive advantage and order to do so; there is a strong need to understand the various factors in which customers consider when choosing to shop at a hypermarket. This proves to be quite a difficult task when customer’s expectations on retail outlet attributes are not properly identified.

Due to the significant shifts in customer’s needs and technology, the future of retailing industry has also been the subject of significant speculation particularly with the advent of direct marketing and internet shopping. For foreseeable future, most retailers will be faced with the challenge of attracting customers to their hypermarkets, persuading them to spend money once inside and achieving this with the most efficient retail operations. Therefore, it is of great importance for the retailers to appeal to customer’s expectation today and learn how to be the best in catering for their needs tomorrow.

Although customers have changed their store choice decision by shopping at the new retail format, no research has found that customers rely on a single format for their shopping needs. This indicates that the customers are relying on multiple retail formats to accommodate their lifestyles and to meet their shopping needs. Customers prefer to shop at different formats as each type of format has various store attributes which they perceive as important. Attribute such as low price, a wide variety of products, convenience, good quality and promotion are factors that will contribute to customer’s image formation and will affect their store choice decision.

Objectives of the Study

This study investigates the various factors driving customers to hypermarkets and customers choice of going to hypermarkets. Basically it is on what the retailers can do to maximize their offerings to customers. Being the first choice store is important for retailers because customers will tend to shop at the store more often and spend twice as much in the store compared to others.

Besides, customers will only carry out their daily or weekly marketing at their favorable hypermarkets depending on their perception. Thus, it is important for the retailers to understand the various factors driving customers to their store and customer’s choice of going to hypermarkets as this information is vital in turning the customers in loyal customers.

Having said that, the primary objectives of this study is as follows:

To identify the various factors driving customer to hypermarkets.

To understand and uncover the reasons as to why customers prefer going to hypermarkets as opposed to conventional stores.

To determine whether these factors can affect customer’s preference towards hypermarkets.

To identify which factors has relationship with customers wanting to go to hypermarkets.

With the implementation of this study, the hypermarkets should be able to appeal more favorable to their potential and existing customers to ensure a health mutual advantageous relationship. Failing to heed the importance of the various factors will inevitable and lead to serious business complications in future.

Research Questions

Based on the objectives of the study, this study attempts to answer the following questions:

What are the various factors driving customers to hypermarkets?

Why do customers go to hypermarkets these days as opposed to conventional stores?

Is there a relationship between the various factors (example convenience, price, product quality) and customer’s choice of going to hypermarkets?

How does this factor affect customer’s preference towards hypermarkets?

Which of these factors has relationship with customers wanting to go to hypermarkets?

Scope of the study

The scope of this study is to assist retailers in gaining a better understanding of the various factors driving customers to their retail outlets as customer needs are continually changing at an increasing rate.

Despite there being only a few key players (Giant, Tesco and Carrefour) the hypermarkets environment in Penang is highly competitive. This is because the retailers employ similar positioning strategy in order to attract more customers.

The source and respondents for this study will take place from the three foreign owned hypermarkets as mention where self administered questionnaires are conducted and distributed to the customers accordingly.

Significance of the Study

This study provides insights into the relationship between the various factors driving customers to hypermarkets and customer’s choice of going to hypermarkets thus providing valuable information for few parties concerned.

First, the results of this study are significant to retailers themselves because the research assesses the extent of all outlet attributes affecting customer’s outlet choice and store loyalty. The customer knowledge gained enables retailers to better adapt their marketing mix and tailor competitive strategies to remain and improve their current target customers.

Second, it provides valuable information for shopping centers developers to decide on types of building design such as construction of single storey stand alone building or multi storey shopping mall. In addition, information about surrounding developments or barriers will affect the selection of site locations. This information is utmost important because it involves substantial amounts of capital investment and payback period.

Thirdly, the findings of this study enable suppliers and distributors to strengthen their marketing mix variable in terms of "Place" where the distribution of products shall make available to the target customers through the retails outlets.

Fourthly, the policy makers in various government agencies can make use of this study to assist them in future policies making.

Definition of Key Terms

It is important to define the key terms that will be used in this study in order to entirely understand the topic of discussion of this research.

Retailing – Retailing consists of the sale of products from a fixed location such as departmental stores in small or individual lots for direct purchase by the customers. It is a commercial transaction in which customers intends to consume the goods or services through personnel, family or household use. (Levy and Weitz, 1995)

Hypermarkets – A very large retail outlet built in the early 1990s offering low prices. It combines a discount stores and superstore (a large supermarket) in one warehouse like building. Hypermarket can be up to 300,000 square feet or larger than six football field and stock over 5,000 different items. By offering broad assortments of grocery and general merchandise under one roof, hypermarkets provide a one stop shopping experience and therefore unique. (Levy and Weitz, 1995)

Conventional Stores – Provide a limited variety and assortment of merchandise at a convenient location in a 3,000 to 8,000 square feet store with speedy checkout. (William et al, 1994)

Customer – Any individual that buy goods and services for personal consumption, household use or as a gift for someone.

Customer Perception – customer perception has been defined as the process, by which an individual selects, organizes and interprets information inputs to create a meaningful picture of the world. Perception plays a major role in the stage of the buying decision process where alternatives are identified. (Schiffman and Kanuk, 1997)

Overview of the Research

This research consists of five chapters. Each chapter is connected to the other and is systematically structured to ensure better understanding of the research. The thesis will be organized as follow:-

Chapter 1 introduces the background of the study, identifies the problem and objectives of the study, settings the scope of the study, explain the significance of the study and outlines the overview of overall chapters.

Chapter 2 presents an intensive review of literature relevant to the previous studies and models regarding to various factors driving customers to hypermarkets and customer’s choice of going to hypermarkets.

Chapter 3 focused on the theoretical framework and research methodologies used in this research. The questionnaires and sampling plan are also discussed. Finally, the report lay out the data analysis technique of reliability testing and hypothesis testing.

Chapter 4 presents the results and analysis of the survey. An overview of data collected is shown followed by the sequence of data analysis applied in SPSS which includes data presentation from frequency tables, reliability analysis and descriptive statistics and so on.

Chapter 5 concludes the writing of this thesis by recapitulating the earlier discussion and empirical finding and eventually highlighting the important implications of this research. Possible ways are suggested for future where recommendations and conclusion wrap up the thesis.

CHAPTER 2

LITERATURE REVIEW

Introduction

Hypermarkets nowadays have become an integral part have of Malaysian lifestyle and have been growing accelerated rate particularly in peninsular Malaysia. In order to survive, retailers must be strong competitors and have high performance. They cannot achieve high performance by simply satisfying customer’s needs and at the same time keep a close watch to ensure that competitors do not attract their customers away.

Gaining long term competitive advantage in retailing is particularly difficult when they have to protect themselves from competition through offering unique assortment and services that cannot be copied easily while offering goods at lower price and larger quantities.

This chapter presents the conception foundation about the various factors driving customers to hypermarkets and customers choice of going to hypermarkets. As known, customer plays a major role in every organization in the world. Understanding customer expectation is a good strategy for business as organization exists to satisfy their wants and needs.

Traditionally, women are the one who went to hypermarkets to purchase households but now it has changed as men too also shop for groceries. With both spouses working, hypermarkets have been a great demand because of time saving and convenience. Through this, hypermarkets have successfully positioned itself as a provider of value and quality to the customers.

Review of Past Research

This section reviews the various studies or research conducted in relation to the various factors driving customers to hypermarkets and customers choice of going to hypermarkets. Customers are complex and constantly changing. Not only it is difficult for hypermarket to figure what program will work but what worked yesterday may not work today. Thus, retailers must constantly improve their understanding of the various factors driving customers to hypermarkets and customers choice of going to hypermarkets because customers make decision and take actions based on what they perceived to be reality.

Furthermore, customers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many products and services? Generally it can be said that customers make buying choice based on their perception of the value that various products and services deliver. Therefore, it is important that retailers understand the whole notion of factors and its related concepts so that they can be more readily determine what factors influence customers going to hypermarkets.

Following are the various factors driving customers to hypermarkets.

Store Image

Martineau (1958) was the first researcher to offer the following description of store image: "It is… the way in which the store is defined in the shopper’s mind, partly by its functional qualities and partly by an aura of psychological attributes." The more favorable the image, the more likely it is that customer would shop and buy at the store. The researcher further conceptualized the store image to include store attributes.

According to Schiffman and Kanuk (1997), retail stores have images of their own that serve to influence the products they carry and the decisions of customers as to where to shop. Over the years, image has been used interchangeably with customer’s attitude towards the hypermarkets to describe the overall impression a customer has of it. In a sense, it is the way in which the hypermarket is defined in the customer’s mind based on its functional qualities and psychological attribute.

For Donna (2010), it is not enough anymore for a store to just look good from a merchandising or display standpoint but a store must also encourage the customer to buy. The researcher said that visual merchandising is comprised of six components: image, layout, presentation, singing, display and events as image described the overall look of a store and the series of mental pictures and feelings it evokes within the beholder. For the retailer, developing a powerful image provides the opportunity to embody a single message, stand out from the competition and be remembered. As a rule, image is the foundation of all retailing efforts while store layout. Presentation, singing, display and events can all change to reflect newness and excitement from week to week, season to season where they must always remain true to the underlying store image. (www.sideroad.com/Retail_Services)

Store Environment

Many retailers acknowledge the importance of store environment as a tool for market differentiation. According to Levy and Weitz (1998), the store environment and the physical surroundings of a store are made up of many elements including music, lighting, layout, directional signage and human elements. It can also be divided into external and internal environment that is exterior and interior of a store. The effects of store environment elements could be complex as these elements influence customer’s behavior through their effects on customer’s emotion, cognition and physiological state.

In addition, some of these elements could elicit more direct response from customers with very little impact on their thinking, feelings or body comfort. Despite numerous studies on store environment, their findings are not enough to provide a detailed understanding of the store environmental effects.

Levy and Weitz (1998) also said that certain response of customer to environment may be conditioned or hard-wired in the human brain. For example, customers may follow the path defined by the store layout with little thought or emotion aroused by the layout.

Much of the researcher s agree on how important the retail environment is in terms of supporting and ensuring that product is available to the customer at conclusion of the supply chain. McGoldrick (2002) and Varley and Raffiq (2004) agree that the retail environment is a combination of physical and emotion i.e. tangible and intangible attributes. Table 2 show that the retail environment is characterized by a number of physical elements which converge to create a distinctive image appropriate to the retailers environment. All of these attributes collectively contribute to the overall in-store communication of the product or retailer with an overarching aim to encourage purchase.

Physical and Tangible Attributes

Emotional and Intangible Attributes

Overall store design

Image

Window display

positioning

Layout and merchandising

branding

Fixtures and fittings

Sensory perception

Decoration

Emotional connections

Signage

Ambience

Table 2 – Summary of the Attribute Associated with the Retail Environment

Source: Adapted from McGoldrick, 2002, "Retail Marketing", 2nd Edition, McGraw- Hill Education, Maidenhead & Varley And Raffiq, 2004. "Principle of Retail Management", Palgrave Macmillan, Basingstoke

According to Babin and Darden (1995), store environment can provide customer with various kinds of shopping value such as convenience in locating products and recreation and hence customer’s impression of a store’s environment in terms of shopping value that the environment delivers may affect their likelihood of choosing the store for shopping once again.

Display is an aspect of the store environment which communicates information about the products to the consumer. It plays an important role in the creation and support of the proposition of the retailer as well as highlighting and drawing attention to merchandise. The way in which product I displayed in store can also influence customer behavior and aid purchasing decisions. (Hart and Davies, 1996)

Products

Kotler and Armstrong (2004) define products as "anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need." Thus, it can be said that marketers developed a product only once they noticed a want or need of a particular market and offered to them to satisfy their only wants and needs.

Alderson and Robert (1962) said that customers prefer stores that offer either a wide variety of products lines, breadth and prices or substantial depth to their assortment such as sizes, colours and styles over stores with only medium depth or breadth of assortment.

In addition, David and Albert (1993) said that product shelving has an important influence on customer behavior. Both the height at which products are displayed and the number of rows presented (facings) can influence sales of products. Furthermore, the use of shelf signs and extender can affect sales too.

Other researcher such as David, Gerald and Robert (1987) state that "a product is anything that is potentially valued by a target market for the benefits or satisfactions it provides including objects, services, organizations, places, people and ideas." This view of the product covers a wide range of situation including both tangible goods and intangible services.

Price

Pricing is a relevant issue to customers as well as for retailers as price is the amount of money a buyer pays to a seller in exchange for products and services. Nagle and Holden (2002) indicated that price is a specification of a company requires in exchange for the benefits of having or using the products. The reason is because price is the only element that contributed revenues to the company.

For researcher Diez de Castro (2004), pricing allows firms to segment markets, define products, create incentives for customers and even send signals to competitors. Price and promotional policies have a powerful and rapid effect on sales. Because of that, it is very important to clearly indentify pricing and promotional policy of two direct competing format retailers. And in this way, the managers of these firms would know the kind of customers that can be attracted and the signals and image that can be projected in the market.

Other study has also linked the pricing policies of retailer to customer value perceptions and ultimate shopping intensions. According to Yavas (2003), price is an important driver in store choice among a battery of patronage motivations as price was found to be a major determinant of store choice in the grocery shopping context.

Promotion

According to Kotler (2003), promotion is used by retailers to communicate with customers with respect to their products offerings. He further says that retail promotion includes all communication from retailers to customers and between sales people and customers. The objective is to build the stores image, promote customer traffic and sell specific products. It includes both personal and impersonal promotion and paid or unpaid. Figure 2.1 classifies the different communication methods that retailers use.

Impersonal

Personal

Paid

Advertising

Sales Promotion

Direct Marketing

Personal Selling

Unpaid

Public Relations

Word of Mouth

Figure 2.1 – Different Communication Methods

Source: Adapted from Philip Kotler, 2003, "Principle of Marketing Management", Prentice Hall, Inc.

Kotler and Armstrong (2004) emphasized that promotion is concerned with ensuring that customer are aware of the products that the retailers make available to the customers. More specifically, the objectives of promotion are:

To raise customer awareness.

To create a favorable climate for future sales.

To persuade customers to switch from competitor’s.

To improve and maintain the image of the business.

Other researcher Raghubir et al (2004) say that sales promotions are recognized as a viable competitive weapon for marketers with retailers investing up to one quarter of the marketing budget towards promotion efforts. It was found that promotion will help to build patronage and store traffic, temporarily increase sales of the promoted brands and affect sales of their other items. (Carpenter and Moore, 2008)

Customer Choice of Going to Hypermarkets

Since its appearance, the hypermarkets have become a symbol of modernization. It has dramatically changed the retailing structure and also the consumption behaviour of the customer. Ultimately, understanding customer’s needs is critical for effective targeted marketing. However, this need is not always easily detectable as people are not fully aware of their own underlying motivations or the forces determine their own behavior.

Generally the customers prefer going to hypermarkets due to several factors such as improved living standards, convenience, and the attitudes of shopping together with family and the bargain hunting nature of most Penang customers. These factors will eventually determine the route of the retail trade in future. Following are some of the example.

Positioning of hypermarkets i.e. store location – positioning is the essence of the marketing mix as it complements retailer’s segmentation strategy and selection of target. Positioning conveys the concept or meaning of the product or services in terms of how it fulfill a customer need. Therefore, location is critical to the success of a retail store. A store’s trading area surrounding the store from which the outlet draws a majority of its customers. The extent of this area depends upon the merchandise sold. For example some people might be willing to travel a longer distance to shop at a specialty store because of the unique and prestigious merchandise offered. Having decided on the site includes traffic patterns, accessibility, competitors’ location, availability and cost and population shifts within the area. (Miller, 2000)

Customer loyalty – The ultimate goal of any retailer is to establish a loyal and profitable customer base in order to ensure future profits any longevity of the business. Given that increased competition has provided the customers with more store choice, what is important now is the way in which the retailer is able to encourage customers to visit the store again or turn them into a loyal customer. The term store loyalty can prefer to the customer’s inclination to patronize a given store during a specific period of time because customer patronage results in revenue. Loyal customers will tend to concentrate their purchases in the store and therefore may represent a very profitable market segment if they can be readily identified. (Robert, 1975)

Shopping lifestyle i.e. pleasure and choice – Lifestyle is the pattern of living which is expressed in activities, interest and opinions. People from same occupation, age or economic circumstances may have different type of shopping lifestyle. Shopping in real life is more than plain purchase. It is a leisure activity. For those individuals who love to shop around, the activity resonates a feeling of excitement as they go through their favorite finds. (Howard, 2007)

Summary

Having reviewed the literature, it is evident that the various factors driving customers to hypermarkets and customers choice of going to hypermarkets has very dynamic and important implications for retailers to develop their marketing strategies if they are to be successful.

CHAPTER 3

THEORETICAL FRAMEWORK AND RESEARCH METHODOLOGY