Impact of supermarkets on retail customers
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 5478 words||✅ Published: 1st Jan 2015|
1.1 Today the field of marketing performs in a very competitive world, which is like a battle field fighting with each other to attract customers in the forms of new company or due to a lapse of customers. Many different of customers are needed in order to sustain the brand as well as the company in the market.
1.2 Opposite to traditional business practices there is a huge extent of synergy that is needed while the raw materials are supplied for the process from the plants. Thereafter, it will go to the hands of the end consumer and this chain of distribution constitute with the numbers of the independent organizations.
1.3 These parties operate in channels of many kinds of degrees which contribute to a wholesaler at one time and a retailer in another time. In addition, the importance of a strong retail sector is a must for any country to distribute the benefit of the economic process that has taken place in the country itself. Therefore, the retail sector has become a necessity of any society.
1.4 The supermarket concept was initiated in Sri Lanka with the departmental store namely of Cargill’s and Millers, which was during the colonial period of Sri Lanka. The supermarkets initially started in 1980’s but the expansion appeared from 2000 onward. Today, the supermarket industry is at the growing stage of its industry life cycle. There are around 600 supermarket outlets. The major outlets offer i.e. FMCG products. The major supermarket chains that are dominating the industry are; Cargill’s Food City and Keels super. In addition to the above major supermarket chains there are other supermarket chains such as Sentra, Kings Super, Arpico, Sun Up, Park & Shop, Crystal and Prince Super to name a few. In addition to the major supermarket chains, there are a lot of single owner, self service and retail outlets operating all over the country.
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1.5 Retailing is an industry that has been growing rapidly over the past decade and is also contributing a significant amount for the Sri Lanka’s GDP. There are several major supermarket chains that have emerged, especially for food and grocery items. The supermarkets are and have been popular over the past. The private supermarkets chains are rapidly growing in the country and are driven to urban areas and as well as in the past five years the supermarket concepts have expanded to the city limits. This has taken place due to the changes of lifestyles of the retail customers and due to the new social circle of the wealthy people in the outstation areas. The newly acquainted lifestyles of the people require them to seek such services.
11.6 In the Western Province there are number of supermarkets that has been already established and the grocery owners are a little bit scared about whether their will be a collapsed with the starting of the supermarkets. However, the customers are still patronising the traditional groceries. This research is done in order to find, “to what extent have the supermarkets replaced the marketing assortment elements offered by the traditional grocery shops of the retail consumers in Sri Lanka.”
STATEMENT OF THE PROBLEM
1.7 There are number of supermarkets that have been already established and the grocery owners are a little bit scared about, whether there will be a collapse in the groceries with the starting of the supermarkets. However, the customers have not totally ignored the traditional groceries. The Sri Lankan retail market customers use presently both the grocery stores as well as the supermarkets. Both the supermarkets and the groceries are facing a greater danger of switching the customers among the supermarkets and the groceries. The strategies adopted by the groceries are to introduce the supermarkets and the strategies adopted by the supermarkets are to copy the groceries. The retaining of customers is either a matter of surviving or destroying both supermarkets and groceries.
Our issue can be defined as;
“To what extent has the supermarkets replaced the marketing assortment elements offered by grocery shops for the retail consumers in Sri Lanka.”
SCOPE OF THE STUDY
1.8 The focus of the research is to find out whether the supermarket culture has an impact on their customers behaviour towards the traditional grocery shops in Sri Lanka. The scope of the study is limited to geography and 100 retail customers have been selected from the Colombo District, Western Province of Sri Lanka. The method of the study chosen is convenience sampling design.
1.9 Sri Lanka is still on the convenience store phase with marketers like Keells and Cargills and expanding supermarket chains to more towns in the country. The supermarkets two or three years ago were limited to the capital. Most local supermarkets focus on groceries and food items. The groceries were the main retail distributor for decades in Sri Lanka and the major source of FMCG for the retail customers. The grocery owners were a little bit in fear about whether there will be an end with starting of the supermarkets. The customers used both the sources and the customers who went to supermarkets came back to the grocery store again. While a number of supermarkets chains have increased there is no evidence to find out if a significant number of groceries have closed down. Also some of the grocery stores do practice operations in similar fashion to the supermarkets. These incidences promote the researcher with interesting study material “to what extent the supermarkets have replaced the marketing assortment elements offered by the grocery shops for the retail consumers in Sri Lanka.”
1.10 To identify how the customers recognize the mix of the marketing elements arrangements by the supermarkets and the grocery shops.
1.11 The specific objectives are;
1.11.1 To study the present situation of the grocery shops.
1.11.2 To study the present situation of the supermarkets in Sri Lanka.
1.11.3 To evaluate the customer satisfaction of the mix of marketing elements within the supermarket and the grocery shop.
Marketing element mix offered by the traditional grocery shops for the retail customers has not fully replaced by the Supermarkets in Sri Lanka.
ORGANIZATION OF THE PAPER
1.13 The first chapter introduces the Subject and the Objectives. The chapter two consist of the Hypothesis, Statement of the Problem, Scope of the Study, Data Collection, Methods, Sampling, Limitations, Constraints and Literature Review. The chapter three contains the Findings, Statistics. The chapter four is about Discussion and Arguments. The chapter five contains the Findings and chapter six is the Conclusion and the Recommendations will be included in chapter seven.
2.1 The primary data gathering is done by using a survey method. The convenience sampling method is used with a help of a questionnaire. The sample for primary data gathering is from the retail customers of the Colombo District in Sri Lanka.
2.1.1 Primary sources will include interviews, focus group discussions with a several consumers and economists.
2.1.2. Secondary Sources of information is gathered from the Annual Reports of the Central Bank of Sri Lanka and from relevant web sites.
2.2 From the total population that consists of all the retail customers in Sri Lanka, a sample of 100 respondents were selected using the convenience sampling method from the Colombo District, which represents the highest number of groceries and supermarkets in Sri Lanka.
DATA COLLECTION METHOD
2.3 The main source of data collection is by issuing a self-administered questionnaire with the details gathered from the retail customers in the Colombo District.
2.4.1 The availability of time to conduct this research was only 3 months. In depth results could be obtained if research time period was extended.
2.4.2 The sample size was limited only to 100 respondents.
2.4.3 The scope of the research was limited only to the Colombo District.
HISTORY, PAST AND PRESENT STATUS OF THE SUPERMARKERTS
2.5 Under this chapter; History, past and present status of groceries and supermarkets will be discussed.
HISTORY OF SUPERMARKETS
2.6 Supermarkets existed in Latin America from at least the 1960s1, but began to grow more rapidly in that region during the economic boom and opening of the Foreign Direct Investment (FDI) in the 1990s. The growth of it began later in East/South East Asia and the Central Europe (Reardon et al, 2004).
2.7 A more cautious view regarding the likely rate of supermarket expansions were expressed early in Asia and over the past two years in Asia, Africa and even Latin America. Goldman et al., 1999, identified the “persistent continued strength of ‘wet markets’ in Hong Kong”3, despite that city’s developed economy; they attribute this strength to these traditional markets’ and the adoption of consumer shopping habits. Goldman (2000) was one of the first to identify consumers’ “selective adoption” of supermarkets, whereby the “consumers who regularly shop in supermarkets continue to purchase fresh food at the traditional outlets”; these findings echo those of others showing continued retail diversity even where most supermarkets have expanded. Maruyama et al.,2007, also see strong growth, but cite serious challenges for supermarkets into lowering their prices and enhancing the convenience of their location, both of which are key factors for the great mass of consumers in Africa and Asia.
RETAIL PERFORMANCE IN SRI LANKA
2.8 In 2009, all major sectors of the economy contributed positively to the economic growth. The largest contributor to this is the wholesale and retail trade sub-sector, meanwhile, the services sector recorded only a growth rate of 1.1 per cent during the first half of 2009, this was largely due to the contraction in the wholesale and retail trade and the hotels and restaurants sub-sectors, amidst the overall slowdown of economic activity.
SUPERMARKET SECTOR OF SRI LANKA
2.9 The supermarket concept was initiated in Sri Lanka with the departmental store namely Cargill’s and Millers, which was during the colonial period of Sri Lanka. The supermarkets initially started in the 1980’s but after year 2000 onwards, the expansion appeared. Today, the supermarket industry is at the industry’s growing life cycle stage.
2.10 In the last ten years, a major improvement in the retail sector has been observed in Sri Lanka. The super-marketing has come to stay together with the excellent footwear, clothing and electronic retailing norms amongst others. The traditional trade (kade’s) has also been upgraded, in order to compete with the modern retailing norms. The Sri Lankan consumers have been influenced by the Western lifestyles and hence, now demand a greater convenience. The supermarkets and other modern trade outlets offer a wide range of products under one roof. Hence, the consumers need of greater conveniences are met. The consumers also demand good quality products at affordable (value-for-money) prices. The modern trade is in a great position to fulfil this requirement as well. The majority of consumers patronizing the modern trade outlets are upper and upper middle class income earning consumers. These consumers are more “brand” conscious and hence, are able to fulfil this need by shopping at supermarkets, hypermarkets and other modern retailers. The consumer lifestyles are also changing with a greater degree of westernization, a comfortable shopping experience is desired. Hence, the modern retail formats can provide this consumer requirement.
CUSTOMER SATISFACTION AND DEFECTION ATTRIBUTES IN RETAILLING FORMATS
2.11 A study was conducted to compare and contrast customer perceptions related to satisfaction with the conventional grocery stores as compared to the specialty grocery stores. The study examines store attributes of product assortment, price, quality and service in order to determine which attributes have the greatest satisfaction and defection. The perception of satisfaction was higher among the specialty grocery store customers compared to the conventional grocery store customers. For both store formats; the store price, the product assortment, the service and the quality has positively influenced satisfaction. The stepwise regression indicated that each store attribute, contributed differently to the store satisfaction for conventional and specialty store formats. (Patricia et al, 2009).
2.12 Smaller grocery stores in Malaysia are seen as offering more personal services (Osman et al.,1988) but with inadequate stocks and facilities (Moreira, 2003); a contrast to the larger retailers which are seen as offering better merchandise of choice and public amenities (Moreira, 2003) but with standardized and non-personalized service (Osman etal.,1988). As the competition is higher in the urban sector the number of hypermarket are at the highest (Izwan et al., 2002), grocery stores should be looking for strategic options to increase their patronage. Indeed, retaining the current customers leads to a gradual increment in the retailer’s customer base and profits gained from the customers grow with the loyalty of them (Sirohi et al., 1998).
2.13 The quality of service has been seen as a critical for the service firms to position strongly in a competitive environment (Parasuraman, et al., 1985; Shemwell et al., 1998; Mehta et al., 2000) and also as indicators of business performance (Hurley et al., 1998). When faced with larger and powerful retail competitors, the smaller stores could compete instead by improving the service than by competing on the price (Klemz et al., 1999). Concentrating on the quality of service is seen as critical in the markets that offer similar products in stores (Berry, 1995), this is commonly seen in the grocery retail stores. Hoffman & Bateson (2001) defines service quality as an attitude “formed by a long-term, overall evaluation of a performance”. The attitude is defined as “a consumer’s overall enduring evaluation of a concept or object, such as a person, a brand or a service.” (Arnauld et al, 2002) The service quality as “an attitude” is consistent with the views of Parasuraman et al., (1988), Cronin & Taylor (1992) & Sureshchandar et al., (2002).
2.14 For a retail store, the tangibility aspect will be critical as the retailers offer a mix of merchandise and service quality (Dabholkar et al., 1996). Specifically, the physical environment plays an important role in the service encounter of the grocery industry (Keillor, et al., 2004).The importance of physical environment in a service setting is due to its ability to influence consumers attitudes (Koernig, 2003), behaviour intentions (Keillor, et al., 2004) and the behaviour (Bitner, 1992; Koernig, 2003). As customers are involved in the production and consumption process of a service conducted within a physical environment, the physical environment will have a deep impact on the customers’ perception of the service experiences (Bitner, 1992) and the noted physical environment has often been used as cues of a firm’s competencies and quality by the consumers before a purchase. Specifically, the proper layout in a store will reduce a shopper’s search time (Sirohi et al., 1998) and the colour combined with lighting was suggested to “affect the consumers’ cognitive representation and for an affective reaction” (Babin et al., 2003) and a light and pleasing scent affects the shoppers’ perceptions of the shopping environment in which the latter will have a significant effect on shoppers’ mood (Chebat and Michon, 2003). Parasuraman et al. (1988) called it the “tangibles” adding appearances of staff besides the physical facilities and equipment. Baker (1986) and Santos (2002) acknowledged the appearance of staff as part of the tangibles, Feinburg & de Ruyter (1995) in their cross Dabholkar et al. (1996) proposed a new dimension to “problem solving” which was not addressed in SERVQUAL. This dimension-incorporated the store’s willingness to handle returns and exchanges shows a sincere interest in solving the customers’ problems and store personnel’s ability to handle customer complaints immediately and directly.
2.15 The retail stores should include the measure of the service quality and product quality, as retail stores offer a mix of services and products Brady & Cronin (2001) shared this view. Personal relationships and problem solving dimensions will contribute significantly to the overall service quality measure of a small-sized grocery store. The physical aspects and inter-personal relationship dimensions contribute significantly to the overall service quality measure of a medium-sized grocery store and the physical aspects, reliability and policy dimensions will contribute significantly to the overall service quality measure of a large-sized grocery retailer.
2.16 Smaller stores have been viewed negatively by customers as having crammed spaces, expensive products, product run outs and narrow product range (Uusitalo, 2001). The Malaysian consumers faced inconveniences such as, insufficient parking facilities, inadequate stocks, price discriminations, excessive profiteering, getting short-changed in weight of products sold and unsatisfactory service” (Moreira, 2003, ). On the other hand, the medium-sized grocery stores or the more modern supermarkets, capture the sales of food items due to the shopping comfort and parking facilities (both related to service quality) although the prices of the similar items maybe relatively higher than the smaller stores (Osman & Ismail, 1989). The “personal interaction” and “physical aspects’ were the only two important determinants in the respondent’s evaluation of the service quality of a supermarket (Mehta et al, 2000). The other dimensions namely “Policy”, “Problem solving” and “Reliability” were found not to be important in the measure of the service quality for a supermarket (Mehta et al, 2000).
2.17 The existence of large format of retailers said to have caused losses on the level of service to the community due to the closure of the traditional stores (Arnold and Luthra, 2000). The larger store chains are been seen as giving more anonymous and standard self-services (Odekerken et al., 2001). The size of the physical environment had been seen as a factor for influencing the extent of social interaction between and among customers and employees (Forgas, 1979). The size of the larger store itself would prevent the store from focusing on the “process and social aspects of the retail encounters” (Odekerken et al., 2001). The larger stores were perceived as requiring more time and effort due to the extensive walking and searching (Klemz & Boshoff, 2001). Nevertheless, the hypermarkets which are larger, tends to offer lower prices, provides more efficient climatically-controlled shopping area and more consistency in its service offering as compared to the supermarkets (Arnold and Luthra, 2000). The large store chains emphasize and compete based on a wide and deep mix of merchandise (Klemz & Boshoff, 2001; Odekerken et al., 2001). The larger grocery stores provide convenience as large amounts of goods can be purchased during one shopping trip and can easily be transported by car (Klemz &Boshoff, 2001). This convenience is supported by the increased mobility as consumers have more choices as where to shop and how much to shop (Clarke, 2000).
2.18 Sometimes the chains also offer higher prices than the wholesale market prices to the producers who meet their standards; a little systematic information exists about this point, but in general we have found that the premium is around 10 to 15 percent, just enough to meet the additional costs implied by the chains and meeting the standards. But sometimes no price premium is offered: (Moreira, 2003).
2.19 The supermarket chains are locked in a struggle with the other chains. In a highly competitive industry with low margins they seek constantly to lower the product, the transaction cost and the risk .The results show the super-centres can gain from 15 to 20 percent from the primary shoppers and an even greater proportion from the secondary shoppers. Furthermore, the super-centre primary shoppers, especially those of Wal-Mart and Meijer, identified as low price and assortment more often as the reason for store choice. In comparison, the traditional supermarket primary shoppers were less willing to trade off the location convenience or in some cases, quality and assortment. The Wal-Mart is predicted to continue, to rapidly gain share at the expense of the competitors who do not differentiate themselves in some significant way.
NEW TRENDS IN SUPERMARKETS
2.20 The tidal wave of Foreign Direct Investment in retail was mainly due to the global retail multinationals. These trends of multi-nationalization and consolidation fit the supply function of our supermarket diffusion model. The global and retail multinationals have access to investment funds from their own liquidity and to international credit that is much cheaper than the credit that is accessible by their domestic rivals. The multinationals also have access to the best practices in retail and logistics, some of which they have developed as proprietary innovations. The global retailers adopt retailing and procurement technology generated by their own firms or increasingly, via joint ventures with the global logistics multinationals. When domestic firms have competed, they have had to make similar investments; these firms either had to enter joint ventures with global multinationals or had to get low-cost loans from their governments or national bank loans.
THEORIES RELATING TO SUPERMARKET SECTOR
2.21 Supermarkets have been traditionally viewed as the rich world’s place to shop by the development economists, policymakers and practitioners .The three regions discussed here have a great majority of the poor on the planet. However, the supermarkets are no longer just a niche for the rich consumer players in the capital cities of the countries in these regions.
2.22 The rapid rise of the supermarkets in these regions in the past 5 to 10 years has transformed the agricultural food markets, albeit the different rates and depths across the regions and countries. Many of these transformations present great challenges, even inclusion for small farms, processing and distributing firms, but also potentially great opportunities. The development models, policies and programmes need to adapt to this radical change. In supermarkets the “demand incentives” side forces to include urbanization, with the consequent entry of women into the workforce outside the home, which increased the opportunity cost of women’s time and their incentive to seek shopping convenience and the processed foods to save cooking time and the supermarkets often in combination with large-scale food manufacturers, which reduced the prices of the processed products.
On the “demand capacity” side, several variables were key factors. The real mean per capita income growth in many countries of the regions during the 1990s, along with the rapid rise of the middle class, increased the demand for processed foods, and the entry point for the supermarkets increased as they could offer greater variety.
It was the lower cost of these products that changed the then traditional retailers due to economies of scale in procurement. The rapid growth in ownership of refrigerators during the 1990s meant the ability to shift from daily shopping in traditional retail shops to weekly or monthly shopping. The growing access to cars and public transport reinforced this trend.
MARKERTING MIX ELEMENTS
2.23 Traditionally the marketing mix consists with four Ps, which includes, price, place, promotion and product. Nowadays service is an integral part of any product. The 4 Ps marketing mix has been expanded and the other Ps, which include are people process and physical evidence.
The 7Ps of the marketing mix can be discussed as follows:
2.23.1 Product – It must provide a value to a customer but does not have to be tangible at the same time.
2.23.2 Price – Pricing must be competitive and must entail profit. The pricing strategy can comprise discounts, offers etc.
2.23.3 Place – It refers to the place where the customers can buy the product and how the product reaches out to that place.
2.23.4 Promotion – It includes the various ways of communicating to the customers of what the company has to offer.
2.23.5 People – People refer to the customers, employees, management and everybody else involved in.
2.23.6 Process – It refers to the methods and process of providing a service and hence it is essential to have a thorough knowledge on whether the services are helpful to the customers.
2.23.7 Physical (evidence) – It refers to the experience of using a product or service. When a service goes out to the customer, it is essential that you help him see what he is buying or not.
3.1 The data collected through the questionnaire will be presented and analyzed using descriptive statistics and percentage analysis.
Figure – 3.1 Product Prices, Survey Data 2010
Figure 3.1 depicts the levels of customer agreement with the statement 01 in the questionnaire which is, ”the product prices of supermarkets are lower than groceries”.43% of respondents disagreed and 25% strongly disagreed. Total disagree responses were 68% out of the sample. On the other hand there were 16% customers who are neutral about the product prices. Out of the sample the total agreed were 16% (11%+05%). When concerning about statistics, the concluding remarks can be presented as most customers did not agree with prices offered by the super markets for the grocery items and concluded that the prices of groceries has not been replaced by the super markets in Sri Lanka.
Figure – 3.2 Employee response to customer request Survey Data 2010
The employees respond quickly in the supermarkets over groceries has tested and in figure 3.2 depicts that 44% (27%+27%) disagree with the statement and 38% of the customers agreed (25% +13%) and 08% customers were neutral out of the total sample. This is evident in the quickness provided by the groceries have not replaced by the supermarkets.
Figure – 3.3 Supermarket availability Survey Data, 2010
Figure 3.3 depicts the statement of ”supermarket availability is convenient to me over grocery” and 54% of the respondents disagreed and 31% gave positive responses and 15% neutral responses regarding the availability of supermarkets. These statistics reveals to us that the supermarket still have not replaced the groceries in terms of availability in Sri Lanka.
Figure – 3.4 Locations of supermarkets, Survey Data 2010
61% (40%+21%) customers were not agreeing with the locations of the supermarkets. Meanwhile 29% gave positive responses regarding the locations of supermarkets and 10% neutral responses. Still in the Sri Lankan scenario, the supermarkets have not been replaced by the convenience of locations as groceries.
Figure – 3.5 Parking facilities, Survey Data 2010
Figure 3.5 shows the test results of the statement of ”Parking facilities are enough in the rush times in the supermarkets over groceries”. 53% (37%+16%) of customers were dissatisfied regarding the parking facilities and 28% of customers were satisfied regarding the parking facilities and 19% customers were neutral regarding the above matter. It can be proved that the parking is not yet up to the required levels in the supermarkets.
Figure – 3.6 Queues of supermarkets, Survey Data 2010
No queues in the supermarket counters over groceries depicted by the figure 3.6, 28% of customers were dissatisfied and 25% of customers were strongly dissatisfied about the queues in the supermarket counters. More than 50% of customers (53%) disagreed with the counters and on the other hand there were 19% of customers who were neutral regarding the statement. The convenience of the counters has not yet replaced the groceries by the supermarkets.
Figure – 3.7 Customer Relationships, Survey Data 2010
Figure 3.7 shows the test result of the statement “as Personal relationships with grocery people can be maintained by the supermarket employees” and 88% of customers disagreed with the statement (36%+52%). The personal relationships with the customer and grocery owner will not be protected in the supermarket.
Figure – 3.8 Credit availability, Survey Data 2010.
Figure 3.8 depicts, 85% of customers agreed that the customers expected credit base for their purchases and they are not visiting the supermarkets since there is no credit facilities but in grocery they are dealing with the grocery owner and he/she is ready for credit needs of customers.
Figure – 3.9 Customer loyalty, Survey Data 2010
Figure 3.9, belongingness and customer loyalty depicts 76% of customers agrees that the customer loyalty is more with the grocery and the supermarkets has not replaced it.
Figure – 3.10 In store environment, Survey Data 2010
Figure 3.10 depicts 28% of customers totally disagreed and 44% disagreed regarding as in store environment of groceries are attractive over supermarkets. The total responses were 72% disagreed stating that they are prefer more of the in store environment of super markets over grocery.
Figure – 3.11 Service Quality of Supermarkets, Survey Data 2010
Figure 3.11 depicts the service quality offered by grocery is high over the super markets. 85% of customers disagreed and particularly due to the tangibility and the in store environment.
Figure – 3.12 Availability of Product Verities in groceries, Survey Data 2010
Figure 3.12 depicts, the test results of “varieties are not available in grocery”.56% of customers disagreed saying verities are available as their needs are for a day-to-day necessities.
Figure – 3.13Products quality of supermarkets over grocery, Survey Data 2010
Figure 3.13 depicts customers were 53% of the respondents have not agreed with grocery items saying that the supermarkets use refrigerators for storing fruits, vegetables and fish. (19%+34%), 43% of customers agreed with the product quality in the supermarkets.
Figure – 3.14 Customer views on replacement of supermarkets by groceries in Sri Lanka, Survey Data 2010
Figure 3.14 depicts majority of customers 86% (23%+63%) said that even the supermarkets are one of the substitutes for the traditional groceries and the groceries have not been replaced by the supermarkets in the Sri Lankan context. 18% of customers agreed that the traditional groceries has been replaced by the super markets.
3.2 Many of the elements considered for the analysis have reported that the Marketing Mix Elements offered by the traditional grocery shops for the retail customers has not fully replaced by the Supermarket in Sri Lanka. The hypothesis can be proved with the above analysis.
DISCUSSION AND ARGUMENTS
4.1 The product prices of supermarkets are lower than groceries were tested and 68% of the customers disagreed with the price of supermarkets. Even though supermarkets have many ways and means to reduce the price over groceries, they add some value for the environment, maintenance, electricity etc and sti
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