Factors affecting the outlet selection decision for everyday household needs

1. Introduction

An empirical study to assess the factors affecting the outletselection decision for everyday household needs is conducted by theresearcher to understand the decision issues related to selection ofoutlet.

1.1. Background

In the past decade countries in the subcontinent have undergonemajor transformative changes in terms of their political, economicand social structures. The transformative changes in the countrieshave triggered creation of new progressive cultures and also ensuredfaster integration with the global culture both at a microeconomicand a macroeconomic level. The higher incidence of global traveland the advent of Global media in the local television space,amongst many other triggers, have caused a paradigm shift in theconsumer culture. These socio economic changes have ensured a clearand rapid shift in consumer preferences – seeking global standardsboth in the product and the purchase experience.

Globalization on the other hand has also ensured the launch ofGlobal power brands and marketing practices in the region. We seethis revolution touching various aspects of the economy – but theimpact is more pronounced in sectors like telecom and retail thanmany others. Retail could be ranked as the one of the most impactedsectors in the wave of globalization. A more demanding consumer,entry of international entities into the region and the pressures ofcompetition have all cumulatively added to ask for a change in theconsumer retail dynamics.

It is also becoming a phenomenon in Bangladesh that some giantretail investors like Agora, Nandan, Family Needs, PQS, Pricehouseetc. are trying to cope with these changes by offering new form ofservice, layout and product offerings but within a very limitedgeographic coverage. The success of such effort is yet to be provedas they are still operating in an unprofitable niche market.

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In order to gain a mass appeal in retail industry, it is very muchobligatory to understand the consumers and their way of selecting anoutlet for shopping.

1.2. Problem Identification

The entire business proposition of retail depends on shoppers’decision on selection of outlet for shopping. In order to have afavorable position in the shopper’s mindspace it is critical for themarketer to understand – what are the factors that influence theshoppers’ decision of selection of a place for shopping? The factorscan be controlled to win the customers. If we want to control thefactors, first we need to measure them. We need to understand howstrongly a factor can influence the decision of the shopper. Thisresearch developed a perspective of such measurement in the contextof daily household needs.

1.3. ObjectivesThe primary objective of this research is to explore and identifythe factors that influence the decision of selecting an outlet.

The secondary objective of this research is to develop and test amodel that can explain the relationship between the decision and thefactors that influence the decision on selection of outlet.

1.4. Scope of the research

The scope of this research is limited to retail outlet only thatdirectly serve the consumer/ end user. The scope is further limitedto the buying decision of everyday household needs such asperishables, commodities, and personal and household effects. Theresearch will be conducted in Dhaka city only due to limitation oftime and cost.

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2. Research Framework

As the context is made earlier, it is very clear that, shoppers’selection of an outlet to retailer is as important as consumers’selection of a brand to manufacturers. Digging down into thequestion of outlet selection could not favor much in this researchas there is very little information available on the subject area.Thus, some desk studies have taken place, prior to primary survey.

Del I. Hawkins identified that selection of outlet take the sameprocess as selection of product- problem recognition, informationsearch, evaluation of alternatives, select an outlet, and post-purchase satisfaction (repeat purchase). The intensity of shopper’sinvolvement in this buying process depends on knowledge, attitude,and philosophy of the shopper which ultimately determines the outletselection decision. A recent study by Quantum Market Researchrevealed that a highly involved shopper always looks for the “bestdeal” while shopping. They have also seen to be always preferred togo to the same outlet.

This implies that the intensity of selecting an outlet depends onthe personal level involvement of the shopper- the psychographiccharacteristics. The research from Quantum also revealed that thereare 5 segments of shoppers based on their involvement. Shopping isthought to be a reflection of status for the shoppers who involvehimself with shopping the most. For the next tier of shoppers,shopping is an enjoyable experience. To a moderately involvedshopper, shopping is winning. Shopping is just making the mostwithin a given budget to the shoppers whose involvement is very low.And the lowest involved shoppers think that shopping is nothing buta duty.

Hawkins also outlined few evaluation criteria used by consumers toselect an outlet. The criteria include i) image, ii) advertising,and iii) location and size. The outlet image is further defined withmerchandise, service, physical facilities, convenience, promotion,store atmosphere, reputation, and satisfaction.

Price plays a major role especially when the product is commoditycategory. As price of same product sometimes differs from outlet tooutlet, it has become a determinant factor in outlet selection.

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Considering this fact price discount is a commonly used tool by theretailers to attract consumer. In some cases, such discount isregularly offered through membership card by large retailers. Inorder to compete in the market, the grocery and corner stores offerbargain and credit option to the customers.

The product quality is also a major determinant factor, whichinfluence the selection of an outlet. In fruits and vegetablecategory freshness is an indicator of quality. The shoppers look forvisible proof to get a perception of quality. It differs for eachproduct and even shopper’s experience. For company goods, it is thebrand which represents quality. The hygienic presentation of productgives indications to shoppers regarding the quality of the product.In addition to this, sellers experience on a particular category isalso important to a shopper.

The trust factor of a store is also very important to a shopper.This includes primarily the personal relationship with the salesperson. In many cases the shoppers depends on trust for guaranteedquality, lower than market price, and accurate weight/quantity.

Finally, good experience reinforces a shopper to visit an outlet infuture. The experience can come from product, service or the storeitself. Product experience includes abundance of choice with manyverities, pick and choose option, and sample for taste for newitems. Home delivery, return option, and good salesmanship are theelements of service experience. Apart from product and serviceexperience, the store experience also plays a significant role tomake shopper’s choice. The store experience includes comfortableenvironment, large in size, interior decoration, organized shelves,and good merchandising.

Conceptual Framework

From the above discussion we can easily identify a dependentvariable and four independent variables. Following functionalrelationship can be drawn from the below equation:

Decision of selecting an outlet (y) = [Price (x∫ 1), Quality (x2),Trust (x3), Experience (x4)]

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Dependent Variable

Decision of selecting an outlet

Independent Variables

Price (Low price, Price discount, Bargain ability, Membershipand Credit facility)

Quality (Fresh, Visible proof, Branded, Hygienic, and Seller’sexpertise)

Trust (Guaranteed quality, Lower than market price, Accurateweight/ quantity, and Personal relationship)

Experience (Abundance of choice with many verities, Pick andchoose, Sample for taste, Home delivery, Return option, Goodsalesmanship, Comfortable environment, Large in size, InteriorDecoration, Organized shelves, and Good merchandising)

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3. Research Methodology3.1. Research Design

The research was conducted in two phases. The first phase was aqualitative research where the subject area was explored to identifythe factors that influence the decision of selection of an outlet.The outcome of this phase will be a model comprising of a dependentvariable (the decision) and few independent variables (factors thatinfluence the decision). A number of hypotheses are developed inthis phase.

The second phase included a quantitative research where the modeland hypotheses was tested to understand the relationship among thevariables.

3.2. Sampling Procedure

The sample size was derived using one of the statistical methods forsampling. The most frequently used formula for deriving sample sizeis used where: n = pq(z/e)2

‘n’ is the required sample size, ‘p’ is a certain proportion in theuniverse, which if not specified, is taken to be 50% (p=0.5); ‘q’ isthe reciprocal of ‘p’; ‘z’ is the confidence probability of theestimates (at 95% confidence probability, the table value for ‘z’ =1.96); and ‘e’ is the tolerable error of the estimates, which inthis case is taken to be +/- 10% (‘e’ = 0.1). As per thecalculation, the sample size came to ‘n’ = 96 or 100 (rounded).This, therefore, was the sample size for this research.

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4. Research Findings

This section describes the findings from the primary survey.

4.1. Characteristics of the respondents

Among the respondents near half (51.8%) are found male (Graph4.1.1), majority (63.4%) of the respondents have completed post-graduation (Graph 4.1.2), most (79.5%) of the respondents areservice holder (Graph 4.1.3), majority (57.1%) of the respondentshave monthly household income above 25,000 (Graph 4.1.4), andmajority (46%) are aged between 31 to 35 (Graph 4.1.5).

Graph 4.1.1: Distribution of Sex of the respondents

Male52%

Female48%

Graph 4.1.2: Distribution of Educational Qualification of therespondents

HSC and below3%

Graduate34%

Post Graduate63%

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Graph 4.1.3: Distribution of occupation of the respondents

Business10%

Service80%

Housewife9%

Student2%

Graph 4.1.4: Distribution of income of the respondents

11k-15k5%

16k-20k15%

21k-25k22%

25k+57%

Graph 4.1.5: Distribution of the Age of the Respondent

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30 and below29%

31 to 3546%

36 to 4019%

41 and above5%

4.2. Selection of outlet

The research findings revealed that people tend to investigate forthe best deal before they buy something. The intensity ofinvestigation has a mean value of 8 with a standard deviation of1.9. The graph 4.2.1 shows that 62.5% of the respondents rated theirintensity of searching best deal 8 and above on a 10-point scale.This implies that selection of an outlet for shopping is ajudgmental decision for food and grocery category.

Graph 4.2.1: Distribution of respondents based on their intensity ofinvestigation

1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

70%

We also understand that people has a moderate to high tendency to goto same outlet for daily household needs. The intensity of going tosame outlet has a mean value of 7.4 with a standard deviation of1.7. As per Graph 4.2.2, 49% of the respondents rated theirintensity 8 and above. This shows that there is some degree of storeloyalty among the respondents.

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Graph 4.2.2: Distribution of respondents based on their preferenceof selecting outlet

1 to 3 4 to 7 8 to 100%5%

10%15%20%25%30%35%40%45%50%

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The research shows that a large portion of the respondents (39%)goes for shopping considering that an enjoyable experience where tosome 22% thinks shopping is all about winning in market place (Graph4.2.3). To some 19% of the respondents shopping is a symbol ofstatus (Graph 4.2.3). This implies that experience seeker customersare the biggest portion in the market. The retailer’s primary targetshould be this segment of customers.

Graph 4.2.3: Distribution of respondents based on segmentation

Duty9%

Budget11%

Winning22%Experience

39%

Status19%

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4.3. Importance of price

Among the attributes which affect price of the product, low price isthe most important attribute (mean 7.08) to the shoppers followed bymembership card (mean 7.04), discount scheme (mean 6.98), creditoption (mean 6.36), and bargain ability (mean 6.21) (Graph 4.3.1).This shows that price promotion is the best weapon for a retailerwhich can be either direct or indirect form.

Graph 4.3.1: Distribution of respondents based on influence of pricefactors in outlet selection

Price Discount Bargain Member Credit 5.60

5.80

6.00

6.20

6.40

6.60

6.80

7.00

7.20

The research shows that low price stores do not have any advantageover distance (mean 4.04). Only 5.4% of the respondents rated 8 andabove for travelling distance to find a discount store. This impliesthat proximity has a major factor in a retail business (Graph4.3.2).

Graph 4.3.2: Distribution of respondents based on preference ofdiscount stores

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1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

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4.4. Importance of quality

When it is the question of quality, freshness comes top ofeverything (mean 9.1) followed by hygienic condition (mean 8.9),visible proof (mean 8.6), branded (mean 8.2) and expertise (mean8.1) (Graph 4.4.1). This proves that shoppers look for fresh andhygienic product, which are an essential for good taste. No retailershould miss out this by any chance.

Graph 4.4.1: Distribution of respondents based on influence ofquality factors in outlet selection

Fresh Vis. Proof Branded Hygienic Expertise 7.40

7.60

7.80

8.00

8.20

8.40

8.60

8.80

9.00

9.20

For daily household product most of the respondents prefer relevantto higher quality of product. Graph 4.4.2 shows that 69.6% of therespondents rated 4 to 7 in quality scale. This shows that althoughquality is not sacrificed but premium quality does not alwaysdesirable.

Graph 4.4.2: Distribution of respondents based on preference ofrelevant quality

1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

70%

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The research shows that proximity has a weak advantage over qualityof the product (mean 4.54). In the Graph 4.4.3, 85.7% of the peoplerated between 4 to 7 for travelling distance to find qualityproducts. This implies that for the sake of quality, people may wishto go distance outlet. This is an advantage for organized retailerwho can bring better quality product using strong supply chainnetwork.

Graph 4.4.3: Distribution of respondents based on preference ofquality over distance

1 to 3 4 to 7 8 to 100%10%20%30%40%50%60%70%80%90%

Preference of Quality Over Distance

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4.5. Importance of trust

The research findings revealed that the trust for an outlet ismostly endorsed by guaranteed quality (mean 8) (Graph 4.5.1). Thetrust is also endorsed by accuracy in weight or quantity (mean 7.9),comparable lower price (mean 7.6), and personal relationship (mean7) (Graph 4.5.1). This implies that even a variable like trust alsostarts with quality parameter. In the context of Bangladesh whereconsumers are being cheated by the retailers, we are seeing thatquality and accurate weight is coming high. This also indicates thatconsumers know that they are being cheated in these two case.

Graph 4.5.1: Distribution of respondents based on influence of trustfactors in outlet selection

Gurantee Lower price Accurate weight Personal relationship

6.40

6.60

6.80 7.00

7.20

7.40

7.60

7.80

8.00

Influence of Trust Factors

The research shows that respondents have a preference towards fixedpriced outlet (mean 7.2). Graph 4.5.2 shows that, 55.4% of therespondents rated between 4 to 7 and 42.9% rated 8 and above whileshowing their preference towards fixed priced outlet. This is aclear indication that consumers do not have any trust on the pricethey are paying in bargain outlet. This is also an opportunity fororganized retailers to fix their price competitive with bargainoutlet.

Graph 4.5.2: Distribution of respondents based on preference offixed over bargain price

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1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

Preference of Fixed Over Bargain Price

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The research also shows that trusted outlet has almost equaladvantage with distance (mean 5.12). In the Graph 4.5.3, 69.6% ofthe people rated between 4 to 7 for travelling distance to findtrusted outlet.

Graph 4.5.3: Distribution of respondents based on preference oftrusted outlet over distance

1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

Preference of Trusted Outlet Over Distance

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4.6. Importance of experience

An experience for a consumer comes from product, service and store.The research findings indicate that abundance of choice with manyverities is a major influencer of product experience (mean 7.5)followed by pick and choose option (mean 7.04), and sample for taste(mean 6.96) (Graph 4.6.1). This is one advantage that wet-market hasover organized retailer. Consumer wants to have abundance and plentyof choice which a single individual retailer will not be able togive.

Graph 4.6.1: Distribution of respondents based on influence ofproduct experience factors in outlet selection

Verity Pick n' choose Sample for taste 6.60 6.70 6.80 6.90 7.00 7.10 7.20 7.30 7.40 7.50

Influence of Product Experience Factors

The findings explained in Graph 4.6.2 shows that home deliveryoption is a major influencer of service experience (mean 7.49)followed by return option (mean 7.43) and good salesmanship (mean6.94). Ho

Graph 4.6.2: Distribution of respondents based on influence ofservice experience factors in outlet selection

Home delivery Return option Good salesmanship 6.60 6.70 6.80 6.90 7.00 7.10 7.20 7.30 7.40 7.50

Influence of Service Experience Factors

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The research findings reveled that comfortable environment is amajor influencer of in-store environment (mean 7.82) followed bylarge space (mean 7.53), good merchandising (mean 7.21), organizedshelf (mean 7.14) and interior decoration (mean 6.75) (Graph 4.6.3).

Graph 4.6.3: Distribution of respondents based on influence of in-store experience factors in outlet selection

Environment

Size

Interior

Organized shelfs

Merchandising 6.20

6.40 6.60 6.80 7.00 7.20 7.40 7.60 7.80 8.00

Influence of In-Store Experience Factors

The research also shows that good shopping experience does not haveadvantage over distance (mean 4.11). Only 1% of the people rated 7and above for travelling distance to find good shopping environment(Graph 4.6.4).

Graph 4.6.4: Distribution of respondents based on preference ofexperience over distance

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1 to 3 4 to 7 8 to 100%

10%

20%

30%

40%

50%

60%

70%

Preference of Experience Over Distance

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4.7. Overall importance

In this research we saw that quality has an average score of 35.13,followed by price 22.63, trust 24.11 and experience 17.32 (Graph4.7.1).

Graph 4.7.1: Distribution of factors based on their importancetowards respondents in outlet selection

Price Quality Trust Experience -

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Importance of Factors in Outlet Selection

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4.8. Empirical findings

Table 4.8.1 shows a significantly strong correlation (correlationcoefficient 0.788 in 99% level of confidence) between quality andselection of outlet. This implies that quality is a strong parameterfor the selection decision of an outlet. We also see that there is amoderate correlation between trust and selection decision and priceand selection decision.

Table 4.8.1: Correlation coefficient of variables

Selection Price Quality Trust Experience

Selection 1

Price 0.508 ** 1

Quality 0.788 ** 0.679 ** 1

Trust 0.553 ** 0.391 ** 0.527 ** 1

Experience 0.429 ** -0.047 0.199 ** 0.072 1

The regression model also shows a strong dependency (R2 = 0.728)between dependent variable “selection of outlet” and independentvariables price, quality, trust and experience. The coefficients areas follows:

Variable B

(Constant) - 6.872

Price .048

Quality 1.095

Trust 0.330

Experience 0.428

The conceptual of this research was:

Decision of selecting an outlet (y) = [Price (x∫ 1), Quality (x2), Trust (x3), Experience (x4)]

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We can fit the identified coefficient in the above model which willcome to:

y = -6.872 + .048 x1 + 1.095 x2 + 0.330 x3 + 0.428 x4

5. Concluding remarks:

This is very clear from the study that quality is the top mostconsideration for the shopper while shopping for food and groceryitems which also include perishable like vegetable, fish, meat andfruit. These items are directly consumed by the family and qualityis a major issue for health. In a country like Bangladesh wheremodern trade is still unpopular, quality is still ignored bymajority of the retailer. This research can be an eye-opener forthem.

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Factors affecting the outlet selection decision for everyday household needs

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