Retail Environment and Merchandising on the Evaluation of Impulse ...

Jurnal UMP Social Sciences and Technology Management

Vol. 3, Issue. 1, 2015

Retail Environment and Merchandising on the Evaluation of Impulse Buying (A Case Study of Department Store Consumer in Malang City, Indonesia) Sumiati Management Department, Faculty of Economics and Business, University of Brawijaya, Indonesia

Nadiyah Hirfiyana Rosita Management Department, Faculty of Economics and Business, University of Brawijaya, Indonesia

Ida Yulianti Management Department, Faculty of Economics and Business, University of Brawijaya, Indonesia

Abstract This research examined the relationship among retail environment, merchandising and impulse buying of department store’s customer in Malang City, Indonesia. It got 200 customers of department store in Malang City as the respondents based on sampling method. The data analysis in this study used Structural Equation Modeling. Based on the research findings, it was confirmed that the retail environment consists of three dimensions (physical environment, features of store and security-cleanness), one dimensionality of merchandising and impulse buying. It has also received a tentative model among retail environment, merchandising and impulse buying in which all of them have positive and significant influence and fulfill goodness of fit criteria. Key word: Retail Environment, Merchandising, Impulse Buying, Department Store. Introduction Retail business becomes a popular one in less economically developed countries such as Indonesia, Thailand, Philippines and so on. Global Retail Development Index in 2015 describes that Indonesia Retail th Business get 12 rank in the world with the total revenue USD 326 billion. This is a huge number compared to other countries. Basically, retail business is quite different with small medium enterprise in the domain of their consumer. Retail business is the economic activity selling a product to final consumer directly while small medium enterprise is an manufacture or service provider that produce only in small quantity. In the concept, there is no distribution channel between retail business and their consumer. Kotler and Keller (2009) described that retailing is all selling activities of goods and services toward the final consumers, not for business user. Department store as one type of retailer sells several product lines. Therefore, department store tends to have larger market share than other types. Despite having a lot of product lines, most of department stores also create comfort shopping environment to encourage consumers spend longer time for shopping. Crawford (1992) proved that the emergence of consumer aesthetic experience is stimulated by the wonderful retail environment. Some consumers use their emotional feeling when shopping in department store. They prefer to visit the department store having comprehensive facilities such as large parking area, safety environment, cleanness store, good store design and layout. In AC Nielsen (2014) research, it confirmed that around 93% of Indonesians looked for shopping centre like department store as a pleasure place for recreation. On the other hand, when customer spends more time in certain stores, they tend to buy additional unplanned products called as impulse buying. A lot of previous research conducted the relationship between retail environment and impulse buying. For instance Bonnin and Goudey (2012) developed the research that confirms the positive relationship among retail atmospheric attributes, utilitarian value and hedonic shopping values. Retail environment is a critical issue in retailing research area due to the influence toward consumer behavior and consumer experience. However, there is also another factor stimulating people to do the impulse buying behavior namely merchandising. Levy and Weitz (1998) have proven that merchandising is a key element in store management. Good merchandising coordination will improve store image, consumer attention, customer shopping experience and also sales revenue (Lam and Mukherjee, 2005). To conclude, this research would examine the “Retail Environment and Merchandising on the Evaluation of Impulse Buying (Case Study of Department Store’s Consumer in Malang City, Indonesia)”. 436


Vol. 3, Issue.1,2015

Retail Environment Babin and Babin (2001) described that retail environment is a level of environment created based on customer expectation. If customer feel comfort with their shopping environment, they will make a repeat buying and become loyal customer. Some of the previous research found that extraordinary retail environments will ultimately impact customer shopping behavior (Chebat et al., 2006; Sirgy et al., 2000), because atmospheric attributes in store can stimulate customer experience and social interaction which on the other hand encourage utilitarian and hedonic value (Bonnin and Goudey,2012). Sipahi and Enginoglu (2015) confirmed that features of store, physical environment, security and cleaning, and pedesterian access are the main factors to influence the quality of shopping environment. In this research, Center Point Department Store is the research object located in Mall Olympic Garden which does not have pedesterian access. Therefore, this research uses three dimensionality of retail environment including features of store, physical environment, and security-cleaning. Some of the research also confirmed that store features have positive influence toward retail store choices (Hansen and Deutscher, 1977; Doyle and Fenwick, 1974). In addition, accessibility and store characteristics have direct and indirect influence to attract customer attention (Teller and Reutterer 2008; Baker et al., 1994; Donovan, et al, 1994). Merchandising Merchandising is another key element to attract impulse buying behavior. Russel, et al (1999) described that merchandising has several purposes including store image, attracting customer attention, influencing customer feeling and making positive shopping experience in the result of purchase outcome. According to AMA (American Marketing Association), merchandising is a wide term that encompasses promotional activities run by the manufacturer in the form of special presentations that take place within establishments, as well as initiatives run by the retailer to make the product stand out. Merchandising is all about taking a product in store and making a customer easy to find it (Currid, 1993). It has been found that merchandising also becomes one factor which encourages people to buy unplanned product (Cobb and Hogen, 1986; Iyer, 1989; Gagnon and Oesterhaus, 1985; Folwell and Moberg, 1993). In order to achieve succesful merchandising strategies, the new products should be taken in prime area, made a display based on planograms to reflect needs of customers, given best sellers the most facings and put them at eye-level (Gladson, 1993). In the fashion store such as Center Point Department Store, a window display is needed as the part of merchandising strategies. Kim (2003) found that purchasing clothes behavior of the customer depends on the promotional campaign and window displays. This research focused on window display elements in the fashion store as merchandising factors including color, lighting, textual style and mannequin (Pegler, 1983; Diamond and Diamond, 2007; Morgan, 2008). Impulse Buying A lot of research analyse impulse buying as a part of customer behavior. Impulse buying becomes a good sign for producers or sellers; thus, they try to implement some of the strategies to maintain it. Sharma et al (2010) defined that impulse buying occurs suddenly with complex hedonic behavior and preclude any thoughts. In general, customer tends to buy unplanned products when they meet attractive factors in sudden time. Beatty and Ferrell (1998) also agreed that impulse buying is customer behavior under no preshopping intentions about a product. Center point Department Store Center point Department store is organized by Center point Putra Sejahtera launched in Mall Olympic Garden, Malang City, Indonesia. Its main concept is nonfood retailer. It sells many product categories in fashion such as clothes, shoes, accessories, make-up and so on from different brands. It always offers a special price promotion in every season. Methodology Research Model This research examined a tentative model which consists of three variables (retail environment, merchandising and impulse buying). Figure 1 suggested that merchandising has positive influence toward retail environment and impulse buying. Meanwhile, retail environment has positive influence toward impulse buying.

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Merchandising Physical Environmen t Features of store

Retail Environment

Security and Cleaning

Impulse Buying

Figure 1. Research Model

This research conducted three hypotheses as follows: H1: Retail Environment has positive influence on Impulse Buying. H2: Retail Environment has positive influence on Merchandising H3: Merchandising has positive influence on Impulse Buying

Sampling Method The population of this research was consumers in Center point Department Store in Malang City, Indonesia. The number of population is unknown because it is a part of company secret. Based on Roscoe’s formula, a research with unknown number of population can take around 30 and 500 respondents describing the population characteristic. This research had 200 respondents answering all questionnaire items. All of items in questionnaire were represented by 7 Likert scale and based on related previous study having Cronbach Alpha score more than 0.6. The following table described questionnaire items in this research. Table. 1Question Item Variable Retail Environment

Dimension Physical Environment

Features of Store

Security and Cleaning Merchandising

Impulse Buying

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Item

Sources

Store environment ambience makes me feel comfort for shopping. Store design makes me feel comfortable for shopping. Store layout helps me to find the product in an easy way. Good sign and symbol help me to find the product position. Variety of fashion product is huge Variety of fashion product fulfills my need Discount program attracts me to shop Store condition cater my taste Operational hours in this store are appropriate time to shop Store environment is clean Store environment is safe

Sipahi and Enginoglu (2015)

Clothing display based on the same colour attracts my attention. Lighting in the store makes product more interesting. Lighting in fitting room makes clothes more interesting. Using mannequin for several clothes attracts my attention. Using mannequin makes clothes design more interesting. Using clothes focused on design help me find a product in an easy way. Using clothes focused on function help me find a product in an easy way. I often by unplanned products when shopping in this store. I often by unplanned products because of the attractive discount. I often buy unplanned products because they are displayed in mannequin.

Pegler, 1983; Worachat Udompong, 1992; Diamond and Diamond, 2007; Morgan, 2008.

Rook (1987); Beatty and Ferrell (1998); Sharma et al (2010)



Measurement Method The purpose of this study was to explore the relationship among retail environment, merchandising and impulse buying. In order to fulfill this goal, it applied quantitative analysis through Structural Equation Modeling. The data analysis process consists of three part including (1) item generation and selection, (2) item reduction and dimensionality, (3) testing the structural model. The aim of stage one is to generate scaled items for the dimensionality of retail environment, merchandising and impulse buying. In this study, all of the items were conducted with items in previous study having cronbach alpha more than 0,6. Retail environment has three dimensions using 11 items including (a) physical environment; (b) features of store and (c) security and cleaning. Variables of merchandising and impulse buying were measured by multiple items respectively. To sum up, this study used 21 items in questionnaire. In the second stage, all items will be checked by using validity and reliability analyses. If there any items with scores of corrected item correlation 3

Frequency (N=200) 124 50 15 11 165 18 6 11 129 41 15 10 5 91 80 29

Percentage 62% 25% 7.5% 5.5% 82.5% 9% 3% 5.5% 64.5% 20.5% 7.5% 5% 2.5% 45.5% 40% 14.5%

Item Reduction and Dimensionality of Scale All research items were checked to ensure the validity and relibility through SPSS 20.0 looking the scores of Cronbach Alpha and Corrected Item Total Correlation. In the study, all questionnaire items were valid and reliable with scoring Cronbach Alpha > 0.6 and corrected item total correlation >0.3. The analysis of validity and reliability was figured out in the following table.

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Table 3.Validity and Reliability Variable

Dimension

Item

Cronbach Alpha

Retail Environment

Physical Environment

PE_1 PE_2 PE_3 PE_4 FS_1 FS_2 FS_3 FS_4 FS_5 CLS_1 CLS_2 MC_1 MC_2 MC_3 MC_4 MC_5 MC_6 MC_7 IB_1 IB_2 IB_3

0.802

Features of Store

Security and Cleaning Merchandising

Impulse Buying

0.753

0.868 0.759

0.855

Corrected Item Total Correlation 0.652 0.756 0.677 0.619 0.528 0.586 0.513 0.608 0.414 0.726 0.743 0.584 0.583 0.505 0.575 0.633 0.550 0.584 0.824 0.846 0.787

On other hand, this study consists of three variables (retail environment, merchandising and impulse buying) where all of them should be measured by confirmatory factor analysis (CFA). CFA have a purpose to the accepted model of each variable where the dependent variable will be explained by independent variable. Retail environment consists of three dimensionality while merchandising and impulse buying have only one dimensionality. The requirement of CFA should be having t-value greater than 2 or the cutt off score in standardized solution is 0.4. The following tables described Confirmatory Factor Analysis for all variables. Table 4.Confirmatory Factor Analysis of Retail Environment Items PE_1 PE_2 PE_3 PE_4 FS_1 FS_2 FS_3 FS_4 FS_5 CLS_1 CLS_2

Standardized Score 0.69 0.80 0.64 0.52 0.45 0.46 0.38 0.76 0.43 0.77 0.60

T value score 10.19 12.46 9.36 7.28 6.13 6.30 5.14 11.31 5.83 9.26 7.65

Note Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable

Table 5.Confirmatory Factor Analysis of Merchandising Items MC_1 MC_2 MC_3 MC_4 MC_5 MC_6 MC_7

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Standardized Score 0.53 0.49 0.41 0.65 0.73 0.52 0.57

T value score 7.21 6.53 5.37 9.16 10.45 6.95 7.81

Note Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable



Table 6.Confirmatory Factor Analysis for Impulse Buying Items IB_1 IB_2 IB_3

Standardized Score 0.80 0.88 0.75

T value score 12.41 14.05 11.63

Note Acceptable Acceptable Acceptable

To conclude, all variables have fulfilled the confirmatory factor analysis which means all items in retail environment, merchandising and impulse buying were confirmed as the measurement of those variables. The Structural Model The analysis of structural model measuring the relationship among retail environment, merchandising and impulse buying used summated scale. This model had been confirmed by the goodness of fit criteria such as CFI, IFI, NNFI and SRMR. The result of structural model analysis was described in the following table. Table 7.Relationship Score of Structural Model Relationship Retail Environment – Impulse Buying Retail Environment – Merchandising Merchandising – Impulse Buying

Score 0.10 0.89 0.46

Note Positive Influence Positive Influence Positive Influence

Table 8.Goodness of Fit of Structural Model Measurement Comparative Fit Index (CFI) Incremental Fit Index (IFI) Non-normed Fit Index (NNFI) Standardized Root Mean Square Residual (SRMR)

Score 0.92 0.92 0.90 0.067

Criterion >0.90 >0.90 >0.90