AN EMPIRICAL ANALYSIS ON CONSUMER SATISFACTION AND STORE LOYALTY IN ORGANIZED FOOD AND GROCERY RETAILING WITH SPECIAL REFERENCE TO COIMBATORE CITY.

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1 AN EMPIRICAL ANALYSIS ON CONSUMER SATISFACTION AND STORE LOYALTY IN ORGANIZED FOOD AND GROCERY RETAILING WITH SPECIAL REFERENCE TO COIMBATORE CITY. ABSTRACT Mr. L. GOPALAKRISHNAN Assistant Professor, Department of Management Science, PSG College of Arts and Science, Coimbatore DR. S. VARADARAJ Associate Professor of Management, Gobi Arts and Science College, Gobi. Organized retailing provides an ideal shopping experience through consumer preference analysis, excellent ambience and choice of merchandise. Changing lifestyles, strong income growth and favourable demographics are the drivers for the fast growth of this sector. This paper makes an attempt to find answers for store loyalty of customers in organized retail format and to find out the cause and extent of satisfaction of consumers in the outlet. From this study it is evident that no consumer is loyal to one store, this study also found that the following factors: gender, marital status and family size correlate with satisfaction level, the majority of the consumer s loyalty shallow in nature and other results were examined in detail. Key Words: Organized Retailing, Ideal Shopping, Consumer Preference, Ambience, Merchandise, Changing Life Style, Demographic, Consumer s Loyalty, Satisfaction.

2 Introduction Retailing is the largest private industry in India and the second largest employment sector after agriculture. It contributes about 10% to the GDP of India and generates 6-7% of employment. According to Images F&R Research (2007), India has the highest retail density in the world having over 15 million retail outlets. This sector witnessed significant developments in the past 10 years from small, unorganized family-owned retail formats (commonly known as Kirana Stores ) to organized retailing. Organized retailing provides an ideal shopping experience through consumer preference analysis, excellent ambience and choice of merchandise. Changing lifestyles, strong income growth and favourable demographics are the drivers for the fast growth of this sector. Rising income level, education, acceptance of smart and credit cards and global exposure have an impact on the Indian consumer shopping habits (Baser and Laxmi Prabha, 2007). Health and beauty care services, food and grocery, entertainment and catering services, footwear and mobile phones, apparel and fashion accessories and jewellery are the fastest growing organized retail categories. In food and grocery retailing, the largest component of retail, only 1 per cent is organized; the remaining 99 per cent is unorganized. Food and grocery has three Subcategories: branded FMCG products, dry and unprocessed grocery, fresh grocery and delicatessen (Sahani, 2007). Uniquely Indian shopping habits Indian shoppers are very different in many ways from their counterparts elsewhere in the world. First, loyalty is not a virtue with the Indian shopper. Around 60% of the consumers surveyed bought from more than one retailer compared with 10% in Brazil and 24% in China. Indian consumers associate packaged food with lack of freshness and it is not surprising that almost 65% of respondents indicated they will never buy packed fruits or vegetables compared to 24% in China and 6% in the US. Also, shoppers in India place a lot of importance on convenience. Around 64% buyers surveyed said they do not mind paying extra for conveniently located stores, compared with 31% in China. According to the survey, women in India prefer ethnic apparel and jewellery. More than 75% women s clothing and 85% jewellery sold in India are traditional in style and design. Around 38% shoppers in India said they buy clothes mostly for special occasions; only 6% Chinese and 3% Russians are driven by occasions for most of their apparel purchases. Indian shoppers are willing to compromise a bit on food and grocery, the survey says. For instance, 57% respondents said buying a wellknown brand of shampoo is important; while as many as 49% indicated that they were willing to buy lesser-known brands. When it comes to electronic goods, almost 85% shoppers said they would only go with a reputed brand 1. Store Loyalty In simple terms, customer loyalty relates to the proportion of expenditure devoted to a specific brand or store (East and others, 1995). In other words, consumer loyalty can be described as a positive propensity Namex International Journal of Management Research 30 Vol. No.2, Issue No. 1, Jan-June, 2012

3 towards a store or brand (East and others, 2000). A store loyalty customer prefers and visits the same store to purchase certain merchandise. Gaining a customer is a universal goal of competitive business. The reason for this is that it is far easier to retain a satisfied and contented customer, which requires less marketing effort, than gaining a new customer (Muncy, 1983). Loyal customers in the grocery sector spend a large proportion of their budgets in the shops to which they are loyal as compared to the switching customers (Knox and Denison, 2000). And also, customer loyalty can provide the organization with sustainable competitive advantage (Dick et al., 1994; Sivadas at al., 2000). Customer loyalty helps an organization with the opportunity to charge a price premium and very often serves as a barrier to competitive entry (Aaker, 1991). At the same, increasing customer retention is profitable for the organization as repeat purchase provides the opportunity for a relationship to develop between the retailer and the customer (Mittal and Kamakura, 2001; Zeithaml et al., 1998). Thus the retailers objective is to increase customers store loyalty. Understanding why consumers patronize one store over another is important. Many marketing researchers have paid great attention to consumers; frequency of shopping or repeat visiting behavior for its positive association with store loyalty and effect on store s profitability. A loyal consumer to a particular store has a tendency to give that store a priority visit in any shopping event. Studies have also shown that there is a positive relationship between customer loyalty and store s profitability of the loyal customer (Oyvind Helgensen, 2006). Review of literature: Mridula.S.Mishra and Umakanth Dash have undertaken a research with the intention to explore the way organized retail has dramatically changed not only the Indian traditional retailing structure but also the consumption behaviour. The findings were; the hypermarket/malls/supermarkets are the stores preferred by the consumers, even though consumers tend to buy from several establishments and not exclusively from the organized retail outlets, which indicates that there was no single loyalty. While in organized outlets, consumers buy essentially convenience goods with low level of risk, in traditional outlets, they buy products of more involvement, which requires a more complex buying behaviour. Finally consumers primarily focus on the convenience factors while shopping and select a store based on the convenience it offers. Bloemer. J, Ryter de K and Wetzels. M were empirically showed, across four different types of service industries, that loyal is indeed a multidimensional construct consisting of loyalty to the company, the propensity to switch, the willingness to pay more, the external response to the problem and the internal response to the problem. In a comparison of convenience stores, and the supercenters, (Carpenter and Moore, 2006) demonstrated that, smaller households tend to patronize traditional neighbourhood markets rather than travelling to larger grocery shopping venues such as supercenters. In the light of all the above it is proposed that, the family size should Namex International Journal of Management Research 31 Vol. No.2, Issue No. 1, Jan-June, 2012

4 be positively related to a patronage of supercenters (and away from convenience stores). Fiona M. Davies, Mark M. H. Goode, Luiz A. Moutinho and Emmanuel Ogbonna have studied the UK supermarket behaviour, by analyzing the antecedent variables of three critical factors: overall levels of consumer satisfaction, number of trips to the supermarket and the amount spent. A neural network approach predicts these factors using ten input variables and three hidden nodes. The result showed that the most satisfied and high spending customers tend to be those who have the income to take full advantage of the choice and quality offered. Other customers are more concerned with price being reasonable and discount available, but the satisfaction of these shoppers is also linked to store atmosphere. Hotniar Siringoringo and Anacostia Kowanda carried out a research to analyze consumer shopping behaviour in different retail formats such as their shopping intention, attitude towards modern retail outlet and shopping habit. Data was collected from five different retail formats consumer, i.e. Hypermarket, Supermarket, Departmental Store, Mini Market and Convenience Store. The findings were there was no difference in this behaviour among hypermarket, supermarket and mini market. Furthermore they found that attitude towards retail outlet and shopping habit influences shopping intention. Research Methodology: The overall objective of this is to examine the customer satisfaction and store loyalty in the organized food and grocery retailing. Specific research objectives are as follows: 1. To elicit the store loyalty of customers in organized retail format. 2. To find out the cause and extent of satisfaction of consumers in the outlet. 3. To know the reason why consumers prefer organized retail outlets. 4. To suggest suitable strategy to improve the sales in organized retail. Data Collection The present study is based on an empirical analysis of retail customer s demographic variables like age, family size, income levels, occupation, education in organized food and grocery retail formats. The study is based on primary data as well as secondary data. The population of this study is organized retail customers in the city of Coimbatore in India. Respondents were selected by using the disproportionate stratified convenience sampling method and participation was voluntary. A total of 800 customers was surveyed and only 780 customers responded and returned the survey instrument. This is a 96.1% response rate. Out of this, only 750 were usable as 30 were rendered unusable because of incomplete data. A total sample size of 750 was made up with 250 respondents from the organized supermarket (Nilgiris, More and reliance fresh), 250 from departmental store (Kannan department) and 250 from hypermarket (Big Bazaar) located in Coimbatore. Data Analysis and Interpretation Namex International Journal of Management Research 32 Vol. No.2, Issue No. 1, Jan-June, 2012

5 1. Age and level of satisfaction towards food and grocery stores Table No. 1: Age and level of satisfaction towards food and grocery stores S. No. Age No. of Respondents % Average 1. Up to 20 yrs yrs yrs Above 40 yrs Total From the above table it is found that the respondent aged upto 20 years have perceived maximum level of satisfaction than the other age group of the respondents. H 0 : There is no significant relationship between age and level of satisfaction towards food and Table No. 2: CHI-SQUARE TEST Factor Calculated 2 Value Table Value D.F Remarks Age Not Significant It is divulged from the above table that the calculated chi-square value is less than the table value and the result is not significant. Hence the hypothesis, age of the respondents and the level of satisfaction towards food and grocery stores are not associated holds good. From the analysis, it is found that there is no close relationship between the age of the respondents and their level of satisfaction towards food and 2. Gender and level of satisfaction towards food and grocery stores Table No. 3: Gender and level of satisfaction towards food and grocery stores S. No. Gender No. of Respondents % Average 1. Female Male Total From the above table it is found that the female respondents have perceived maximum level of satisfaction than the male respondents. H 0 : There is no significant relationship between gender and level of satisfaction towards food and Table No. 4: CHI-SQUARE TEST Factor Calculated 2 Value Table Value D.F Remarks Gender Significant at 1% level Namex International Journal of Management Research 33 Vol. No.2, Issue No. 1, Jan-June, 2012

6 It is stated from the above table that the calculated chi-square value is greater than the table value and the result is significant at the 1% level. Hence the hypothesis, Gender of the respondents and the level of satisfaction towards food and grocery stores are not associated does not hold good. From the analysis, it is found that there is a close relationship between the gender of the respondents and their level of satisfaction towards food and 3. Educational qualification and level of satisfaction towards food and grocery stores Table No. 5: Educational qualification and level of satisfaction S. No. Educational qualification No. of Respondents % Ave rage 1. Below HSC HSC UG PG No formal education Total From the above table it is found that the respondents who educated till higher secondary level have perceived maximum level of satisfaction than the other respondents. H 0 : There is no significant relationship between educational level and level of satisfaction towards food and TABLE NO. 6: CHI-SQUARE TEST Factor Calculated 2 Value Table Value D.F Remarks Educational qualification Not significant It is noted from the above table that the calculated chi-square value is less than the table value and the result is not significant. Hence, the hypothesis, educational qualification of the respondents and the level of satisfaction towards food and grocery stores are not associated holds good. From the analysis, it is found that there is no close relationship between educational qualification of the satisfaction towards food and grocery stores. Store Loyalty: Most retailers would like to have a hard core of loyal customers who continue to visit frequently to their outlets. Generally this is achieved but whether there are enough of these customers, and whether they are the right customers. The following table supports to evaluate the loyalty of the customers. Namex International Journal of Management Research 34 Vol. No.2, Issue No. 1, Jan-June, 2012

7 Table No. 7: The level of the store loyalty of the customers Stage of Loyalty Mean SD Cognitive Affective Conative Action Total The store loyalty of the customers in Coimbatore city is discussed in the above table. It is found that the Coimbatore city customers behavior conscious with cost and benefit (Cognitive loyalty) with the mean score of 3.10 followed by the consumer conscious with satisfaction (Affective Loyalty) with the mean score of 2.33, consumers like to recommend to other people and repurchase (Conative loyalty) with the mean score of 1.96 and finally the consumers have frequencies of visit (Action loyalty) with the mean score of From the study, it is found that most of the consumers are having the behavior of Cognitive Loyalty. Store Preference: Henry Garrett ranking technique is used to find out the reason why consumer prefers organized retail outlet. TABLE NO. 8 - Factors Preferred By The Respondents S. No. Factors Total Mean Score Score Rank 1 Convenience of location & Time I 2 Availability of store brand & Variety of branded products III 3 Value for money II 4 Parking facility V 5 Services (Return policy, Home Delivery, Bagging, etc.) IV 6 Clean and serene ambience VI 7 Friendly staff VII 8 One stop shopping VIII 9 Loyalty card X 10 Promotion and offer XI 11 Quality of Product IX It is found that the consumer expects convenient and value for money and hence prefer the organized retail outlet. Major Findings: between the age of the respondents and their level of satisfaction towards food and There is a close relationship between the gender of the satisfaction towards food and between educational qualification of the respondents and their level of satisfaction towards food and between educational qualification of the respondents and their level of satisfaction towards food and Namex International Journal of Management Research 35 Vol. No.2, Issue No. 1, Jan-June, 2012

8 between occupation of the satisfaction towards food and between monthly income of the satisfaction towards food and It is found that there is a close relationship between the marital status of the respondents and their level of satisfaction towards food and between the nature of the family of the satisfaction towards the use of food and There is a close relationship between the family size and level of satisfaction towards the use of food and There is no significant relationship between the preference of shopping and level of satisfaction towards the use of food and between the frequency of shopping per month of the respondents and their level of satisfaction towards the use of food and between the purchasing range of each time in shopping of the satisfaction towards the use of food and between favourite shopping days of the satisfaction towards the use of food and There is a close relationship between the preference of shopping hours and level of satisfaction towards the use of food and The majority of the consumer s loyalty is shallow in nature. Major Suggestion: No consumer loyal to single store. Hence it is suggested to have a proper CRM program to retain the customers. Identifying the gender requirement is an important criteria Consumers are interested in shopping in the less crowd environment. Hence, it is to suggest having a quick check out counter. Marital status influences the consumer satisfaction. Hence understanding requirements of married and bachelors are advisable. More branches can be constructed as consumers expect convenient to shop. Conclusion: This study can provide insights to the modem food and grocery retailers on how the consumer in Coimbatore perceives their satisfaction and store loyalty. An important factor which can lead to increased loyalty at the organized retailers is customer relationship management activities like loyalty bonus/discounts, special customer cards, free-parking facility and so on. It was found that there is an association between satisfaction and gender. This will give us opportunity to explore the requirements of male and female separately. REFERENCES: Aaker D. A (1991), Measuring brand equity across product and markets, California Management Review, 38 (2): pp Namex International Journal of Management Research 36 Vol. No.2, Issue No. 1, Jan-June, 2012

9 Baseer, A. and Laxmi Prabha, G. (2007). Prospects and Problems of Indian Retailing, Indian Journal of Marketing, 37 (10), Bloemer. J, Ryter de K and Wetzels. M Linking perceived service quality and service loyalty: A Multidimensional Perspective, European Journal of Marketing, 1999, Vol. 33. pp Carpenter, J. M. and Moore, Marguerite, Consumer demographics, store attributes, and retail format choice in the US grocery market. International Journal of Retail & Distribution Management, 2006, Vol. 34, Issue.6, pp Dick A and Basu K, (1994), Customer loyalty: towards an integrated conceptual framework, Journal of the academy of marketing science, 22 (2): pp East R, Hammond K., Harris P & Lomax W, (2000) First-Store loyalty and retention, Journal of marketing management, 16: pp East R, Harris p., Wilson G & Lomax, W. (1995), Loyalty to supermarkets, International review of retail, Distribution and Consumer Research, 5 (1): pp Fiona M. Davies, Mark M. H. Goode, Luiz A. Moutinho and Emmanuel Ogbonna Critical factors in consumer supermarket shopping behaviour: A neural network approach., Journal of consumer behaviour, Vol.1, Issue.1, pp Hotniar Siringoringo and Anacostia Kowanda Consumer shopping behaviour among modern retail formats, GITAM Journal of Management, Jan-Mar 2009, Vol.7, No.1,pp ces/documents/indiaretail_q pdf Knox SD, Denison TJ (2000). Store loyalty: its impact on retail revenue: an empirical study of purchasing behaviour in the UK. J. Retail. Consum. Serv. 7: Mittal V and Kamakura W (2001), Satisfaction, repurchase intent and repurchase behavior: investigating the moderating effect of customer characteristics, Journal of Marketing Research, 38 (1), pp Mridula. S. Mishra and Umakanth Dash Importance of retail service attributes: A study on Indian consumers, The ICFAIian Journal of Management Research, 2008, Vol. VII, Issue. 2. pp Muncy J. A (1983) An investigation of two dimensional conceptual brand loyalty, PhD Thesis, Texas Tech. University. Oyvind Helgensen (2006), Are loyal customers profitable? Customer satisfaction, customer (Action) loyal and customer profitability at the individual level Journal of Marketing Management, 22, pp Sahani, P.B. (2007). Consumer Buying Behaviour and Food Retailing, Marketing Mastermind, (December), Sivadas E, and Baker-Prewitt J (2000), An examination of the relationship between service quality, customer satisfaction and store loyalty, International Journal of retail & distribution management, 28 (2): pp Zeithaml V. A (1988) Consumer perceptions of price, quality and value: A means-end model and synthesis of evidence, Journal of Marketing, 52 (3), pp Namex International Journal of Management Research 37 Vol. No.2, Issue No. 1, Jan-June, 2012

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