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Study On Factors That Impede The Success Of Retail And Wholesale Industry: A Case Study On Consumer Selection Decision Towards Retail Business At Alor Setar, Kedah

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International Journal of Innovation and Economic Development
Volume 1, Issue 5, December 2015, Pages 44 – 52


Study on Factors That Impede the Success of Retail and Wholesale Industry: a Case Study on Consumer Selection Decision towards Retail Business at AlorSetar, Kedah

DOI: 10.18775/ijied.1849-7551-7020.2015.15.2004
URL: http://dx.doi.org/10.18775/ijied.1849-7551-7020.2015.15.2004

1Jimisiah J, 2NurTasnim KZ, 3Khairul Firdaus A, 4Sallaudin SH

1 2 3 4University Kuala Lumpur, MITEC, Johor, Malaysia 

Abstract: The rapid grown of urban development in Malaysia has increased the number of grocery retail outlets that provides a variety of products. Due to this situation customers have become accustomed to visits multiple outlets. Retailers have recognized this trend and noticed that customer satisfaction plays a role in their business success. Therefore, it has become important for grocery retail store to identify the factor of customer selection decision. This study was conducted at three selected store, namely Mydin, Giant and Tesco in AlorSetar, Kedah. A sample from 190 respondents was collected using a set of questionnaires. Data was analyzed using summative score analysis, comparative analysis and chi-square independence test. Factors that are found significant are location, facility, process, product quality and value for money. Chi-square is used in measuring the relationship among the supporting factors, age, frequency, and gender and store choice. Thus, several recommendations are presented to improve customer satisfaction and loyalty of their customers

Keywords: Retail Business, Consumer Selection Decision, Retail Success Factor

1. Introduction

The rapid grown of urban development in Malaysia greatly influenced the way of life in which almost every city has at least a supermarket as a convenience to shopping and fulfil consumer demand. The existence of a town or city seems to be not complete without a supermarket or shopping mall.

Centres or malls and shopping arcades is defined as a building that have an arrangement of shops and walkways that allow visitors to walk from shop to shop whether it is covered or not. In the Europe and Australia, it is known as the shopping centre or shops on the sides or roofed street and is commonly referred to as shopping area. In North America, the term ‘complex’ or ‘shopping mall’ is usually applied to structures of a closed grocery store while shopping complex refers to the grocery store outside.

In Malaysia, it includes self-service store offering a variety of products typically larger and have more options that the grocery store includes food products, meat, agricultural products, dairy products, canned and packaged goods as well as various non-food items such as household supplies, pharmacy and care themselves as well as animal feet. It has a large amount of floor space area on one level and usually built near residential areas with parking facilities.

For a hypermarkets, it must have a total floor area of business not less than 5,000 square meter and is only allowed to operate a hypermarkets for every 350,000 population and operate within a radius of 3.5 kilometres from the city centre and residential areas, subject to the approval of the Local Authority, In addition, the hypermarkets are only allowed to operate in the suburbs with a freestanding facility that is standardized such as parking, lounges, restaurants and other public facilities (toilets, telephone, ATMs etc) as well as the landscape. As is generally known, there are many existing supermarkets nowadays such as Giant hypermarkets, Carrefour, Tesco, Jaya Jusco, shopping malls, plazas and other format.

Retail became the main entrance or the last channel for goods before they reach the consumer. It has become an important channel between retailers and consumers. Retail is not just limited to grocery stores only; it covers the entire wholesale and retail activities, regardless of big or small business. There are together 11 kinds of wholesale and retail activities. These include supermarket and mini-markets, specialty stores, convenience stores, need-supply shop, pharmacy, traditional medicine shops, direct selling, hypermarkets, sidewalk shops and petrol stations.

According to the Department or Statistics, Malaysia, wholesale and retail accounted for 11.6% of GDP in 2006. In 2007, this sub-sector contributed an increase of 12.2%. This encouraging development is in line with strong private consumption supported by rising disposable income higher fitness retail trade and the increasing number of tourist arrivals in line with Tahun Melawat Malaysia 2007. Hypermarket showed the greatest growth compared with other types of retailing; it can be seen in the Rancangan Malaysia Kesembilan (RMK9). There were only 22 hypermarkets in Malaysia in the year 2000. But this figure rose to 81 hypermarkets in 2005. This means an average annual growth rate from 2001 to 2005 was 29.8%.

Hypermarket is comprised of both local and foreign. Examples of local hypermarket are Econsave, Mydin and KamdarCheAniza, SitiRahayu, Nor Asiah, 2010).

2. Problem Statement

Foreign operator has chosen Malaysia as their place of target for investment has caused an increasing number of hypermarket owned by them, in which the situation has threatened our local retailer. Most of the foreign entrepreneurs who involved in this retailing industry are highly skilled and have experience in terms of management and they also have adequate capital. This situation created an increasing competition in the retail industry between hypermarket and hypermarket, or local grocery store.

Apart from the company’s strength, other local factors also contributed to this situation. For example, local consumer behavior, consumers are more likely to choose hypermarkets as their first choice when looking to buy existence of a business activity. Thus customer’s level of satisfaction, suggestions or

Complaints should be identified. If customers are satisfied, they will be loyal to the hypermarket and will visit it repeatedly. Retail owners also have to identify their strengths and weaknesses in order to compete with other retailers that have same potential.

According to Siti Aisyah (2004), decision-making style refers to the mental orientation that explains how a consumer or individual makes a choice in buying a product. When deciding the purchase of goods, consumers have a number of dimensions to be considered. There are eight dimensions of the consumer decision-making model have been highlighted. Ti consists of the components of perfection, brand awareness, awareness on the latest fashion, recreation, price consciousness, intuition, confused by the many choices and brand loyalty. There are three issues related to the above dimensions:

  1. The price-conscious users a combination of price and quality dimensions (the means to pay at a lower price with high-quality goods).
  2. Based on user intuition dimension overlaps with brand loyalty behavior in the shopping process (as opposed to each other).
  • Time consciousness overlap with dimensions Recreational.

Retail owners should identify their strengths and weaknesses in order to compete with competitors or a relatively to have very similar potential. In Malaysia, the competition will become more intense as the government adopted free trade that have been agreed upon the nearly every developed and a developing country. There will definitely cause more foreign entrepreneurs to build hypermarkets in Malaysia.

In the context of this study, consumer decision-making style refers to the process of consumer making store selection and ultimately purchase a product or service offered at local and foreign hypermarket. The current study attempts to discover consumers’ store selection and the determinant of the retail store selection decision in Malaysia.

Although there are many studies on store selection, not many studies have been conducted in developing countries such as Malaysia, where the retail landscape is changing with the emergence of new retail formats. Past studies have investigated determinants of retail selection which uncovered factors such as store location, image, atmosphere and service but few studies have distinguished the factors affecting store choice by different product types such as groceries versus shopping goods. From the industry perspectives, better segmentation of the retail market may offer better retail strategies to serve targeted customers.

Additionally, this research sought to identify and analyze the elements of consumer retail selection while focusing on their shopping experiences at 3 different stores, local and foreign store, namely Mydin, Giant and Tesco. The research focused on these stores since they are the typical samples of the most popular shopping channel in AlorSetar. They are influential powerful retailers, large hypermarket and popular grocery store in the area. The geographic area or research was limited to AlorSetar, the state capital of Kedah, only where most of the empirical investigation and data collection was conducted.

Research Objective of this research is twofold. 1) to identity the most preferred hypermarket choice among the three stores; 2) to investigate factors that influence customers’ store choice. Based on the research objective, there are two important research questions to answer:

  1. Which is the most preferred hypermarket choice among the three stores?
  2. What are the factors that influence customers’ store choice?

3. Methodology

In this study, questionnaire was used to collect primary data. The questionnaire was design in bilingual, English and Malay, which consists of structural question (closed ended).

Question used were brief, comprehensive and the use of jargon was avoided to enhance the understanding and interest of respondents. The questionnaires consist of two sections. First section is general question, and second section focus more specific to answer the objective of the research. There are 9 dimensions to be highlighted which constitute to the selection decision of customers under store context. Those are core dimensions which include (I) location, (ii) additional services, (iii) product quality, (IV) store facilities, (V) reliability, (VI) process, (VII) value for money, (VIII) staff, and (ix) personnel service.

Each dimension composed of few elements which described attributes of customer selection decision in more details. There were a total of 19 elements categorized into relevant 9 dimensions as mention previously. For this section, respondents were asked to rate their satisfaction level by using Likert scale, to show the importance of each elements. The scale is from 1 to 5 (1=Very Dissatisfied, 2=Dissatisfied, 3=Neutral, 4=Satisfied, 5=Very Satisfied).

Empirical cases of the research were Mydin, Giant and Tesco respectively. In other words, sampling frame consisted of 3 grocery stores. The population was the customers of the three retailers in AlorSetar. For the next steps, it was decided the sample size for each of the store would be 10% of the day with the highest number of customer. The sampling method used was non-probability.

Table 1: Calculation of Sample

Sample Calculation
MYDIN GIANT TESCO
Day with
highest no of
customer 800 550 700
(fourth
weekend
every month)
Sample (10%) 10% x 800 10% x 550 10% x 700
= 80 = 55 = 70

Theoretical frameworks was based on 9 dimensions with 19 elements overall are put together to determine what are the characteristics of customer selection decision.

1

Figure 1: Theoretical Framework for Element of Customer Selection Decision

4. Results and Discussion

Number of questionnaires distributed at the three stores is as follow:

Table 2: Number of Questionnaires

Store No of No of ‘reject’ No of
Questionnaires questionnaires questionnaire
distributed (**) used for date
analysis
Mydin 80 8 72
Giant 55 3 52
Tesco 70 4 66

Note: ** A questionnaire is classified as ‘reject when respondent choose more than one store.

Customer selection decision is the only variable to be measure in this research. To ensure this element was measure effectively, 9 core question with 9 dimensions were developed, (i) location (B6LOC), (ii) additional services (B6AS), (iii) product quality (B^PQ), (iv) facilities (B6FAC), (v) reliability (B6REL), (vi) process (B6PRO), (vii) value for money (B6VLF), (viii) staff (B6STF), and (ix) personnel service (B6PS). Each dimension has different elements.

Table 3: Elements of customer satisfaction

Lable Name
AGE Age of the respondent
GENDER Gender of the respondent
STORE Store that respondent choose to shop at
FREQUENCY Frequency of respondent visit the store
IMPORTANT Important of the store name to respondent
B1LOC Location
B2AS1 First element of Additional services: Membership card
B2AS2 Second element of Additional services: Parking lot
B2AS3 Third element of Additional services: Baby areas
B2PQ1 First element of Product quality: Freshness of products
B2PQ2 Second element of Product quality: Durability
B2PQ3 Third element of Product quality: Product variety
B4FAC1 First element of Facilities: Clean & spacious atmosphere
B4FAC2 Second element of Facilities: Display & signage
B5REL1 First element of Reliability: Accuracy of receipt/Receipt clarity
B5REL2 Second element of facilities: Correct information of price signs & discount.
B6PQ1 First element of Process: Number of check-out counters/express check-outs
B6PQ2 Second element of Process: Operation hour
B6PQ3 Third element of Process: Waiting time at counters.
B7VM1 First element of Value for money: Competitive price.
B7VM2 Second element of Value for money: Frequency of promotions/discount.
B8STF1 First element of Staff: Friendliness, helpfulness.
B8STF2 Second element of Staff: Knowledgeable staff with quick response
B9PS Personnel service

Score criteria: Each element of Liker Scale has score1 to 5 (1=not satisfied at all; 5 = extremely satisfied). Maximum score for each questionnaire of 19 elements was 105 (19 x 5 = 105). The maximum score for each element assigned by the whole sample of 190 respondents is 19,950.

Summative Score

  • (Score obtained from Mydin’s Customers + Score obtained from Giant’s customers + Score obtained from Tesco’s customers) (72*105) + (52*105) + (66*105) = 19,950

Summative Score Comparison

Table 4: Statistics Sum (SPSS)

2

Summary of Dimension

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Analysis of Other Factors

Regardless of which store customers visits, it could be identified that 71 respondent’s age is in the range of 15-25 years old, 50 respondent’s age is in the range of 26-35 years old, 58 respondent’s age is in the range 36-50 and 11 respondent’s age is more than 50 years old in percentage they are 37%, 26%, 31% and 6% respectively.

70% of the respondents are female which accumulates the value of 133 respondents. Only 30% is male, 57 people. This value indicates the female involve in shopping compared to male.

From the analysis it could be identified that most of the respondent, 43.7% visit store for the purpose of shopping monthly. Followed by 1-2 times per week 29%, almost daily 14% and 13% for 3-4 times per week.

Comparative Analysis of Mydin, Giant and Tesco

According to the sample size of respondent from the 3 stores, the maximum score for each are 360 for Mydin (72*5 = 360), 260 for Giant (52*5 = 260) and 330 for Tesco (66*5 = 330).

Location

For first dimension, location, score obtain for Mydin, Giant and Tesco is 74%, 80% and 78% respectively. This shows that customer prefer to shop at Giant due to its strategies location that is near to the neighbourhoods are, same goes to Tesco. While Mydin is least in this dimension because it is located quite far from the residential area.

Additional Service

First element, additional service, and its element for the first element, member card, Tesco obtain the highest score, followed by Mydin and Giant. Tesco are generally known with their benefits and reward for their club card member, so this attracts customer to register for the card. Furthermore, the card is given for free to customer and points collected could be redeeming for any product in the store. As for Mydin, they also provide member card for their customer for free as well Customer could be a discount of 5% for every purchase of selected item using the card. Giant do not provide any member card, except for those registered for the debit or master card under City Bank, they will get the benefit such as discount for some of the promotion item.

Second element is parking area and again Tesco get the highest score, followed by Giant. All Tesco in Malaysia is well-known with their roofed parking area in which is very convenience to their customer, same goes, to Tesco AlorSetar. Giant Hypermarket in AlorSetar also provides underground parking lot, and large parking area around the building. The third element is baby area. Giant score highest followed by Tesco. This figure is correct as Giant and Tesco in AlorSetar do provide baby area. So customers are more pleased to visit these stores.

Product Quality

Scores for element of product quality, Mydin scores the highest for the three elements that is freshness, durability and variety of product because the store do provide wide range of products, include product from the SME industries, with different brands at a lower price. Therefore customer may choose any of the items they wish to buy.

For Giant and Tesco, they score nearly equal percentage. In conclusion, customer rated Mydin as the best among the three stores in terms of product quality.

Facilities

First element of facilities, clean and large area, and the highest score goes to Giant with 77%, followed by Mydin 76% and Tesco 72%. This shows that customer is more pleased to shop at a place that is spacious and clean, as well as with clear signage. Giant is rated as the clean and spacious store to shop at with the score 75% and it also provide clear signage inside the store as compared to Tesco and Mydin.

Reliability

Element for reliability are clarity of bill and discounts/promotions. It is clear that most customers said that Mydin are more reliable in terms of bills and discounts/promotion. Correct information printed on the receipt as well as corrects price tags for the correct product so that customers will not get confused when choosing product.

Process

The element of process is number of counter/express counter, operating hours and waiting time. For the first element, all the three stores scores almost equal, same goes to the third element. Customers are not satisfied with the number of checkout counter available at the store and the waiting time. Even though the stores do provide express counter, but is seems do not help to speed up the overall process.

For the second element, Mydin obtained the highest score of 80%, followed by Giant 77% and Tesco 73%. Hypermarkets that sell a fresh product like fish, meat, vegetables, dairy products, etc, usually start their business earlier compared to those that do not sells fresh product.

Value for Money

For the first element, Mydin scores the highest of 74%, which indicates that customer-rated Mydin’s price range was more competitive compared to the other stores. Giant and Tesco price range are high and the two stores seldom hold a promotion, as compared to Mydin.

Staff

Customer rated Mydin staff are friendlier, helpful, knowledgeable and quick response compared to Giant and Tesco. Therefore, customers are more satisfied with Mydin, and less satisfied with Tesco.

Personnel Services

Last dimension, personnel services, the highest score goes to Mydin accounted for 69% and Giant get the lowest score that is 63%. Customer felt most satisfied with Mydin store since the staffs give

6. Conclusion

The generalization of findings from the research is however limited due to its small-scale design. A large scale study which includes customers from different demographic and geographic areas may provide more representative findings. Another factor which may contribute to further enrich this area of research is to determine the relationship between social class and retail selection decision (CheAniza et. al.)

Some suggestions that might be relevant to retail industry since most of the respondents feels not satisfied with the process at the store are:

  1. Due to the changing demographics it is a fact that time available at the disposal of the urban consumers is depleting and thereby putting pressure on the available time. With the little time available at their disposal the customers want to optimize time utility. Hence in spite of the fact everything has gone well for the customers in the retail store, any delay at the billing counter is definitely going to have a negative impact on the customers buying experience.
  2. Generally, there is a large crowd on holidays and weekends which put lot of pressure on the existing infrastructure. Therefore to take care of such exigencies the store design should be flexible enough to accommodate and start additional billing counters to take care of the large crowd.
  • The mere sight of long queues in the store can put off the customers and may switch the store anticipating delays at the billing point. This calls on the part of the retailers to avoid such situations and erase the negative perception of the customers.

Separate billing counters to be kept operational for customers with very small purchases. This will result in customer happiness & continued store patronage.

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