Customers Prefrance

8/4/2019 Customers Prefrance

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CUSTOMER PERCEPTIONS OF FACTORY OUTLET STORESVERSUS TRADITIONAL DEPARTMENT STORES

Dr. G. S. Shergill*

Department of Commerce,

Massey University, Albany Campus,

Private Bag 102 904 NSMC,

Auckland, NEW ZEALAND

Ph: 0064 9 414 0800 x9466,Email: [email protected]

&

Y. Chen

Department of Commerce,

Massey University,

Auckland, NEW ZEALAND,Email: [email protected]


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CUSTOMER PERCEPTIONS OF FACTORY OUTLET STORESVERSUS TRADITIONAL DEPARTMENT STORES

Abstract

This paper examines customers perceptions of two different types of retail stores;

factory outlet stores and traditional department stores; as well as their purchasing

preferences. In addition, the paper compares these preferences across demographics. It

explores four critical factors which significantly influence customers perceptions of

both types of retail store. Findings are base on a mall intercept survey with 205

respondents across a range of demographics. The results indicate that factory outlet

stores are perceived as having comparatively lower prices and attractive promotions in

comparison to traditional department stores, while traditional department stores have

competitive advantages in terms of the other three factors. Also it is found that different

demographic characteristics play an important role in influencing differences in

customer perceptions regarding the different types of stores. The main implication ofthese findings is that factory outlet stores are perceived favourably and that they need to

build more positive marketing strategies accordingly.

Keywords- Factory outlet stores, Traditional department stores, Customer preferences.

Nowadays, an increasing number of customers choose factory outlet stores as their

alternative shopping places, rather than continuing to shop at traditional department

stores. Since customer loyalty is becoming more important for marketers in achieving

sales performance goals (Kulpa, 1998), this increase in the use of factory outlet stores as

an alternative choice poses a significant challenge to traditional department stores. This

circumstance means that the competition between these different retail channels has

become extremely intense.

A factory outlet store is owned and operated directly by a manufacturer to sell only its

brand of merchandise, whereas a traditional department store does not manufactureproducts itself but instead sells a variety of products manufactured by independent firms

(Meyers, 1995). In a factory outlet store, the manufacturer has full control over the

product offering, in-store customer service and the quality and price of the product sold,

as well as the physical attributes of the store. Traditional department stores are owned


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and operated independent of manufacturers. Manufacturers of the products sold at these

stores have limited control over in-store customer service, prices of the products sold

and the physical attributes of the stores. Initially factory outlet stores were established to

offer end-of-line goods and seconds at the lowest possible prices (Lombart, 2004). As a

result it was mainly customers in lower socio-economic groups who were willing to buy

through this channel. These outlets have begun, however, to be gradually accepted by

more customers, in part due to special annual sale promotions which began during the

1980s (Lombart, 2004). Additionally, customers increasing value-consciousness has

stimulated the development of factory outlet stores. This has especially been the case in

the United States, where there are over 10,000 factory outlet stores now in operation

(Meyers, 1995). Nowadays, factory outlet stores which provide the same range of brand

name merchandise attract more and more customers, and have developed into

showcases in much the same form as that of traditional department stores (Fernie and

Fernie, 1997).

It is unclear, however, whether customer perceptions of factory outlet stores versus

traditional department stores may differ in general and across demographics, as well as

how such differences may be seen. The findings will assist marketers, particularly those

employed by manufacturers, in understanding the ways in which customers view both

traditional department stores and factory outlet stores. This insight will allow such

marketers to set more suitable customer-oriented marketing strategies and business

objectives, achieve superior financial performance and develop their marketing

performance in the retail industry. The main objective of this paper is to explore

customers perceptions of these different types of retail stores, as well as their

purchasing preferences. In addition, the paper examines customer preferences across

demographics regarding customers perceptions of factory outlet stores and traditional

department stores.

The paper contains five sections. Following the introduction is an overview of literature,

summarising previous studies, and sets the hypotheses to be tested. The next two


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sections deal with research methodology, data analysis and findings. Conclusions and

implications are discussed in the last section.

LITERATURE REVIEW

Factory outlet stores vs. Traditional department stores

Factory outlet stores

An increasing number of factory outlet stores have been built for various reasons. Some

of these stores have been created to deal with seconds products, some are presented as

discount stores associated with new distribution channels, and some have been designed

by manufacturers in order to reduce the price of their products through savings on

overhead costs (Parker et al., 2002). This last reason has been pursued in order to attract

more current and potential customers in price-oriented and price-sensitive markets and

satisfy customers varying needs and wants (Parker et al., 2002). Initially, the factory

outlet store was identified and established as an off-price retailer (Joshi, 2003).

Internationally, especially in Europe, factory outlet stores were built and developed for

four basic reasons: to sell discounted products; to reduce overhead costs and carry out

sales promotions; to create flexibility of stock running; and to achieve brand promotion

(Joshi, 2003). The roles and functions of factory outlet stores have changed significantly

over the past few decades. They are no longer designed only as low price stores, but are

also used for branded product promotions, especially in Europe and the US. For

example, manufacturers of the Reebok, Levi, Gap and Warnaco brands regard their

brand promotion to be one of the key functions of their factory outlet stores (Joshi,

2003). Factory outlet stores have also been designed as specific seconds stores and

discount stores, and are located in many of Japans major cities (Joshi, 2003). There has

been a 62% increase in factory outlet stores since 1990 and the trend is for this increase

to continue (Rudnitsky, 1994). Factory outlet stores have been developed using original

styles by including some specific characteristics of conventional shopping centres in

order to provide products with attractive prices and a leisurely shopping environment

for most price-oriented customers (Golub and Winston, 1983).


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Nowadays, the factory outlet stores are normally recognised as gaining a larger

market share through price reductions, which are aimed at capturing the mass market

(Hellofs and Jacobson, 1999, p. 33). Therefore, the factory outlet stores need to develop

their level of customer satisfaction and ensure that the products sold in these stores are

of a reasonable quality in comparison to the previously built brand images (Parker et al.,

2002). Overall, the trend in factory outlet store development is quite satisfactory. For

example, according to a survey discussed in Happy Campers at Outlets (Rauch, 2005),

around 84% of respondents agreed that the prices in these stores met, and even

exceeded, their expectations. Also, nearly 93% of the respondents indicated their

intention of making a return visit (Rauch, 2005).

In summary, the development of factory outlet stores is rapid. They are seen as offering

reasonable and lower prices than traditional department stores, and a much better

shopping environment and atmosphere than ever before. Therefore, the sales

performances achieved by factory outlet stores are satisfactory, tending towards positive

maintenance and a continuous increase in this type of store.

Traditional Department Stores

Nowadays, traditional department stores are facing a significant threat because the

number of consumers who shop at traditional department stores is decreasing, although

the sales of these stores have increased (Nasri, 1999). The number of customers who

shop at traditional department stores has dropped sharply (Li, 2003). This means that

department stores are in an endangeredsituation, and are receiving a lessening portion

of the total retail sales. This situation has led to a significant decrease in the number of

department stores (Li, 2003).

Traditional department stores are perceived by customers as playing a distinctive

fashion role and offering a range of up-to-date fashion merchandise with reasonable

prices, high levels of customer service and a comfortable shopping atmosphere


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(Johnson, 1994). Customers are more willing to enter into, and purchase products in,

traditional department stores, which offer more excitement and emotional attachment

than do outlet stores. As a result traditional department stores tend to be developed to

create and satisfy various demands of customers of different ages and with differing

perceptions of fashion trends (Facenda, 2005). This could be a competitive advantage

which traditional department stores can utilise to attract and maintain customers, as well

as increase market share as an effective defence against the threat presented by factory

outlet stores.

In summary, unlike discount stores, traditionaldepartmentstores tend to be challenged

into finding and creating a winning combination of a diverse customer and merchandise

mix, along with service and price expectations, rather than addressing and focusing on

attracting bargain-seeking customers through niche target marketing (Coward, 2003).

Therefore, the first hypothesis to be tested in the research can be stated as follows:

H1: There is a significant difference in customers store preferences (traditionaldepartment stores, or factory outlet stores) across their demographics.

Product Brand Image

Loyal customers may hold strong and positive images of a brand which are hard to

change and lead to long-term sales revenue (Wyner, 2003). A well-known brand as one

important extrinsic factor can significantly affect customer perceptions (Ailawadi and

Keller, 2004). Retailers have an obvious opportunity, and are in an ideal position to

build these kinds of positive experiences for customers (Schmitt, 2003). Brookman

(2004) noted that brand images should be used to link merchandise ranges and store

design. Parker et al. (2002) also recommended that good brand imagery leads to good

sales revenues. Ailawadi and Keller (2004) pointed out that there was a direct relevance

between branding and customer perceptions of retailer imagery, which has been

confirmed by a large number of researches in this topic area. Inman et al. (2004) pointed

out that customers associate different branded product ranges with different types of

retail stores. Accordingly, store image is impacted significantly by customer perceptions


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of the different branded products and services offered by retailers (Ailawadi and Keller,

2004). The greater the breadth of different products and services offered by a retail store,

the greater the number of customers who will frequently patronage the store, as the

variety of product categories provided in the same store provides a much more

convenient shopping experience for customers (Messinger and Narasimhan, 1997).

Furthermore, the depth of within-category brand products is another very important

factor in influencing store image in customer perceptions, and could be a main

stimulator in the customer store choice decision (Ailawadi and Keller, 2004).

Developing a selection, a range of styles, and favourable categories of branded products

are the most important keys to increasing customer perceptions of store image and, as a

consequence, achieving higher sales (Dreze et al., 1994). Therefore, the design of

brand-name products can be a comparable factor in creating images for factory outlet

stores and traditional department stores.

The customer image of retail stores is highly and positively influenced by the quality of

the manufactured product brands (Ailawadi and Keller, 2004). Accordingly, Jacoby and

Mazursky (1984) noted that carrying strong positive images of brands could improve

the positive image of retail stores. Furthermore, they noted that it was much easier to

increase sales and achieve market share by increasing both the images of the brands and

of the retail stores in the current saturated retail environment (Jacoby and Mazursky,

1984). Nevertheless, Jacoby and Mazursky (1984) also mentioned that a good product

brand image would be damaged if it was associated with a retail store which had a poor

image. Therefore, brand products sold in either type of retail store should be designed

and managed to create and improve relevant customer perceptions. In summary,

customers having good brand image tend to be much more loyal in their shopping

patterns, whether at traditional department stores, or factory outlet stores. Also,

customers who wish to purchase high quality branded products would consider whether

the quality and value of the brand products sold in traditional retail stores is higher than

those products sold in factory outlet stores (Parker et al., 2002). So, the second

hypothesis to be tested in the research could be stated as follows:


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H2: The brand images of those products sold in traditional department stores are higherthan for those products sold in factory outlet stores.

Retail Store Image

The store image plays a very important role in creating profit and maintaining customer

loyalty. Therefore, it could be a determining factor in customer perceptions (Parker et al.,

2002). A high quality store image implies the possibility of differentiation, loyalty and

profitability, while a low-quality store image paves the way for price wars by

emphasising and intensifying customer price sensitivity (Hallanan, 1994). The

conclusion that retail stores should develop a positive, clear and favourable self-image

to be an alternative choice in customers minds was drawn by Martineau (1958).

Understanding the impact of product brand image, and how a retailer should be

positioned, is extremely important in building the image of a retail store (Ailawadi et al.,

1995). Building the image of a retail store requires the identification of sufficiently

different goods and services from those of their competitors, which tends to increase

customers appreciation (Keller, 2003). There are lots of different attributes which

significantly influence store image. These include the quality of merchandise and

services, the store appearance, the quality of the purchase service, the physical facilities,

the behaviour and service of employees, the price levels, the depth and frequency of

promotions and the store shopping atmosphere (Lindquist, 1974). Two basic dimensions

can be used to analyse the store image. These dimensions are in-store atmosphere, and

price and promotion (Ailawadi and Keller, 2004, p.333).

In-store atmosphere is one of the most important factors in the influence of customer

perceptions of retail stores. Baker et al. (2002) pointed out that a stores shopping

environment plays an extremely important role in providing information and shopping

guides to customers, and is the key attribute in building store image. The in-store

environment; particularly physical features such as merchandise pricing, quality and

store design and layout, as well as social service facilities such as employees service


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and friendliness, as well as food-court service; can influence customers economic and

psychological shopping behaviours (Baker et al., 2002). Certainly, store environment

plays a major role in providing informational cues and signals to customers about the

type of merchandise and service they should expect (Parker et al., 2002). Merchandise

quality and service quality are key variables in influencing store image (Parker et al.,

2002). This indicates that service attributes might be some of the most important factors

in store image brand building, and deeply influence consumer purchase behaviours

(Hicks, 2000). This leads to the creation of long-term sales revenue and profitability

(Hicks, 2000). Furthermore, when different retailers stock similar products and brands,

an appealing in-store atmosphere can play a critical role in building retailer brand image

(Ailawadi and Keller, 2004). In this research, the in-store atmospheres of factory outlet

stores and traditional department stores are compared, especially in terms of the

physical characteristics and social service features. Two further hypotheses need to be

tested, as follow:

H3: The physical features (such as lighting, air conditioning, washrooms, music,cleanliness, displays, etc.) of traditional department stores are perceived to be betterthan those of factory outlet stores.

H4: The in-store customer service features (such as friendliness, helpfulness ofsalespeople, etc.) of traditional department stores are perceived to be better than thoseof factory outlet stores.

Price and promotion is another factor which directly affects customer perceptions of

different types of retail stores and their images. A stores image in terms of price and

promotion will be influenced by average levels of prices, seasonal variations in prices,

and the frequency and depth of promotions (Dickson and Sawyer, 1990). Different

customers hold different perceptions of the store choice decision, according to the

different images of stores. For example, large basket shoppers like every-day low pricestores, while small basket shoppers prefer high-low promotional pricing stores (Bell and

Lattin, 1998). Traditional department stores tend to create a diverse customer and

merchandise mix, service expectations and price point in order to design a desirable

shopping experience (Coward, 2003, p.27). For example, Coward (2003) suggested that


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stores needed to rethink convenient designs, return policies and commission policies in

order to make their service more flexible and satisfying for customers. Parker et al.

(2002) pointed out that there is an incredible interaction between price levels and

customer perceptions of product brand images and store images. In particular,

comparatively lower price levels would lead to negative customer perceptions of the

retail stores (Parker et al., 2002). To identify the different price and promotion images of

retail stores, the hypotheses formulated are:

H5: The price and promotion features of products sold in traditional department storesare perceived as being higher than that of factory outlet stores.

H6: There is a significant difference in customers store ratings (traditional departmentstores vs. factory outlet stores) across their demographics.

RESEARCH METHODOLOGY

The study was conducted in a mid-sized multicultural city with a range of local and

international retailers, including a number of traditional department stores and factory

outlet stores. Using Parker et al.s (2002) nineteen items developed for measuring store

characteristics, a questionnaire was constructed which measured preferences for generic

stores. A five point scale was used in the questionnaire, anchored by 1=very poor and

5=very good. In addition, four items designed to measure the demographiccharacteristics of the respondents were also included. The data was collected using

intercept surveys. The respondents were selected equally at both types of retail outlets.

The usable sample was 205 respondents. The sample profile is given in Table I.

DATA ANALYSIS AND FINDINGS

Sample Profile

The sample profile of 205 respondents is summarised in Table I below. There are 107

female and 98 male respondents in the survey. The majority of the respondents are less

than forty-five years of age (approximately 71% of the total sample). Furthermore, the

majority of the respondents had completed secondary school and completed at least one

trade diploma, or certificate degree. Additionally, around 78% of the respondents earned


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a yearly gross income (before tax) of over NZ$20,000. Respondents with a yearly

income over NZ$60,000 only comprised 9.3% of the sample, with the majority having a

yearly income of between NZ$20,000 and NZ$40,000.

Table I: Sample Profile (N=205)

Demographics Percentage

Female

Male

52.2

47.8

Gender

Total 100

Under 25yr

25-34yr

35-44yr

45-54yr

55-64yr

Over 64yr

15.6

25.9

29.8

18.5

7.8

2.4

Age

Total 100

High School Degree

Trade Diploma/Certificate

Bachelor Degree

Masters Degree

16.6

30.2

38.5

14.6

Education

Total 100

Less than NZ$20,000

NZ$20,001--$40,000

NZ$40,001--$60,000

Over NZ$60,000

21.5

45.4

23.9

9.3

Individual yearly

gross income (before

tax)

Total 100

The reliability analysis was utilised to test whether the nineteen questions used in the questionnaire

fit the factor analysis criteria. Using Cronbach alpha, we found that the nineteen items reliability for

traditional department stores was .889 and for factory outlet stores was .880, both figures being at an

acceptable level (Nunnally, 1978).

Factors which Customers keep in mind while Shopping at Traditional DepartmentStores (TDS) and Factory Outlet Stores (FOS)

Table II displays the factor analysis results for different scales of TDS in the

questionnaire. Four factors were extracted through the factor analysis for TDS. Factor 1

concerns the in-store customer service characteristics of TDS. The variables relating to

Formatted: Swedish (Sweden)


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customer service in the stores; such as friendly, helpful, familiar with merchandise,

exchanges, salespeoples pressure and enough salespeople; are loaded more highly than

other variables contained in Factor 1. Customers are especially concerned with whether

the salespeople in traditional department stores are helpful. Within Factor 2, higher

loadings are given to quality, wide selection, newest styles and fully stockedin regards

to the products sold in the stores. These loadings indicate that Factor 2 largely displays

concerns about the brand images of products sold in TDS.

Table II: Factor Analysis Results for Traditional Department Stores and Factory

Outlet Stores

Traditional Department Stores Factory Outlet Stores

Variables

Factor1:In-store

customerservicefeatures

Factor2:Brand

imagesofproducts

Factor3:Physical

features

Factor4:Price&

promotionfeatures

Factor1:In-store

customerservicefeatures

Factor2:Brand

imagesofproducts

Factor3:Physical

features

Factor4:Price&

promotionfeatures

Salespeople are friendly

Salespeople are helpful

Salespeople are familiar with

merchandise

Exchanges happily

Less pressure from

salespeople

Enough salespeople

.600

.746

.637

.571

.601

.580

.628

.717

.652

.590

.640

.639

Quality is good

Selection of products is wide

Styles of products are newest

Stock level

.449

.763

.771

.702

.471

.694

.779

.740

Store is attractive

Store is not crowded

Store is cleanStore is neat

Store is bright

.458

.545

.763.745

.672

.556

.697

.822.677

.160


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Prices are good

Value for price

Markdowns are attractive

Prices of products are marked

clearly

.655

.810

.468

.360

.359

.325

.882

.739

Customers shopping in TDS tend to pay more attention to whether products sold in the

stores display a wide selection, with the newest styles and are fully stocked, rather than

being concerned about their quality, as the loadings of these three variables are 0.763,

0.771 and 0.702, respectively, while the loading ofquality is only 0.449. Furthermore,

Factor 3 shows significant loadings on the variables of attractive, not crowded, clean,

neatand bright, at 0.458, 0.545, 0.763, 0.745 and 0.672, respectively. Therefore, Factor

3 can be identified as containing the physical features of TDS. Specifically, the variablesofclean and neathave much higher loadings than the others. This implies that these two

factors significantly influence customer perceptions of the physical features of TDS.

Factor 4 shows customers considerations regarding the price and promotion features of

products sold in TDS. Within the fourth factor, comparatively higher loadings are found

for the variables ofprice, value for price, markdowns and clearly marked price. These

loadings are 0.655, 0.810, 0.468 and 0.360, respectively. In particular, customers who

preferred traditional department stores tended to give more consideration to whether

they could gain reasonable value from their purchase.

Table II also displays the factor analysis results for the different variables of the factory

outlet stores (FOS) in the questionnaire. Again, a similar group of four factors is

extracted through factor analysis. As in the TDS analysis, Factor 1 concerns the in-store

customer service features of FOS. The variables regarding customer service have higher

loadings than the other variables contained in Factor 1. Respondents were concerned as

to whether the service offered by the salespeople is helpful or not, as it is given the

highest loading, at 0.717. The variables ofquality, wide selection, newest styles and fully

stocked, regarding the products sold in FOS are included in Factor 2. Their high

loadings indicate that Factor 2 is related to measuring the brand images of the products


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sold in the retail stores. The customers who shop in FOS tend to give more

consideration as to whether the products sold in these stores are comparatively new

styles and have satisfactory stock levels, as shown in the related high loadings of these

two variables (0.779 and 0.740, respectively). These customers do not pay much

attention to the quality of the products sold in FOS, however, as this variables loading

is only 0.471. Moreover, Factor 3s variables of attractive, not crowded, cleanliness,

neat and bright have loadings of 0.556, 0.697, 0.822, 0.677 and 0.160, respectively.

Thus, Factor 3 can be identified as concerning the physical features of FOS. More

specifically, customers tend to be concerned about the cleanliness of FOS, but few of

them indicate that store brightness is important. Lastly, Factor 4 concerns the price and

promotion features of the products sold in FOS. Higher loadings are given to the price,

reasonable price for value, markdowns and clearly marked price variables included in

the fourth factor, at 0.359, 0.325, 0.882 and 0.739, respectively. Customers of factory

outlet stores tend to be more concerned as to whether the markdowns of the products

sold in the stores are attractive, and whether the prices of the products are clearly

marked.

Customer Store Preference across Demographics

To know if there is a trend to shop at factory outlet stores, we asked respondents which

store they normally prefer to shop. To control for any possible response bias, we

selected respondents equally at both types of retail outlets. As shown in Table III, the

number of respondents who prefer TDS as their shopping place is 113, compared to 92

respondents choosing FOS as their preferred shopping place. This implies that a sizable

number of customers prefer and/or are shopping at factory outlet stores.

Table III: Frequency analysis of store choice

Frequency Percentage

Traditional department stores 113 55.1

Factory outlet stores 92 44.9


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Total 205 100.0

Chi-square is next used in order to examine whether there are any significant effects

from the different demographic characteristics on customer decision-making in regards

to shopping choices. As shown in Table IV, significant differences exist in customers

store choice as regards to their different genders, levels of education and gross yearly

income, as the relative P-values for these variables are 0.001, 0.000 and 0.003,

respectively. Nevertheless, there are no significant differences between customers

shopping preferences in regard to age, as the P-value is 0.690.

Table IV: Store choices and demographic characteristics

Demographics

Traditional

Department

Stores

Factory

Outlet

Stores

Total

Chi-squa

revalues

P-values

Gender Female

Male

Total

47

66

113

60

32

92

107

98

205

11.343 .001

AgeUnder 25yr

25-34yr

35-44yr

45-54yr

55-64yrOver 64yr

Total

19

28

36

18

8

4

113

13

25

25

20

8

1

92

32

53

61

38

16

5

205

3.065 .690

EducationHigh School Grad.

Trade

Diploma/Certificate

Bachelor Degree

Master Degree

Total

13

24

56

20

113

21

38

23

10

92

34

62

79

30

205

20.223 .000

Individual

yearly gross

income (before

tax)

Less than NZ$20,000

NZ$20,001--$40,000

NZ$40,001--$60,000

Over NZ$60,000

Total

18

46

33

16

113

26

47

16

3

92

44

93

49

19

205

14.256 .003



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More specifically, female respondents tend to prefer shopping in factory outlet stores,

while nearly two-thirds of the male respondents prefer to shop in traditional department

stores. Furthermore, customers with higher levels of education are more likely to choose

traditional department stores as their shopping preference. As shown in Table IV, the

number of customers who possess degrees and prefer shopping at traditional department

stores is much higher than the number of those customers who are willing to go to

factory outlet stores. In addition, customers who earn a higher yearly income;

particularly those whose gross yearly income is between NZ$40,001 and NZ$60,000, or

over NZ $60,000; tend to choose traditional department stores over factory outlet stores.

These statistics are summarised in Table IV above. Therefore, H1 is supported on

gender, education and income, but not on the demographic of age.

Customer Perceptions of Brand Images of Products Sold in Traditional

Department Stores and Factory Outlet Stores

Table V below provides a comparison of the brand images and T-test results of products

sold in traditional department stores and factory outlet stores. According to these results,

H2; which holds that the brand images of products sold in TDS are higher than those of

products sold in FOS; is supported (see Table V). In other words, the overall mean

rating of TDS branded products is significantly higher than that of FOS branded

products, at 16.02 and 9.71, respectively. Specifically; according to the analysis of the

individual items of product features; the respondents gave higher ratings for products

sold in TDS (regarding their wide selection, newer styles and satisfactory stock levels),

than for the products sold in FOS. There is a significant difference between the mean

ratings of the branded products sold in TDS and FOS. Thus, the results from the data

analysis show that there is a significant difference in the brand images of the products

sold in traditional department stores and factory outlet stores. Customers tend to have

higher, and more positive, images of branded products sold in traditional department

stores than they do for branded products sold in factory outlet stores.


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Table V: Comparison of brand images of products sold in stores

Brand Images of Products Soldin the stores

TraditionalDepartment

StoresMean SD

Factory OutletStores

Mean SD

P-values

Quality is goodSelection of products is wide

Styles of products are newest

Stock level

3.884.05

4.02

4.07

.70

.81

.93

.88

3.112.53

2.16

1.91

.77

.89

.87

.94

.000

.000

.000

.000

Overall 16.02 2.69 9.71 2.73 .000

Customer Perceptions of Store Images of Traditional Department Stores andFactory Outlet Stores

Table VI below provides a comparison of the store images and T-Test results of both

types of retail stores. As shown, the respondents overall mean ratings, as well as their

item-wise mean ratings of TDS physical features are significantly higher than for FOS,

at 19.87 and 16.13, respectively. Therefore, H3 is accepted. That is, the physical

features of traditional department stores are perceived as being better than those of the

factory outlet stores. There is a significant difference between the mean ratings of the

physical features of TDS and FOS. Thus, the respondents indicated that the physical

characteristics of traditional department stores are more attractive than those of factory

outlet stores.

Further to this finding, the respondents overall mean ratings, as well as their item-wise

mean ratings of TDS in-store customer service features are significantly higher than

those for FOS, at 22.18 and 20.48, respectively. Therefore, H4 is accepted. That is,

in-store customer service features of traditional department stores are perceived as being

better than those of factory outlet stores in New Zealand

Furthermore, H5; which holds that the price and promotion features of products sold in

traditional department stores are perceived as being significantly higher than those of

factory outlet stores; is accepted, as indicated in Table V. The applicable overall mean

ratings of TDS and FOS are 12.70 and 16.11, respectively. Also, the individual scale


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items of price and promotion features are much higher for the factory outlet stores. This

finding indicates that respondents consider the prices of products sold in FOS to be

comparative lower than those sold in TDS and that the promotions offered by FOS are

more attractive and satisfactory.

Table VI: Comparison of the features of traditional department stores (TDS) and

factory outlet stores (FOS)

Features TraditionalDepartment

Stores

Factory OutletStores

P-values

Physical Features:

Store is attractive

Store is not crowded

Store is clean

Store is neat

Store is bright

Mean

3.63

3.70

4.10

4.16

4.28

SD

.84

.81

.75

.73

.73

Mean

3.32

3.25

3.44

3.49

2.62

SD

.94

.85

.83

.86

.70

.000

.000

.000

.000

.000

Overall 19.87 2.96 16.13 3.10 .000

In-store Customer Service Features:

Salespeople are friendly

Salespeople are helpful

Salespeople are familiar with merchandise

Exchanges happily

Less pressure from salespeople

Enough salespeople

Mean

3.86

3.76

3.77

3.39

3.48

3.91

SD

.67

.73

.86

.84

.81

.85

Mean

3.59

3.52

3.42

3.07

3.36

3.51

SD

.82

.82

.88

.87

.87

.96

.000

.000

.000

.000

.000

.000

Overall 22.18 3.45 20.48 3.95 .000

Price & Promotion Features of

Products Sold in the stores:

Prices are good

Value for price

Markdowns are attractive

Prices of products are marked clearly

Mean

2.88

2.82

3.38

3.63

SD

.83

.88

.91

.88

Mean

3.99

3.66

4.22

4.24

SD

.65

.76

.79

.84

.000

.000

.000

.000

Overall 12.70 2.71 16.11 2.26 .000

Customer Perceptions of Traditional Department Stores and Factory Outlet Storesacross Demographics

To investigate Objective 4 (to evaluate whether demographic characteristics are related

to customer perceptions of traditional department stores and factory outlet stores), the

ANOVA and T-tests are used to determine whether there are significant relationships

between customers store ratings and their demographic characteristics. Table VII


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displays the customer perceptions of overall store ratings and their relevant four

demographic characteristics.

As shown in Table VII, only the income level shows significant mean differences in the

ratings of TDS. In other words, customers concerns regarding the physical features and

price and promotion features of TDS are highly influenced by their income level. More

specifically, the higher the customers income is the more favourable will be the mean

ratings for physical features and price and promotion of TDS.

There is, however, no difference in the customer perceptions of TDS and FOS across

gender, age groups and educational levels, as the respective P-values are all much

higher than 0.05. Therefore, H6 is supported only on income, but not on gender and

education levels.

Table VII: Store ratings and Demographic Characteristics

Demographics TraditionalDepartment

Stores

Physical

features

Mean SD

Factory

Outlet Stores

Physical

features

Mean SD

Traditional

Department

Stores

In-store

customer

service

features

Mean SD

Factory

Outlet Stores

In-store

customer

service

features

Mean SD

Traditional

Department

Stores

Price &

promotion

features

Mean SD

Factory

Outlet Stores

Price &

promotion

features

Mean SD

Traditional

Department

Stores

Product

features

Mean SD

Factory

Outlet Stores

Product

features

Mean SD

Gender:

Female

Male

3.93

4.02

.54

.64

3.32

3.12

.60

.63

3.66

3.74

.58

.57

3.43

3.40

.64

.68

3.14

3.22

.70

.65

4.02

4.03

.58

.56

3.97

4.04

.65

.69

2.48

2.37

.74

.61

P-value .682 .059 .307 .832 .636 .635 .734 .476

Age:

Under 25yr

25-34yr

35-44yr

45-54yr

55-64yr

Over 64yr

3.88

3.95

4.05

3.94

3.86

4.48

.55

.60

.57

.59

.66

.74

3.23

3.22

3.20

3.38

3.14

2.76

.69

.62

.64

.44

.69

.82

3.82

3.63

3.71

3.59

3.85

3.73

.56

.57

.60

.52

.57

.89

3.47

3.39

3.38

3.59

3.28

2.73

.59

.66

.64

.57

.76

.66

3.24

2.99

3.31

3.13

3.27

3.10

.69

.70

.58

.65

.77

.68

4.09

3.88

4.05

4.14

4.09

3.80

.48

.57

.60

.46

.56

.56

4.13

3.90

4.09

3.99

3.86

3.90

.58

.68

.63

.72

.75

.67

2.54

2.32

2.44

2.50

2.44

2.10

.80

.64

.65

.74

.56

.65

P-value .270 .330 .450 .097 .206 .225 .532 .572

Formatted



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Education:

High School Grad.

Diploma/Certificate

Bachelor Degree

Masters Degree

3.96

3.85

4.02

4.11

.62

.53

.60

.65

3.38

3.34

3.11

3.14

.68

.52

.68

.53

3.59

3.70

3.76

3.63

.55

.50

.60

.67

3.51

3.55

3.26

3.42

.74

.56

.65

.71

2.94

3.15

3.31

3.15

.72

.65

.65

.72

3.99

4.09

3.97

4.08

.60

.50

.63

.45

3.83

3.99

4.10

4.00

.85

.59

.56

.85

2.57

2.41

2.30

2.63

.72

.52

.70

.82

P-value .201 .058 .480 .590 .066 .552 .281 .075

Yearly gross

income:

Less than NZ$20,000

NZ$20,001--$40,000

NZ$40,001--$60,000

Over NZ$60,000

3.90

3.87

4.11

4.27

.64

.54

.58

.62

3.22

3.28

3.19

3.06

.66

.63

.59

.55

3.67

3.66

3.78

3.74

.56

.59

.56

.58

3.44

3.48

3.29

3.34

.68

.67

.63

.65

2.88

3.20

3.30

3.43

.71

.67

.59

.68

4.02

4.05

4.01

3.99

.57

.57

.53

.66

3.85

3.97

4.12

4.28

.76

.65

.62

.58

2.61

2.38

2.31

2.55

.75

.61

.63

.93

P-value .010 .524 .674 .413 .005 .960 .060 .130

CONCLUSIONS AND IMPLICATIONSThe findings on customer store preference across demographics show that customers

with different genders, levels of education and gross yearly incomes tend to make

different store choices, however, they perceive traditional department stores and factory

outlet stores similarly regardless of their age. More specifically, male customers regard

traditional department stores offering famous branded products as their first choice,

however, female customers are willing to shop at factory outlet stores in order to seek

branded products with comparatively lower prices. Female customers tend to be more

price oriented and price sensitive. Furthermore, the higher the level of education

customers have the more likely they are to choose traditional department stores as their

shopping preference. This finding indicates that more highly educated customers tend to

have greater concerns in regards to the shopping environment and atmosphere offered

by traditional department stores. In addition, customers earning higher yearly incomes

are more willing to choose traditional department stores over factory outlet stores.

In regards to customer perceptions of brand images of products sold in traditional

department stores and factory outlet stores, there is a significant difference in the brand

images of products sold across these stores. The brand images of products sold in

traditional department stores are perceived more positively than are those of products


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sold in factory outlet stores. Customers perceive traditional department stores as

offering wider and more satisfactory selections of various types of merchandise in

comparison to factory outlet stores. The stock levels in traditional department stores are

also seen as being superior. Obviously, the wider selection and greater breadth of

different branded products offered in the stores, the greater the number of customers

who will be more attracted to TDS.

In regard to customer perceptions of store images of traditional department stores and

factory outlet stores, there is a significant difference between traditional department

stores and factory outlet stores. Firstly, respondents feel that the physical features of

traditional department stores are more satisfactory, comfortable and attractive than those

of the factory outlet stores. Customers believe that they will enjoy shopping at

traditional department stores, as they provide them with a more comfortable in-store

shopping environment and atmosphere. Secondly, there are significant differences in the

in-store customer service features of traditional department stores and factory outlet

stores. Customers believe that traditional department stores provide a higher quality of

in-store customer services. TDS are also seen as having better exchange policies and an

adequate number of salespeople offering to meet customers different wants and needs.

Therefore, traditional department stores do have distinctive advantages in terms of their

in-store customer services, in comparison to those offered by factory outlet stores.

Thirdly, traditional department stores have much higher prices when compared with

factory outlet stores. This is due to their different marketing orientation and

segmentation. Customers tend to be attracted by the prices and value of products sold in

factory outlet stores. Schneiderman (1998) found in his research that customers believed

that factory outlet stores could provide greater value for their money than did traditional

department stores.

Results on the examination of customer perceptions of traditional department stores and

factory outlet stores across demographics indicate that only income levels have any

significant effects on customers mean ratings of traditional department stores, but that


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no significant differences exist across the variables of gender, age and education. This

means that customer perceptions of physical features and price and promotion features

of traditional department stores are highly influenced by their different income levels.

Customers with higher incomes tend to be attracted to physical features and price and

promotion features of traditional department stores. They are interested in shopping in a

comfortable environment and seeking famous and fashionable branded products, rather

than being price sensitive, bargain seeking customers.

The implications of these research findings include the point that traditional department

stores should maintain their competitive positions by continuing to offer good physical

facilities and environments, satisfactory in-store customer services and famous branded

products, in order to maintain and attract more customers. This will also help to

maintain their market share and gain competitive advantage against the intense

competition created by factory outlet stores.

Customers perceive that the prices offered in traditional department stores are much

higher than those of factory outlet stores. Therefore, department stores are facing a big

challenge from factory outlet stores in terms of price and promotion strategies. As a

result, they need to assess their value positions and adapt more reasonable prices to

provide satisfactory value for customers. Clearly identifying and dividing their current

and potential customers into different target segments is necessary for retailers in setting

differing price strategies. During sales seasons, more attractive promotion of branded

products could be undertaken in traditional department stores. Certainly, customers tend

to purchase more when there are large sales and attractive promotions of branded

products in traditional department stores. In order to target appropriate segments,

traditional department stores need to identify what relevant level of branded products

should be sold and assign these products reasonable prices in stores across different

ages, genders, and levels of education and income. Traditional department retail stores

also need to provide more selection characteristics (in terms of their branded products

adapting to the newest styles frequently and maintain good stocks level), in order to


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keep their competitive advantages through being perceived as offering more positive

brand images of the products sold in their stores. Furthermore, strategic alliances

between different traditional department stores and their distributors could also be

developed. In such an alliance, competitive advantages (such as better offerings of

quality in-store services and providing similar branded products with reasonable prices

and promotions) could be shared by traditional department stores, , which should reduce

costs for the alliance partners.

Regarding implications for factory outlet stores, they need to learn from the

comparative disadvantages of traditional department stores and engage in enhancing

their current competitive positions on price and promotion offerings, in order to

improve customer perceptions of their stores.

Maintaining their comparatively lower prices and providing frequent promotions of

branded products is one of the most useful price and promotion strategies for factory

outlet stores in maintaining and enhancing their competitive positions in this area.

Meanwhile, manufacturers which utilise factory outlet stores need to control the values

of the products through assessments. As a result, customers who are not only price

sensitive, but are also value seeking will be satisfied with the prices and promotion

features of the products sold in the factory outlet stores. It is extremely important for

manufacturers to immediately improve their products brand images. Widening the

selection of characteristics, improving stock levels and offering positive branded

products in the stores are ways which this could be achieved. Nowadays, factory outlet

stores are no longer established for the sale of seconds or comparatively lower quality

products with lower prices. Therefore, they need to build more positive brand images

for the products sold in the stores instead of being perceived as discount stores. They

need to invest more in the stores physical facilities to offer a better shopping

environment and atmosphere. As a result, however, prices may increase significantly

due to the costs of such upgrading, meaning that such a strategy might be risky (Parker

et al., 2002). Therefore, factory outlet stores need to evaluate their choices carefully in


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order to balance any price increases and distribution channel developments.

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Formatted: Italian (Italy)


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