Literature Review for Woolworths Research - Essay Example

Literature Review Literature Review Introduction The retailing industry has continued to expand both in brand and competitiveness. Understanding factors that determine how customers choose to shop in retail stores is important for such retails in determining the kind of promotional activities that such a store would employ to not only attract customers but also leverage the organization’s competitive advantage further (Briesch, Chintagunta, & Fox, 2009; Bell, Corsten, & Knox, 2011). Such factors mainly play a critical role in determining how to increase customer loyalty. For a large organization as Woolworth which faces intense competition from other rival stores such as Coles’ group, understanding factors that determine customer’s choice is imperative in critical promotional activities. A search through literature reveals that quite a number of studies have evaluated such factors which impact how customers choose to shop (Wel, Hussin, Omar, & Nor, 2012; Chen & Hsieh, 2011; Briesch, Chintagunta, & Fox, 2009; Bell, Corsten, & Knox, 2011). This section reviews relevant literature on this subject. First, it starts by factors that which impact customer store choice, then evaluates the promotional activities in retail stores that are built on customers store choice behavior, and finally identifies Woolworths’ competitive strengths and promotional activities. Factors that impact customer’s store choice Marketing scholars and practitioners have long agreed that the factors which determine a customer’s decision to shop in a specific store is integral as it not only where customers choose to shop, but also what they shop and how much of it they buy (Briesch, Chintagunta, & Fox, 2009). The key factors identifies that influence customer’s store choice behavior include store price, store assortments, convenience in location, availability and variety of merchandise (one stop shopping), value added store services, personal interaction, physical appearance and promotional activities in the such stores (Wel, Hussin, Omar, & Nor, 2012; Chen & Hsieh, 2011; Suher and Sorensen, 2010; Hui, Bradlow, & Fader, 2009; Tang, Bell, & Ho, 2001; Briesch, Chintagunta, & Fox, 2009). All these, Bell, Corsten and Knox (2011) notes positively affect a consumers choice on what stores to shop. Briesch, Chintagunta, and Fox (2009) note that shoppers’ store decisions are highly influenced by assortments which is the image of the store. This factor comes third after location convenience and low prices. Assortment size may be in terms of a broad ray of products and the retail price formats which may be either promotional pricing format (Hi-Lo) where prices changes with changing seasons, or it may be every day price format (EDLP) where prices are lower than competitors. Indeed in their analysis of price formats on store patronage, Bell, Ho and Tang (1998) showed that customers often traded off between lower prices and convenience where, they would most likely visit a Hi-Lo store when they are purchasing less, and hence convenience beets price or they would most likely choose EDLP stores when they are purchasing more irrespective of the location of the store, hence low price beats convenience. Briesch, Chintagunta, and Fox (2009) affirm this by showing that customers would be willing to travel a considerable distance to stores that have a wide assortment of products and low price to make their purchases. However in overall, assortments have a stronger impact than prices in choosing stores to shop. For instance, the researchers found that the number of brands offered in a store had a positive influence on customer choice of retail stores. Value added services such as loyalty cards, home delivery, after sale service, discounts among others also influence a customer’s store choice (Thenmozhi & Dhanapal, 2012). Indeed Thenmozhi & Dhanapal, (2012) affirmed that value added services are a critical driver of consumer store selection. However, some customers may do all their shopping at a single store, some may tend to choose stores where they purchase different items at a good bargain for each (cherry pickers). Such cherry pickers tend to study store promotional materials keenly before choosing a store so that they can understand where they can get the best bargain (Fox and Semple, 2002). While past research studies have focused on supermarket and grocery stores as a whole when studying consumer store selection none has yet evaluated the factor that impact customers to choose Woolworth. This research study seeks to fill this gap in knowledge. Promotional activities in retail stores based on customers store choice behavior A search through literature showed that most promotional activities are often based on consumer behavior and most of these seek to create value to consumers and encourage purchase decisions (Hassan, 2012). As noted above, store choice behavior is often determines by factors such as price, convenience of location, store assortments, availability and variety of merchandise (one stop shopping), value added store services, personal interaction, and physical appearance (Wel, Hussin, Omar, & Nor, 2012; Chen & Hsieh, 2011; Suher and Sorensen, 2010; Hui, Bradlow, & Fader, 2009; Tang, Bell, & Ho, 2001; Briesch, Chintagunta, & Fox, 2009). Such factors influence the kind of promotional activities that a firm uses in order to influence customers to visit their stores. For instance the store price format used a store influences strategies that are used. Often most supermarkets promote and position their business by offering either short term temporary price reductions on a number of products or offering everyday low prices (Ellickson and Misra, 2008). Key promotional activities which Thenmozhi and Dhanapal (2012) showed was based on the value added factor that drives consumer store choices included services such as loyalty cards, home delivery, after sale service, discounts among others. Felgate, Fearne, DiFaco, and Martinez (2011) in their regression analysis of 1.4 million shoppers who use loyalty cards, noted that the use of loyalty cards significantly impacted the promotional decisions within grocery stores. Notably, such loyalty card enables stores to understand shopper characteristics and hence help in determining promotional activities which customer store selection. Furthermore, since customers earn loyalty points from such cards which they can later redeem, customers tend to repeat purchases from the same stores (Wen-Cheng, Ying-Chang, & Ying-Chien, 2009). The success and rapid diffusion of EDLP strategy within the supermarket industry as a promotional tool targeting price sensitive customers (Ellickson and Misra, 2008), has also been a key success factor for Woolworths. However, with major retailers now competing on pricing resulting to price wars, it is imperative that Woolworth set itself apart and determine what promotional tool it needs to elevate even more based on why customers visit the store. Woolworths’ competitive strengths and promotion activities Woolworths Limited is a leading retail store operating in Australia and New Zealand. It’s mass merchandise ranging from food, fuel, liquor, and electronics among others. The company has taken strong measures to enhance the value perception of the store in the market amid strong competition in the market. Some of the strengths of the company are that it has a stronger market position and supply chain to improve value proposition of the company. The more integrated supply chain implies low operating cost for the company, and hence helps the company to adopt an EDLP promotion (Marketline, 2012)). This promotion activity is important in retaining price sensitive customers as well as driving strong sales performance. For instance, its ‘smart value’ and ‘get it for less’ promotions emphasize its low prices with the company positioning itself as a leading company in terms of price. This is one of the core competitive advantages the company has. The supply chain management in Woolworths offers it competitive advantage in terms of replenishment of stock, distribution and display which also ensure that products are in the right shelves at the time customers need. Even further, its wide array of private label products are core strength even as private label products continue to be accepted by customers. Most of these products are often on sale offers (Marketline, 2012). Conclusion In conclusion therefore, from the review of literature, it can be noted that factors such as price, convenience of location, store assortments, availability and variety of merchandise (one stop shopping), value added store services which determine how customers choose to shop in retail stores are important in determining the kind of promotional activities that such a store would employ to not only attract customers but also leverage the organization’s competitive advantage further. There have been a wide range of research into this topic, none has so far investigated why customers choose to shop at Woolworth and how such knowledge influences Woolworth’s promotional tactics. This research seeks to fill this gap in knowledge. References Bell, D.R., Corsten, D., & Knox, G. (2011). From Point of Purchase to Path Purchase: How Preshopping Factors Drive Unplanned Buying. Journal of Marketing, 75, 31-45. Bell, D.R., Ho, T.H., and Tang, C.S. (1998). Determining Where to Shop: Fixed and Variable Costs of Shopping, Journal of Marketing Research. Briesch, R.A, Chintagunta, P.K., and Fox, E.J. (2009). How Does Assortment Affect Grocery Store Choice?. Journal of Marketing Research, 46, 176-189. Chen, H. & Hsieh, T. (2011). The Effect of Atmosphere on Customer Perceptions and Customer Behavior Reponses in Chain Store Supermarkets. African Journal of Business Management, 5(24), 10054-10066. Retrieved September 20, 2012 from http://www.academicjournals.org/ajbm/pdf/pdf2011/14Oct/Chen%20and%20%20Hsieh.pdf Ellickson, P.B. & Misra, S. (2008). Supermarket Pricing Strategies. Marketing Science, 27 (5), 811-828. Felgate, M., Fearne, A., Difalco, S., and Martinez, M.G. (2012). Using Supermarket Loyalty Card to Analyze the Impact of Promotions. International Journal of Market Research, 54(2), 221-240. Fox, E.J., & Semple, J. (2002). Understanding “Cherry Pickers:” How Retail Customers Split Their Shopping Baskets. Edwin L. Cox School of Business, Southern Methodist University. Hassan, A. (2012). The Value Proposition Concept in Marketing: How Customers Perceive the Value Delivered by Firms-A Study of Customer Perspectives on Supermarkets in Southampton in the United Kingdom. International Journal of Marketing Studies, 4(3), 68-88 Hui, S.K., Bradlow, E.T., & Fader, P.S. (2009). Testing Behavioral Hypothesis Using an Integrated Model of Grocery Store Shopping Path and Purchase Behavior. Journal of Consumer Research, 36, 478-494. Marketline (2012). Company Profile: Woolworths Limited. Retrieved September 20, 2012 from Business Complete Database, Ebscohost.com. Suher, J. and Sorensen, H. (2010). The Power of Atlas: Why In-Store Shopping Behavior Matters. Journal of Advertising Research, 21-30. Tang, C.S., Bell, D.R., & Ho, T.H. (2001). Store Choice and Shopping Behavior. California Management Review, 43(2), 56-75. Thenmozhi, S.P. and Dhanapal, D. (2012). Store Choice Behavior in Retail Outlets. Global Management Review, 6(2), 10-24 Wel, C.A., Hussin, S.R., Omar, N.A., & Nor, S.M. (2012). Important Determinant of Consumer’s Retail Selection Decision in Malaysia. World Review of Business Research, 2(2), 164-175. Wen-Cheng, W., Ying-Chang, C., & Ying-Chien, C. (2009). A study of Customer Loyalty Program in Chinese Retail Supermarket. International Journal of Business and Management, 4(11), 85-95. Read More