Thursday, 12 January 2012

IDENTIFYING SERVICE QUALITY DIMENSIONS BY UNDERSTANDING CONSUMER PREFERENCES IN THE MALAYSIAN GROCERY RETAIL SECTOR



IDENTIFYING SERVICE QUALITY DIMENSIONS BY
UNDERSTANDING CONSUMER PREFERENCES IN THE
MALAYSIAN GROCERY RETAIL SECTOR


Nor Khalidah Abu
Universiti Tun Abdul Razak
khalidaha@email unitar.edu.my


Rosmimah Mohd Roslin
Universiti Teknologi Mara
rosmimah@salam.uitm.edu.my


ABSTRACT
Increasing competition in the grocery retail sector in Malaysia has moved many retailers regardless of size, to find competitive edges that could place them ahead of the rest. The prominence of foreign based retailers that are predominantly large in size is worrying the small and medium sized retailers. Yet, their attraction toward different types of grocery retailers may differ as Malaysian consumers become more discerning in their choices of retailers. This study explores the needs of customers frequenting retail outlets of different sizes and evaluates the service quality dimensions which should be given priority by retailers wishing to establish firm competitive edge. Results reported are exploratory and based on interview results. Findings suggest the existence of all dimensions from findings of Retail Service Quality Scale (RSQS) by Dabholkar, Rentz, and Thorpe, 1996. However, specific issues related with physical aspects and personal interaction differs for different sizes of grocery stores. This study also highlight the existence of halal as a critical dimension for grocery shopping in Malaysia.

KEY WORDS: Malaysian retail, Service Quality, Grocery


INTRODUCTION
Grocery retailers in many developed nations operate in mature markets where growth opportunities are very slow and intense competition often shaped the way they operate. In Europe, the struggle for market shares has led many retailers to look for international options and very often international expansion is seen as the key to continued growth. It is therefore inevitable that the world market becomes the target for many established retail players as they look for new areas for expansion (World Retail Congress, 2008). Yet, differing consumer needs in international markets dictate that international retailers understand local preferences (Etger and Rachman-Moore, 2007). Rigby and Tricks (2005) observed that Tesco, for example, strives for a local feel to its international stores, but, in a concept known internationally as ‘Tesco in a box’, it also rolls out some of its successful UK practices, such as multi format stores, supply chain management and own label goods. In Malaysia, modern supermarkets and traditional outlets have always co-existed and the findings by Zain and Rejab (1989) have indicated that household income has been the factor that influenced consumers’ attractions to different types of outlets. Generally, in Malaysia, traditional retail stores and ‘wet markets’ have always attracted the low and middle income shoppers whilst modern retail formats are attractive to the upper middle income group and beyond. This, however, appears to be changing as improved consumer lifestyles and changing preferences are altering the way Malaysian consumers shop.

The Retail Sector in Malaysia


Malaysia, a Southeast Asian nation that is fast developing in tandem with the growth of the region, has often looked at foreign direct investment as the engine for further development. Private investment was growing strongly at 10.2% in 2004 and this reflected a positive growth that influenced other areas of the economy (Asia Economic Monitor, 2005). In line with the growth, the Malaysian government has always been keen to promote Foreign Direct Investment (FDI) where FDI inflows have become more broad-based with a higher share of new flows shifting towards higher value added activities in the services and the manufacturing sector (Bank Negara Malaysia, 2004).

The distributive trade sector is one area which has seen the migration of foreign investments. Grocery
retailing, especially, has been the target of many foreign firms and since 1992 with the emergence of Dutch based Makro into the distributive scene, the country now attracts other foreign names such as France’s Carrefour, the U.K’s Tesco, and Hong Kong based DFI which operates the Giant supermarkets and hypermarkets, Cold Storage supermarkets and Guardian Pharmacy chains. Table 1 indicates major supermarket and hypermarket in Malaysia.

Table 1

     Major Supermarket / Hypermarket in Malaysia
     Sources: Malaysian Business (2007) and * Price Waterhouse Coopers (2004)

Of late, retail sizes and the growing dominance of large scale retailers have been the contention of many local retail operators that are predominantly operating small, independent outlets. It is common for retailers to be differentiated on the basis of their retail sizes. Based on the definitions provided by the Malaysian Ministry of Domestic Trade and Consumer Affairs and integrating this with other theoretical definitions (Zainal Abidin, 1989; Ministry of Domestic Trade and Consumer Affairs, 2004), hypermarkets are defined as those with retail sizes in the range of 2,000 to 4,500 sq. meters while small provision shops are those operating stores less than 400 sq. meters The supermarkets are those with store sizes ranging between 400 to 2,000 sq. meters. The supermarkets are deemed closer to the hypermarkets in terms of their retail strategies although their merchandise assortment may be somewhat limited.

To a large extent, the foreign based competitors brought with them new retail concepts and attractions that are definitely attracting a large proportion of Malaysian consumers. Malaysian shopping preferences changed with the introduction of large scale retailing and their shopping habits are now dictated by more primary factors than merely merchandise attractions. This exploratory study is therefore a step at identifying retail dimensions that attract Malaysian consumers to shop at certain grocery outlets and its implications on strategic retail development. Using Dabholkar, Thorpe and Rentz’s (1996) service quality dimensions as a basis, this study ascertains Malaysian consumers’ views on what they perceived as important dimensions in influencing them to patronize particular grocery retail outlets.

Consumer Behaviour and the Malaysian Population

Malaysia is classified as an upper middle income country and is considered as one of the most developed of the developing nations (Price Waterhouse Coopers, 2004). The lifestyles of Malaysian have evolved and changed in line with the growing affluence and the increase in the education level of the population. High profile retailers and global mass media influence have played a role in shaping the lifestyles and buying preferences of Malaysians. Malaysians are becoming more sophisticated with westernized preferences in their buying behaviours. It is this kind of lifestyles that is propelling the growth of more modern retail formats and thus changing the distributive landscape of Malaysia. Small traditional provision stores that are mostly operated by local individuals are finding it increasingly difficult to survive in a market where changes in consumer lifestyles and preferences are dictating the type of retailers in the industry. The increasing dominance of the foreign owned hypermarkets are indeed changing the way Malaysians shop. 

Uusitalo (2001) finds that consumers look at store size as an important feature for store categorization. Similarly, in Malaysia, consumers patronize retail outlets that are differentiated on the basis of their sizes. Consequently, their shopping behaviour appears to be influenced by the different store formats where purchase size is often larger and they may be more receptive to store brands when frequenting large grocery outlets (Rosmimah and Sofiah, 2004). However, there is still a need to develop an understanding of consumption that is embedded in a grounded approach where an amalgamation of relevant dimensions can be included in assessing consumer preferences (Clarke, 2000).

Service Quality in Grocery Retail Environment

Due to intangibility nature of services, it is difficult to measure service quality as there are fewer tangible cues available when consumers purchase services (Parasuraman, Zeithaml, and Berry, 1985) as compared to goods. Service also requires higher consumer involvement in the consumption process (Grönroos, 1984) which makes it more complicated to measure. 

Several researchers operationalize the service quality construct either as a gap between expectation of service and perceived performance of service, or just perceived performance alone (Hurley and Estalami, 1998). Other researchers see service quality dimensions as the criteria to assess service quality (Parasuraman, Zeithaml, and Berry, 1985; Feinburg, de Ruyter, Trappey and Lee ,1995). The later claimed that service quality dimensions are instruments for measuring perceived service quality and it is seen as a multi-dimensional construct. 

In a competitive environment, service quality is critical for service firms to maintain a stronghold position (Parasuraman, et al., 1985, Shemwell et al., 1998; Mehta et al., 2000) as it is an indicator of business performance (Hurley and Estelami, 1998). Based on superior service, smaller stores could compete with larger and more powerful stores (Klemz and Boshoff, 1999) as they could not compete on price. In addition, focusing on service quality is important in markets where product offerings are similar (Berry, 1986), as typically found across grocery retail stores.

Improvement of the quality of services requires identification of the service quality dimensions that are important to retail customers. Although the research into the dimensions used by consumers to measure service quality in the service sector is extensive, there is lack of empirical studies on factors of quality improvement strategies (Odekerken-Schröder et al., 2001), especially the service quality dimensions (Dabholkar et al., 1996) for the retail sector. SERVQUAL by Parasuraman et al., (1985), the most famous and well discussed service quality model in the 1990s (Robinson, 1999) failed to befully adopted and validated in a retail setting (Dabholkar et al.). Service quality measurement of the retail stores, unlike the pure service setups, should include the measure of service quality and product quality as retail stores offer a mix of services and products (Mehta et al., 2000; Dabholkar et al., 1996).

Dabholkar et al. (1996) developed the Retail Service Quality Scale (RSQS), a multilevel structure with three different levels: an overall perception of service level, a dimension level, and a subdimension level. The multilevel idea was triggered by other findings that claim the existence of high correlations among SERVQUAL items across factors and the evaluations form by customers at different levels (Dabholkar et al.). As a result, the researchers claimed that customers evaluate retail service quality at a dimension level, a subdimension level, and at an overall level. The researchers adopt 17 items from SERVQUAL and added 11 items based on their research. The five dimensions are named physical aspects, reliability, personal interaction, problem solving, and policy.

Although RSQS has high construct reliability and validity (Dabholkar et al, 1996), a need to look into quality dimensions for each country is called for. Each country is believed to have its own unique set of quality dimensions (Xiande Zhao et al., 2002) with different levels of importance (Feinburg et al., 1995). Consumers’ attitudes towards food shopping are associated with culture (Samsinar et al., 2001) and therefore, any findings from previous studies in other countries may be irrelevant in Malaysia. Currently there is lack of research on service quality of retail stores in Malaysia specifically consumers’ service quality perceptions of the different sizes of stores. Several researches have concentrated on service quality of businesses namely courier companies (Norbani Che Ha and Sharmila Sinnathurai, 1999), automotive industry (Tan, 1998), and financial institution (Ndubisi, 2003) and service quality of government department (Sharifuddin Zainuddin, 1997). There is also a gap in the literature on the measure of service quality among competing retailers (Dabholkar et al.) in particular of different sizes.

This study explores the changing needs of Malaysian consumers in selecting grocery retail outlets in an environment where the retail environment is now predominantly dominated by foreign large scale retailers. The needs of Malaysian consumers as they select grocery retail stores are very much influenced by factors that are not necessary tied to only demographic characteristics. Income level need not necessarily be the only factor influencing retail choices. Malaysian consumers are now more discerning and may select retail stores in accordance to specific preferences.

RESEARCH OBJECTIVES

The study aims to:
First, explore the needs of customers frequenting retail outlets of different sizes.
Second, evaluate the service quality dimensions which should be given priority by retailers wishing
to establish firm competitive edge.


RESEARCH METHODOLOGY

A qualitative study was employed as an initial step towards gathering factors that were likely to point to service quality characteristics. A qualitative method is deemed appropriate at the exploratory level as it provides an openness that is typical of qualitative inquiry. This allows the researcher to focus in-depth on a subject while at the same time understand the complexity of social interaction and uncover the underlying implications of such complexity. The adoption of qualitative approach in social studies enhances the chance of uncovering the complex nature of social interaction between individuals at different levels of the social system. According to Glesne and Peshkin (1992), this approach avoids simplifying social phenomena and instead opens the door towards exploring and understanding the range of human behaviour in the process of interaction.

In line with Dabholkar, Thorpe and Rentz’s (1996) Retail Service Quality Scales (RSQS) in assessing service quality of retail stores, this study tries to identify dimensions that could indicate consumer’s preferences in frequenting certain type of grocery stores that are peculiar to Malaysians. RSQS include the measure of service quality and product quality suitable for retail store (Mehta et al., 2000; Dabholkar et al., 1996) and the scale is found to be valid in Malaysian setting in relations to the apparel specialty store (Yeap, T. Ramayah, Jasman J. Maaruf, 2004)

The mall intercept method was utilized where seventeen customers visiting selected grocery retail outlets in Klang Valley, an urban area (Jamaliah, 2004) were intercepted while shopping and interviewed to gauge the reasons for shopping in particular outlets. Nine retail outlets were divided on the basis of their different sizes, i.e. three small stores, three medium sized outlets or supermarkets, and three large scale retail outlets or hypermarkets. Open ended questions were posed to gauge the reasons customers patronize these outlets and why they would not patronize other outlets. Responses generated were then analyzed qualitatively through content analysis and rigorous exercise of categorization. Through the process of open, axial and selective coding procedures, themes were generated and categorizations were formulated to provide clarity in assessing the qualitative responses (Strauss and Corbin, 1990). Connections between categories were developed and validation of dimensions identified was justified through references to statements made by respondents. The findings were further strengthened by relating them to existing literature pertaining to retail preferences (Zain and Rejab, 1989; Sofiah, 2001).

FINDINGS

The process of transcribing and analyzing responses reveal several factors pertinent to customers’ patronization of stores. Qualitative analysis requires an extensive evaluation of the transcripts and this is further grounded with existing literature. Service quality dimensions identified by Dabholkar et al. (1996) are cross checked with the findings and there appears to be similarities as well as new dimensions that are relevant to the Malaysian environment.

The findings indicate overlapping of responses for customers frequenting outlets of different sizes. All dimensions relating to service quality of retail outlets as identified by Dabholkar et al. (1996) are present for all types of grocery stores from the interviews. However, what are peculiar in this study as compared to the researchers are the specific issues surrounding physical aspects and personal interaction which differ for different size of stores.

For physical aspects the following demonstrate the difference across different store sizes. 

For small stores, location is considered important as the following response suggest: “It’s simply easy to go, parking is near (to store) and the store is small.”

For the hypermarkets, convenience is associated with internal environment: 
“What we want is all in one place.”

“At G it is easier because it is on a single floor. That is why it is easier to shop in G.”

“ ...if we want to eat, we go to T. Besides buying groceries, we can buy food at the food court.”

This is typical of Malaysian consumers who look at grocery shopping as a family outing where itinerary
almost always include eating and window shopping as the following comments suggest:

“J is better…in terms of its ambience. Its cleaner, it’s nicer to see. Sometimes we go shopping not to buy grocery but to enjoy. Take a walk…”

Personal interaction between customers and retail staffs is also a factor of interest. In the small stores and the medium sized supermarkets, individual attention is often commanded whilst for the large hypermarket, personal interaction relates to the cashiers at the check-out counters as the following comment suggests:

“If we want to pay, there is no long queue. Fast…just pay.”

Although, customers do not expect personal attention be given, large hypermarkets should still have retail assistants who are well trained and willing to assist those in need. This may not always be the case as related in the following response:

“My mum is very old and there is this one time when she asked…where is the sugar? and the guy just said, Oh, that side and that’s it and we have to go and find it ourselves. They are not that helpful…..They are not friendly. They don’t know how to appreciate customers. So, I took a long time after that to go there again.”

Regardless of size, there is still a need for some personal interaction between retailers and customers in any retail settings. Personal interaction is perhaps a dimension that is not easy for large retailers to provide but its importance has been pointed out and this may well become a competitive edge for the large stores that already possesses many other differentiating characteristics.

Another dimension which is unique to Malaysia is the dimension related to halal. “Halal” is an Arabic word for “permissible” which applies to food products, meat products, food ingredients, and food contact materials in a grocery store. Although 60% of the Malaysian population are Muslims (Melati Mohd Ariff, 2004), many grocery stores are foreign owned or operated by non-Muslim Malaysians. Operators’ ignorance on the sensitivity of Muslims in Malaysia may affect the grocery store choice as
demonstrated below:

“So we feel not confidence. Hesitant. This chicken ..halal or not halal. I’m afraid. That’s why I don’t go
there.”

“I don’t go to C because I think they also put stuffs like the non-halal (counter). And whenever I pass those .. whenever I want to go to the grocery part, I pass that place and maybe it’s not smelly but to me my sensitive nose. I think I smell something. I didn’t like it. So, I don’t go to C.”

“Like chicken or fish. I am not confident. Because the freezer I worry they mix with the non-halal.” 

The halal dimension was first suggested to measure customer service quality (SQ) in Islamic banking (Othman & Owen, 2001) and later insurance institutions (Izah Mohd Tahir & Wan Zulqarnain Wan Ismail, 2004).

PROPOSITIONS

Based on the analysis, the following propositions are developed:

First, consumers expect some service quality dimensions to be present in all grocery retail outlets, regardless of store size.
Second, physical aspects of the store are important dimensions that attract customers to patronize grocery retail outlets.
Third, personal interaction is deemed important as an influencing factor for customers to patronize a grocery retail outlet.
Finally, halal dimension is a new dimension identified to influence grocery shoppers to patronize a grocery retail outlet.
These propositions need to be evaluated further to assess the extent of their applicability in influencing store patronage. As such, a quantitative study may be essential in the next study in proving the propositions statistically.

CONCLUSION

This exploratory study has established that Malaysian consumers may share similarities in terms of relevant dimensions pertaining to service quality when frequenting retail stores, yet, the underlying reasons may differ for stores of different sizes. This is the key to establishing competitive edges as small stores compete with large retailers in attracting customers. Grocery shopping for Malaysian consumers is not merely a routine exercise but a family experience where food and window shopping is part of the itinerary. Therefore, the trip to a supermarket or a hypermarket is looked upon as an outing that involves more than just buying groceries. Although small retailers or provision stores are becoming functional where they are frequented merely for purchases of small, low value items, their competitive edge however, lies with the personal attention given to each customer and the invidualized services that could be developed for customers considered a priority to the store.

The hypermarkets have the resources to offer a large array of customer services but those considered vital should be the ones they concentrate on. This includes offering attractive complementary stores around the hypermarkets as well as fine eateries that cater to the needs of Malaysians of different ethnic backgrounds. Appearance is an essential dimension and store ambience and atmospherics play important roles in attracting customers. Indeed, these are dimensions that have already been given much attention but at times neglected because of differing priorities. Like other consumers in the Southeast Asian region, Malaysians have peculiar needs which multinational retailers that are keen to expand into this country may need to consider as competition increased from local retailers as well as other international competitors looking for international expansion.

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