THE IMPACT OF SELECTED VISUAL MERCHANDISING ...

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2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

THE IMPACT OF SELECTED VISUAL MERCHANDISING TECHNIQUES ON PATRONAGE INTENTIONS IN SUPERMARKETS (STUDY BASED ON COLOMBO DISTRICT)

Authors Ridmi Gajanayake University of Kelaniya Sri Lanka Mobile: +940716822845 Email : [email protected]

Sashini Gajanayake Staffordshire University Sri Lanka Mobile: +940774191509 Email : [email protected]

H.A.K.N.S. Surangi University of Kelaniya Sri Lanka Mobile: +940722488850 Email : [email protected]

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Abstract Supermarket industry is one of the fast growing industries in Sri Lanka. At present there are over 300 supermarkets are in the industry owned by various companies. According to the prevailing literature many researchers are agreed that visual merchandising plays a vital role in retailing. It has become an essentially important element in the retailing industry, in apparel store, supermarkets etc. Therefore, every marketer pays attention to this aspect in order to attract the customers and to survive in the industry.

The main objective of this study is to identify the influence of visual merchandising on patronage intentions. It will also aim at identifying the current strategies used by supermarkets to enhance their visual merchandising and to suggest further improvements.

This study was based on secondary and primary data. Primary data was collected through the survey and semi-structured questionnaire was used to collect the data. The study will considered a sample of 307 supermarket shoppers from five different supermarkets located within Colombo City limits, i.e. from Colombo 1 to Colombo 15. Hypotheses were tested by the regression and ANOVA analysis employing SPSS software. Out of all six hypotheses five were accepted and only one hypothesis was rejected.

Key words: Visual merchandising, Patronage intentions, Supermarket, retailing, customers

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1. Introduction

Supermarket industry is one of the fastest growing industries in the Sri Lankan economy. It is a concept that was brought into Sri Lanka during the 1980’s. Gradually they captured a large number of customers all over the country and now have established themselves as a very dynamic and lucrative industry in the country. There are over 300 supermarket outlets owned by various companies and some of the leading companies are Cargills, John Keells Holdings, and Richard Pieris etc. other than those there are many small supermarket chains running under the names of Magna, Laughs Sun – Up, Crystal etc.

Visual merchandising plays a major role in retailing. “It is that which enhances products, supports brands, increases traffic and sales, adds visual excitement by way of strategically located and illuminated focal destinations in an environment, typically businesses and stores, defines and advertises overall personality and image.” (Gorman,nd.) It is everything the customers see and feel within a store that arouses their interest and desire. In other words it is an important element for a supermarket to attract and capture the customers’ attention towards the products and induce them to purchase them. An effective visual merchandising strategy will help the supermarkets to be ahead of the competitors within the industry and have a competitive edge.

1.2 Problem Statement Supermarket industry is a very volatile one. In Sri Lanka it is at the growth stage, where new outlets emerge very often. There is a high degree of competition among the companies within the industry to stand out from the rest and to be the best supermarket chain of the country.

Colombo is the highly industrialized and dynamic city in Sri Lanka. People within that city limits lead busy lifestyles and often seek for convenience. Therefore, the frequency of visiting supermarkets would be high.

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Visual merchandising is one of the major tactics used by retailers to attract customers to the stores. It will stimulate them to choose the most liked store, spend more time in it, and examine the products and eventually resulting in a purchase.

This study focused on identifying the impact of visual merchandising on patronage intentions would therefore be carried out with the research problems of “Does visual merchandising have an impact on Patronage Intentions in Supermarkets within the Colombo City Limits?”

1.3 Objectives of the Study The key objective of this research is;

To identify the impact of visual merchandising on patronage intentions in supermarkets located within the Colombo City limits. Specific objectives are; •

To identify the most important visual merchandising techniques that would influence patronage intentions in supermarkets within the Colombo city limits.

•

To identify the widely used visual merchandizing techniques by different supermarket chains in operating in the Colombo city limits.

2. Literature Review “Visual merchandising is a major factor often overlooked in the success or failure of a retail store. It is second only to effective customer relations. Visual merchandising can be defined as everything the customer sees, both exterior and interior, that creates a positive image of a business and results in attention, interest, desire and action on the part of the customer.” (Bastow-Shoop et al., 1991)

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Another definition for visual merchandising was put forward by Walters and Waters (1987) as “…. activity which coordinates effective merchandise selection with effective merchandise display.” (Cited in Kerfoot et al., 2003) Kerfoot et al, (2003) stated that “visual merchandising is therefore concerned with both how the product and/ or brand is visually communicated to the customer and also whether this message is decoded ‘appropriately’ – in this context affecting a positive psychological or behavioral outcome, ultimately leading to purchase.” Schimp (1990) has defined the role of visual merchandising as to; -

create awareness among customers about a product and provide relevant information about it;

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remind customers about the benefits of a product and of its availability;

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encourage customers to buy a particular product or brand;

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maximize the utilization of space, while at the same time making the buying experience as easy as possible for customers;

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reinforce the retailer’s communications campaign;

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assist the customers in locating, evaluating and selecting a product.

(Fernie and Moore, p.312)

As per the above definitions visual merchandising is an essential element which plays a vital role in a supermarket setting. It enables the store to attract more customers, help them in selecting the products they look for, retain them for a longer time and encourage them to purchase items with or without a prior plan.

2.1.1.1 Store layout Borges (2003) in his study mentioned that the store layout is a huge task for retail managers. The complexity of this task lies in the relationship between categories on sale as well as on the impact that it produces on the consumer spatial behaviour and in-store traffic.

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According to FMI (2000) 94% of American grocery shoppers seem to consider that a store layout that makes shopping easier as important when choosing their supermarket. Time conscious and empowered consumers will be more attracted by supermarket chains who adopt one stop shopping store layouts. (Cited in: Borges, 2003)

Farley and Ring (1966) suggested that shoppers might be influenced to buy by the layout itself and that a good store layout forces each customer to travel past as many displays as possible.

The results of a survey conducted by Wilson (2007) proved that layout bas a big influence on customers and that the customers want stores to spend whatever it takes to create a layout that minimizes wasted steps and motion in the shopping process. In addition it was stated that the shoppers attach more influence to the floor of a store than to its ceiling.

2.1.1.2 Colour Many researches have been carried out throughout the years in relation to physiological and psychological effects of colour. Gerard (1957) states that generally, warm colors (red and yellow) have produced opposite physiological and psychological effects than cool colors (blue and green), which are opposite on the color spectrum. For example, red or warm colors have been found to be associated with increased blood pressure, respiratory rate, eye blink frequency. (Cited in: Bellizzi and Hite. 1992)

Bellizzi et al. (1983) investigated the effects of color in retail store design. The results indicated that despite color preferences, subjects were physically drawn to warm color (yellow and red) environments, but they paradoxically found red retail environments to be generally unpleasant, negative, tense, and less attractive than cool color retail (green and blue) environments. He speculated that a red environment may over stimulate buyers both physiologically and psychologically and thereby may impair purchasing deliberations and buying decisions. (Cited in: Bellizzi and Hite. 1992)

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2.1.1.3 Product display In a study carried out by Abratt and Goodey (1990) product display has been identified as an in – store stimuli, which is a promotional technique used to encourage impulse buying. There it is stated that displays can increase the rate of unplanned purchase in retail stores on grounds that the consumers naturally tend to focus and perceive at eye level. It was also found out in their study that displays are one of the most influential factors on unplanned purchases. Gutierrez (2004) has found in his research regarding impulse purchases that “the presence of environmental stimulation variables such as ……. or attractive store displays may moderate the choice of search strategies and making impulse purchases”.

Simonson and Winer (1992) found that purchase behaviour can be modified by the way in which inventory is arranged. Kumar and Leone (1988) maintain that point of purchase displays can be very useful in stimulating sales.

Davies and Tilley (2004) explained that product shelving has an important influence on consumer behaviour. Both the height at which the products are displayed and the number of rows in the store can influence the sales of products. In a moderate sized general supermarket, the average shopper will select only thirty five of the likely several thousand different items on display. Moreover, most frequently purchased products should never be located in adjacent spaces but should be spread throughout the store thus increasing the probability of impulse purchasing of the intervening products. Careful placing of high demand lines can help to attract customers to parts of the shop: while impulse purchase lines with high profit margins should be placed alongside the everyday goods. It was also mentioned that more than 50 percent of purchases by supermarket shoppers are pre – planned and the remainder are largely stimulated by the display in the store. Products should be accessible to the customers. 2.1.1.4 Music Bruner (1990) suggests that the genre of the background music is likely to produce stronger effects on perceptions and preferences. Further, according to Cupchik et al. (1982) since preferences for musical genres are strongly influenced by individual differences varying the

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genre of a store's background music is more likely to produce differential effects across customer groups. (Cited in: Areni and Kim, 1993)

A study by Milliman (1982) suggests that slow tempo of instrumental background music can significantly slow the pace of in-store traffic flow of supermarket customers, as opposed to fast tempo. In a follow-up study once again by Milliman (1986) came out with a result that diners stayed longer and consumed more alcoholic beverages when slow tempo instrumental background music was playing than when fast tempo instrumental music was used An early study by Smith and Curnow (1966) found that significantly less time was spent in the stores when the music was loud compared to when it was soft. Kellaris and Rice (1993) used a decibel meter in comparing the impact of soft (average sound level of 60 dB) and loud music (average sound level of 90 dB). They reported that the impact of loudness on musical preference differed by gender, with females reacting more adversely than males to louder music. (Cited in: Oakes, 2000)

2.1.1.5 Lighting Mehrabian (1976) “believed that lighting was a chief factor in the environment’s impact on individuals because brightly lit rooms are more arousing than dimly lit ones”. (Cited in: Summers and Herbert, 1999)

Areni and Kim (1994) found that consumers examined and

handled significantly more items under ‘bright’ lighting conditions than under ‘‘soft’’ lighting conditions.

With reference to the Illuminating Engineering Society of North America (IES) Handbook states that ‘‘the primary goals common in the lighting of merchandise are to attract the consumer, to initiate purchases, and to facilitate the completion of the sale’’ (Rea, 1993). The IES recommends that when illuminating merchandising spaces, lighting designers should create a ‘‘pleasant and secure environment to do business’’ (Rea, 1993, p. 591).

According to Summers and Herbert (1999) a more appealing store with better-illuminated merchandise may entice shoppers to visit the store, linger, and hopefully make a purchase. Their 1137

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findings suggest that a retailer’s manipulation of the in-store supplemental display lighting may achieve a significant increase in general consumer involvement with in-store display merchandise.

Shoppers are highly sensitive to the way a store is lit. They attach more influence to lighting than they do fixtures and signage. 2.1.1.6 Cleanliness A study by Carpenter and Moore (2006) indicated that both frequent and occasional shoppers across all retail formats indicated cleanliness as the single most important store attribute.

Yun and Good (2007) declared that shopping in an immaculately clean store might generate image perceptions of cleanliness, contentment, or luxury. Thus, store image (e.g. a store is clean, secure, friendly, etc.) can be described as the overall look of a store and the series of mental pictures and feelings it evokes within the consumer.

2.2 Dependent Variable

2.2.1 Patronage intentions Consumer patronage intention is driven by a combination of attitude toward the purchase behaviour and a set of normative beliefs and motivations toward the behaviour (Burnkrant and Page Jr. 1982; Fishbein and Ajzen 1975). In retail, intentions are usually determined by a willingness to stay in the store, willingness to repurchase, willingness to purchase more in the future, and willingness to recommend the store to others (Baker et al. 2002; Hightower, Brady and Baker 2002; Macintosh and Lockshin 1997). Retailers are interested in understanding patronage intentions because of the need to forecast customer’s buying behaviour of products and/or services, their willingness to return to the store, and to deliver good word-of-mouth to fellow customers (Donovan and Rossiter 1982).

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According to Grewal et al. (2003) retailers have a certain amount of control over factors that influence consumers’ patronage decisions. Having a desirable product assortment where and when the customer wants it and priced at the level they are expecting to pay is fundamental to any retail strategy. Yet other, less obvious factors can influence customers’ purchase intentions. Atmospherics can make customers less aware of their wait because they are either distracted and/or entertained. Stores can creatively use a store’s layout or method of displaying merchandise to alter customers’ perceptions of the atmosphere. Alternatively, they can enhance the store’s atmospherics through visual communications (signs and graphics), lighting, colors, and even scents.

3. Conceptual Framework and Hypotheses

Visual merchandising •

Store layout

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Colour

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Product display

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Music

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Lighting

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Cleanliness

Patronage intentions

Figure 1: Conceptual framework 3.2. Hypotheses H1: There is a relationship between store layout and patronage intentions in supermarkets. H2: There is a relationship between colour and patronage intentions in supermarkets. H3: There is a relationship between product display and patronage intentions in supermarkets. H4: There is a relationship between music and patronage intentions in supermarkets. H5: There is a relationship between lighting and patronage intentions in supermarkets. 1139

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H6: There is a relationship between cleanliness and patronage intentions in supermarkets.

4. Research Methodology

The research is based on deductive approach where the existing theories and concepts will be used in order to develop hypotheses and test them through a systematic methodology. Survey method was identified as the most appropriate strategy to perform the research activities. The survey will be conducted on supermarket shoppers. . Since it is impossible and impractical to use the entire population to obtain information for this research a section of the entire population would be selected to perform the research more effectively. For this study the sample was selected within the Colombo city limits.

Sampling can be done either as probability or non – probability design. A simple random sampling method will be used here where each respondent gets an opportunity to participate in survey.

The population within Colombo 1 to Colombo 15 is 695,885 as per the 2006 estimates. Since this figure is above 1,000,000 as per the Anderson’s method a sample of 384 was considered. (Saunders et al. 2007) This sample of 384 was randomly selected from 15 supermarkets within the Colombo city limits. These supermarkets were selected on the basis of monthly customer count, those of which have a monthly customer count above 12,000. Secondary data will be gathered from previously done research articles, books and the Internet. Primary data were collected through the means of questionnaires and interviews.

4.1 Data collection instruments •

Questionnaires: A questionnaire was developed to distribute among the supermarket shoppers. It included only close ended questions as the respondents might hesitate to 1140

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spend time on filling it. The questionnaire was developed by the researchers and was tested the validity by conducting a pilot survey. •

Interviews: interviews were conducted with the supermarket managers in order to obtain information and their opinions on visual merchandising.

4.2 Data Analysis Techniques An ANOVA test was used to analyze data and to test the hypotheses. Descriptive tools such as mean scores, percentages and standard deviation was also used.

5. Data Analysis and Presentation

5.1 Descriptive Statistics

5.1.1 Level of monthly income Table 1: Income level of the respondent

A majority of 70 respondents receive a monthly income between LKR 30,001 – 40,000, which is 22.8%. The second highest number of respondents (65) LKR 50,001 – 60,000 category with 21.2% while 64 out of 307 respondents receive an income of more than LKR 60,001.

5.1.2 Frequency of visiting a supermarket

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Table 2: Frequency of visiting supermarkets

38.8% of 307 respondents visit a supermarket once a week. 36.2% (111) visit a supermarket once every two weeks. 58 respondents visit once a month. 3.3% visit once every three months while only 9 respondents visit less often, that is more than three months. 5.1.3 Identification of the most important visual merchandising techniques that would influence patronage intentions in supermarkets within the Colombo city limits

Table 3: Most important visual merchandising techniques

Store

Colour

layout

Product

Music

Lighting

Cleanliness

display

Averages of visual

3.629

3.714

4.168

3.289

3.571

3.770

4

3

1

6

5

2

merchandising

Importance

According to the above table it is evident that product display is the most important visual merchandising technique when prioritized according to the mean values of the averages of every independent variable. Cleanliness was ranked as the second most important technique with an average mean value of 3.770. The next significant technique is the colour scheme. From the six techniques identified music is the least important technique that can be adopted to influence patronage intentions.

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5.2 Hypothesis Testing

5.2.1 ANOVA (Analysis of Variance) Test H1: There is a relationship between store layout and patronage intentions in supermarkets. Table 4: ANOVA – Hypothesis 1

The above ANOVA table tests whether the difference between the deviations in the variable store layout is explained by differences in the variable patronage intentions. The output of the test, which is p = 0.147 illustrates that there is no relationship between patronage intentions and store layout. Therefore the hypothesis one is not supported by the results of the test and it is rejected because p>0.05.

H2: There is a relationship between colour and patronage intentions in supermarkets.

Table 5: ANOVA – Hypothesis 2

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The above ANOVA table tests whether the difference between the deviations in the variable colour is explained by differences in the variable patronage intentions. The output of the test, which is p = 0.009 illustrates that there is a relationship between patronage intentions and colour. The hypothesis two is supported by the test results and it is accepted because p