Merchandise Vs. Facility-Driven Services: Relative Role in Consumer Choice of Supermarkets in Singapore

ABSTRACT - This paper examines the notion that supermarkets, while offering a core product, also provide augmenting services. Customers are not just purchasing merchandise at fair prices when they shop at a store, but are also buying the various services that are provided by the facility. The results of a survey of Singaporean shoppers suggest that while the core product of supermarkets is important, the augmenting services are, perhaps, even more so. Implications for managers and future research are discussed.

Citation:

William C.M. Tan and Subhash C. Mehta (1994) ,"Merchandise Vs. Facility-Driven Services: Relative Role in Consumer Choice of Supermarkets in Singapore", in AP - Asia Pacific Advances in Consumer Research Volume 1, eds. Joseph A. Cote and Siew Meng Leong, Provo, UT : Association for Consumer Research, Pages: 160-164.

Asia Pacific Advances in Consumer Research Volume 1, 1994      Pages 160-164

MERCHANDISE VS. FACILITY-DRIVEN SERVICES: RELATIVE ROLE IN CONSUMER CHOICE OF SUPERMARKETS IN SINGAPORE

William C.M. Tan, Nanyang Technological University

Subhash C. Mehta, National University of Singapore

ABSTRACT -

This paper examines the notion that supermarkets, while offering a core product, also provide augmenting services. Customers are not just purchasing merchandise at fair prices when they shop at a store, but are also buying the various services that are provided by the facility. The results of a survey of Singaporean shoppers suggest that while the core product of supermarkets is important, the augmenting services are, perhaps, even more so. Implications for managers and future research are discussed.

INTRODUCTION

Retailers are in the business of facilitating market transactions. The retailer takes possession of a physical product and then resells it, serving as the distribution channel for some seller or group of sellers. The primary role of the retailer is hence that of a seller, providing services to consumers who may desire to purchase a particular product.

The way consumers select and evaluate retail outlets has long been the focus of much academic research. Considerable attention has been directed to the way consumers think and feel about a store, as consumers tend to seek retail outlets that fit their own self image, or best meet their needs (Martineau 1958; Lindquist 1974; and Mazursky and Jacoby 1986). Consumers' attitudes towards the store, contribute or determine which store the consumer will patronize (Monroe and Guiltnam 1975). This attitude is based on the importance consumers place on salient store attributes such as location, merchandise assortment and service, and their evaluation of these store attributes.

RETAILERS AS SERVICE PROVIDERS

It may be argued that customers of retail outlets, while purchasing goods are also, at the same time, consuming services that form part of the overall offering of the retailer. Hence, a consumer while buying groceries at a supermarket is also "buying" the piped-in music, the check-out facilities, the layout of the store, as well as the ease of movement in the store and locational convenience offered. The services that are consumed will include the atmosphere or ambience of the store, the services provided by sales clerks and other store personnel, the convenience of location of the store, and other "intangibles" offered by the physical facilities.

Retailing has been characterized as a service with high degree of labor intensity, and low degree of interaction and customization (Schmenner 1986), or as a service with some goods, or delivered through goods, with a fairly low degree of consumer/producer interaction (Vandermerwe and Chandwick 1989). These characterizations are especially true for supermarkets, where customers have to perform many of the tasks that traditionally were performed for them, such as the locating of items to purchase, the haulage of the purchase items to the sales clerk for payment, and out of the store, and even, in many cases, the bagging of the items purchased.

Consumers may thus evaluate the offerings of a retail outlet to be consisting of two parts, the core product or "hard" part comprising the components that they actually purchase such as merchandise assortment and pricing, and the intangible or "soft" part comprising items pertaining to services offered by the physical facility.

Consumers will not be attracted to retailers who are not able to provide the core product of an assortment of merchandise at a fair or competitive price, and these retailers will eventually be driven out of business. This "hard" part of the offering however, offers little scope for the consumer to decide between retailers because, as competition increases and the industry matures, the core product sooner or later becomes a commodity and can be easily imitated. All types of merchandise available to one retailer can be easily made available to another retailer. The only exception to this case is perhaps house brands. Even then, competitive advantage will only accrue if the house brands have strong brand equity. Any competitive pricing set, or sales promotion made, by one retailer can also be easily copied by another.

The "soft" part of a retailer's offerings provides more scope for consumers choice making. This is because, with the core product becoming a commodity, the augmenting services will determine store preference. The real choice criteria of shoppers selecting between retailers are not whether goods are available or can be purchased at a fair price. That would be expected, and normally taken for granted. The real choice criteria would more likely be in whether the retail outlet is at a convenient location, has a friendly atmosphere, or has sales staff that are friendly and helpful, and other "intangibles" that are part of the overall offering of the store.

In some retail outlets, such as supermarkets, consumers interact so much with the service facility that the service facility itself may come to be recognized as the service. In these cases, the physical facilities need to be designed such that successful service delivery and satisfying service encounters can occur. Some service theorists (Gronroos 1984; Parasuraman et al 1985) have proposed that consumer perceptions of service quality are the result of the consumer's comparison of expected service with perceived service. They contend that the gaps between expectation and delivery on these dimensions create dissatisfactions. Hence one way for a consumer to choose between retailers is to ensure that the gaps between the expectations and delivery of the "intangibles" of the service facility are minimized.

This study seeks to develop an understanding of the way customers evaluate supermarkets, which has been shown earlier to provide services that are facility-driven. It uses Turley and Fugate's (1992) framework for conceptualizing services that are facility-driven. According to them, facility intensive services have at least five perspectives or dimensions that are associated with them, these being (1) the operational perspective, (2) the locational perspective, (3) the atmospheric and image perspective, (4) the consumer use perspective, and (5) the contact personnel perspective. They contend that satisfaction with the facility-driven service will usually depend upon the customer's ability to interact with the facility and/or its technological core in order to produce a satisfactory consumption experience.

This study uses data from Singapore which offers certain unique features as Singaporean grocery shopping has distinctive features that would be difficult to duplicate anywhere else in the world. Grocery shopping in Singapore is characterized by small purchases, often on a daily basis, and localized shopping, typically within walking distances from home. These shopping patterns are a result of low ownership of cars (about one car for every ten residents), the extremely high population density of the city state, and the availability of many alternative shopping institutions especially the neighbourhood mom-and-pop type grocery stores.

TABLE 1

SAMPLE: PROFILE OF RESPONDENTS

The study will help consumers, as well as retailers, discern the relative importance of the core product of a supermarket, and the "intangibles" of the service facility. The extent that Singaporean customer expectations are met by supermarkets will also be discussed.

METHODOLOGY

This study uses the results of a survey of 885 households in all major housing estates in Singapore. The person who had primary responsibility for grocery shopping in the household was personally interviewed by trained field investigators. Respondents were asked to rate the importance of thirty two supermarket characteristics. Respondents were also asked to rate the performance of their preferred supermarket on the same characteristics.

The attributes of supermarkets considered in the study were drawn from literature review (Lindquist 1974; and Mazursky and Jacoby 1986) and in-depth interviews with both shoppers and managerial personnel familiar with the supermarket industry in Singapore. Thirty two supermarket characteristics were considered sufficiently important by respondents in the pilot study for inclusion in the final study.

The questionnaire was fully structured, and used a 5-point Likert type scale. For measurement of importance, 1 represented the lowest importance and 5 represented the greatest importance. For measurement of evaluation of preferred supermarket, 5 represented excellent service and 1 represented very poor service.

The sample, though drawn on a convenience basis, included a large cross section of Singaporean households. As can be seen from Table 1, slightly more than half were young while about one third were middle aged. The majority were females, and married. Slightly less than half were full time homemakers, with about the same proportion, living in households with five or more persons, or with a car.

RESULTS

A factor analysis, with varimax rotation, was conducted of the ratings of the importance of selection criteria by customers of supermarkets. A seven factor solution, which accounted for 54.6 percent of variance, was obtained. The decision to include a variable in a factor was based on factor loadings greater than 0.40. Only factors with eigenvalues greater than one were retained in the factor solution. The seven factors may be identified as follows:

a. Factor 1: "Environment", accounts for 13.5 percent of variance and consists of variables relating to the physical environment of the supermarket. Variables such as store decor, lighting, atmosphere/ambience and layout, and air conditioning, attractiveness of displays, and advertising effectiveness are included in this factor.

b. Factor 2, "Merchandise and Operations", accounts for 10.9 percent of variance and consists mainly of variables relating to the tangible offerings of the supermarket such as variety and quality of merchandise, availability of desired product lines and desired package sizes. The variables included in this factor also appear to comprehend matters that management can intervene on an immediate, or operational, basis such as fast check-out service, ease of return of merchandise, and low prices compared with other stores.

TABLE 2

FACTOR LOADINGS AND GAPS BETWEEN IMPORTANCE AND EVALUATION OF SUPERMARKET SERVICE VARIABLES

c. Factor 3, "Staff", accounts for 9.2 percent of variance and includes variables relating to the helpfulness, friendliness, courtesy and training of staff, and personalized relations with staff.

d. Factor 4, "Pricing Promotions", accounts for 7.1 percent of variance and includes variables related to "sale" items such as selection/choice, discounts and availability.

e. Factor 5, "Availability", accounts for 5.2 percent of variance and includes variables that are related to the availability of the supermarket such as store hours and locational convenience.

f. Factor 6, "Shopping Ease", accounts for 4.9 percent of variance and has the variables ease of movement in store and ease of finding items.

g. Factor 7, "Image", accounts for 3.8 percent of variance and has the variables reliability and reputation of store in this factor.

The results indicate that these seven factors are closely related to the framework proposed by Turley and Fugate (1992) for conceptualizing services that are facility-driven. Table 2 presents the grouping of the seven factors in the five perspectives, and the results of customer ratings on the importance of the various selection criteria, and their evaluation of preferred supermarkets. Examination of the table reveals the following findings:

a. Customers appear to perceive that even their preferred supermarkets are lacking in the quality of most of the services they offer. The only exception, where supermarkets appear to be providing better than what customers consider to be important, are the environment attributes.

b. Preferred supermarkets appear to do poorly in three factors, which in descending order, are F2 Merchandise and Operations, F5 Availability, and F3 Staff.

c. All the gaps, except for five attributes, are significant. The five attributes for which the gaps are not significant are store layout, store hours, air conditioning, availability of desired package sizes, and reputation of store.

d. The highest gap items are ease of return of merchandise and fast check-out service, which relate to the operational aspects of a supermarket, and locational convenience of the supermarket, followed by attributes associated with staff such as courtesy, friendliness, helpfulness and training of store personnel.

DISCUSSION

This article presents some insights on the concept of facility-driven services and offers a conceptual perspective for consumer evaluation of quality in supermarkets. The empirical results support the conceptualization of supermarkets as facility-driven services whose offerings may be viewed as consisting of two parts, the "hard" core product, and the "soft" part comprising the services offered by the physical facility.

The "hard" part of the offering, which relates to the operational perspective of the supermarket as a facility-driven service, is denoted by two factors, Merchandise and Operations, and Pricing Promotions. These two factors include variables that pertain to the merchandising, pricing, and the other operational aspects of supermarket management, such as accepting returns and opening more counters to speed check-out when needed. This operational perspective of the supermarket explains more variance than any of the other perspectives.

The "soft" part of the offerings of supermarkets are specified by the other four perspectives, namely atmospheric and image, contact personnel, locational or availability, and consumer use perspectives. These "soft" offerings account for about twice the explained variance of the "hard" offerings. The atmospheric and image perspective is expressed by two factors; Environment, and Image. This perspective accounts for a third of the variance explained by the seven factor solution. The other three perspectives, in descending order of importance, account for the remaining third of the variance; contact personnel, locational or availability, and consumer use perspectives.

These results suggest that while the "hard" offerings of supermarkets are extremely important, the "soft" offerings associated with the service delivery process are perhaps even more important in determining if customers' expectations are met, and good service quality achieved.

For the managerial implications of the study, it is apparent that management in supermarkets must act upon both the "hard" and "soft" components of the offerings in order to meet customer expectations and achieve good service quality. In terms of operations, supermarkets in Singapore appear to be underperforming more on items such as fast check-out service and returns policy than on merchandise, pricing or promotion issues. Management needs to concentrate as much effort on other day-to-day operational matters as ensuring that appropriate merchandise is available, and prices and promotions are attractive and competitive.

From the atmospheric and image perspective, the tangible elements of supermarkets such as store decor, lighting, display attractiveness, and overall "atmospherics" were evaluated by customers as better that what was necessary. These tangible elements reinforce the supermarket's positioning and store image, which in turn influence customers' expectations of the quality of service to be obtainable from the store (Gronroos, 1984). The results indicated that while customers did not consider the reputation of preferred store as lacking, the reliability of their preferred store was weak.

The study revealed that while customers considered the elements of the contact personnel perspective as important, personnel in Singaporean supermarkets were very weak in their interactions with customers. Many supermarkets, due to their service offerings not requiring a high degree of contact between staff and patrons tend to ignore the effect of staff's behavior on customers. This, coupled with many of supermarkets' staff that interact with customers being minimum wage personnel, means that management should pay special attention to the quality of service provided by their staff. Management actions should be guided by such characteristics as attitude and competence of staff. Quality standards must be established to reduce the variability in staff performances, and quality improvement programs instituted to ensure that these standards are attained and perpetuated. Employing more full time staff and reducing staff turnover would be other necessary steps.

The locational or availability perspective and the consumer use perspective were found by the study to be unimportant relative to the other three perspectives. However, the gaps between importance and customer evaluation of the elements in these two perspectives were significant. Management needs to investigate the need for convenience by their customers and the economic feasibility of longer or different store hours, and locating stores near certain groups of customers. In this way, appropriate decisions could be made regarding store availability. Management also needs to ensure that supermarkets are designed such that the facilities are easy to use. Adequate signage appropriately positioned at strategic locations within the store and rational placement of merchandise will help in locating items, as will proper consideration of traffic flow within the store and design of aisles to help movement in the store.

CONCLUSION

The study has identified the elements of the "hard" core product, and "soft" augmenting services that are offered by supermarkets. The analysis generated seven factors that in turn could be grouped into five perspectives that reflect the multidimensional nature of service facilities.

The results have important implications for the management of supermarkets. If management can give due attention to the "soft" offerings, it would be easier for a supermarket to achieve competitive advantage. This is especially so since the "hard" offerings of supermarkets are usually not the determinant attributes.

The study is also useful as a basis for further research on shoppers' perception of facilities based retail outlets. It will be interesting to extend the study across national boundaries, and across different types of retail institutions so that some kind of generalizations can emerge.

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