Factors Affecting Consumer's Choice of Retail Store Chain: Empirical Evidence from Vietnam

Abstract

The study explores the factors affecting the brand selection behavior of retail chains in Vietnam and to what extent they have an impact on the customer's choice intention. This research employs a combination of both qualitative and quantitative mixed methods with the help of SPSS version 22.0 in data analysis. Expert interviews are used to design the questionnaire for the survey conducted on 700 consumers. Research results show that the eight factors of store image (1-to-3 split factor of store image including the display of goods and services), price perception, risk perception, brand attitude, brand awareness, and brand familiarity were determined. They all influence the intention to choose the retail chain brand. With a positive β coefficient, the more store image, price perception, brand attitude, and brand awareness are enhanced, the more likely the intention to choose the retail chain brand. The factor of risk perception has negative ��, resulting in an inverse impact on choosing a retail chain brand name. Price perception and risk perception have the strongest impact on retail chain decision behavior while commodity display factors the least. Based on these important results, the study proposes implications for retailers and manufacturers.

1. Introduction

The rapid and continuous development of the world economy in recent decades has led to the globalization of the retail industry, which contributes to the creation of retail companies and large-scale retail brands. In today’s increasingly competitive business environment, coupled with an increase in population, efficient retail businesses have contributed greatly to the global economy. Retailing is the final stage in a channel of distribution, consisting of businesses and people involved in the physical movement and transfer of ownership of goods and services from the producer to the end consumer (Berman & Evan, 2009). The retail context has changed dramatically over the past two decades. Around the world, the retailing industry has been transformed from traditional retail in the domestic market in the past to modern large-scale retail with the creation of retail brands (Kim et al., 2012). Income, lifestyle, expectations, preferences, and buying patterns of consumers are changing day by day, so retail stores are opening for the convenience of buyers. These changes urge retailers to get a new attitude, build a retail brand and do better supply chain organization (Londhe, 2006).

Consumer selection behavior of retail brands and the affecting factors are controversial topics to many researchers and managers. Researchers selected different research contexts to find out the reasons that motivate and hinder the behavior of consumers to choose retail brands. Since then, the findings suggested effective business solutions to attract customers to the managers, businessmen, and owners of retail chains.

Vietnam retail market is considered as one of the potential markets and belongs to the group of attractive retail markets in the world today (EVBN, 2018). With the opening of the retail market from January 1, 2009, and then official full opening in January 2015, foreign retail businesses were allowed to set up 100% foreign-owned enterprises in Vietnam, leading to increasing retailers’ competition for customer attraction. Foreign retail brands were able to offer better and more consistent pricing. So, Vietnamese small and medium-sized enterprises (SMEs) had also great pressure to be more proactive, more professional and to improve their competitiveness to be ready to cope with foreign enterprises. The average CPI (Consumer Price Index) in 2019 increased by 2.79% compared to 2018, since then, total retail sales of goods and revenue from consumer services in Vietnam have also gradually increased over the years with an average growth rate of 15.5% per year.

Currently, many studies were conducted on the retail chain in Vietnam. However, there is hardly any research on the Vietnamese consumer’s choice intention of retail brands. The study aimed to investigate the factors that influence the behavior of Vietnamese consumers to choose a retail brand.

2. Literature Review

Store selection is one of the main research areas in marketing and various authors including Aaker and Jones (1971), Solgaard and Hansen (2003), and Morschett et al. (2005) focused their research on consumer’s selection behavior of retail store. The choice of retail stores is carried out at two levels including outlet type and outlet brand (Geoffrey, 2010). For the first level, researchers concentrate mainly on store attributes to analyze and explain selection behavior. Four of the most notable attributes are price, classification level, the distance of the location, and product quality. These four attributes have a significant impact on the store choice decisions of consumers.

Other studies showed that factors affecting store choice are divided into two categories: (i) factors related to store attributes and (ii) factors related to consumers (loyalty, age of buyers, number of shopping trips, etc). Most research focuses on factors related to store attributes, whereas many studies consider both factors (Bell & Lattin, 1998; Volle, 2001). These studies enhanced understanding of retail chain selection decisions.

Ulrich and Luynn (2008) conducted a study on the consumers’ selection behavior of brands. Ngo et al (2019) focused the research on brand and student’s decision buying fresh milk, Kim et al. (2014) on consumer buying behaviors of an Agricultural Brand. In the study of Fishbein and Ajzen (1975), buying behavior and selection behavior were better understood through studying the insights of buying intention and selection intention. Therefore, this paper examined other research on the factors affecting buying intention, buying behavior, and selection behavior of retail stores. The research results demonstrated the positive and negative effects of store attributes and the store brand on the above-mentioned behavior. It can help stores determine to what extent factors have an impact on consumers’ decisions, thereby have a more effective and appropriate marketing strategy.

Although there have been much research works on retail store selection behavior, brand selection behavior, buying behavior, most of them are related to the first stage of the selection process, which is the choice of retail store type. There is a lack of studies on how the brand affects the consumer’s selection of retail stores.

3. Methodology

3.1. Method of Expert Interview

To determine the factors affecting the intention of consumers to choose a retail store brand, an expert interview method was conducted as follows:

Step 1: An interview questionnaire related to the intention to choose the brand of the retail store was prepared for marketing experts, retail store managers, and consumers.

Step 2: 10 marketing experts, 10 retail store managers, and 10 consumers who have previously shopped at branded retail stores were interviewed. Each interview took place for 45 to 60 minutes in person or by phone. Open and closed questions were used to gather information for the study. After the data was aggregated, transcription and processing of information were conducted. Interview results are summarized as follows:

First, Vietnamese consumers nowadays tend to prefer familiar stores with a brand name, which reduces the risk in the buying process. They like eye-catching stores with good staff attitude, relaxing ambient and competitive price. They do not like to shop at far-off locations. So they prefer to choose retail chain store brands than traditional retail stores.

Second, most of the respondents said that consumers who choose modern branded retail stores in Vietnam are young, educated customers, with a good attitude towards the brand. They pay much attention to the image of retail stores and the buying risks, and actively seek information in the process of information investigation to choose the right retail store brand. In their opinion, a large proportion of Vietnamese consumers still choose non-branded retail stores, traditional toad markets because of the convenience of shopping time, reasonable price, and affordable bargaining that is one of the common habits of Vietnamese consumers including consumers in Hanoi, in the buying and selling process.

Third, many factors can contribute to a retail chain brand, including customer’s perception of risk, brand awareness, and other factors related to retail store brand equity. Based on the results of qualitative research, factors about consumer characteristics and their psychology such as store image, price perception, brand attitude, risk perception, brand awareness, and brand familiarity are used to predict Vietnamese consumer’s choice behavior of retail brands. Then, the interview results are used in the survey method.

3.2. Survey Method

From the findings on the relationship between intention to choose retail store brand and influencing factors, a largescale survey was conducted. The two-part-questionnaire was developed. Part 1 comprised demographic information (age, gender, income, education level) and some general information. Part 2 was made up of questions related to store brand image, understanding of price, risk perception, perception, brand familiarity, brand attitude, and brand choice intention. The questionnaire was designed on a Likert scale with a 5-point scale (1 = completely disagree, 5 = totally agree). The measurement scales were drawn from previous studies: Store image (Diallo, 2012), brand familiarity and brand attitude (Yu, 2014); risk perception and price perception (Prasad & Aryasri, 2011); and intention to choose a brand of retail chains (Low & Lamb, 2000).

The questionnaire was sent for a pilot test implemented by 10 respondents who had been choosing retail chain stores and marketing experts to ensure the content of the questionnaire is not misinterpreted, leading to falsifying investigation results. After receiving feedback, the survey questionnaire was re-edited and used to conduct a largescale survey with a sample size of 700 consumers using the method of direct contact with consumers at retail chain stores in 2019.

The survey data was collected, checked and all incorrect and incomplete forms were removed. The rate of respondents reached 94% (661). The data analysis was processed by SPSS22.0 software to perform descriptive statistics, scale reliability analysis, and correlation regression to investigate the impact of the six factors determined in in-depth interviews of the qualitative research on retail store brand selection intention. The official research model and hypothesis of the thesis are shown in Figure 1.

Figure 1: Theoretical Research Model

Store image: Studies by Diallo (2012) found a relationship between store image perception and consumer purchase behavior in emerging markets. Store image perception plays an important role for Vietnamese consumers in shopping at modern retail stores of domestic and foreign retailers compared with traditional markets and family-run stores. Chang and Luan (2010) showed that the levels of store image storage such as atmosphere, service staff, and commodity are crucial factors influencing Chinese consumers’ perception of modern retail stores. Nguyen et al. (2007) provided evidence that perceptions of store image impact positively Vietnamese consumer buying behavior. Diallo (2012) argued that store perception influences both buying behavior and price understanding in the context of a developing country. So, hypothesis H1 is proposed as follows:

H1: Store image has a positive impact on consumers’ intention to choose a brand of retail chain stores.

Price perception: Retailers are also based on the pricing tactical view by implementing discount programs and price guarantees. In this way, regular discounts and promotions have long been used to attract consumers to choose retail stores and create a crowd effect (Diallo, 2012). However, while discounts and promotions can increase retail store sales, discounts can also negatively affect the perception of brand quality and can even damage brand image and overall store image. We can expect that price consciousness will have a positive influence on consumer buying behavior.

In the context of research in Vietnam, the author found that the choice behavior of selling place and brand of a majority of Vietnamese consumers is still greatly influenced by price. A part of consumers has incorrect price awareness, so they are willing to choose low-priced stores and places to shop without much understanding of the origin of the product. Meanwhile, in major cities, including Hanoi, a part of consumers has also become more aware of the origin of goods, safety, and quality. Hence, they are also willing to pay a higher price to buy goods at the branded stores since they believe that goods origin, quality, and safety are guaranteed (Nguyen et al., 2007). For the above reasons, the following hypothesis 2 is proposed:

H2: Price perception has a positive impact on consumers’ intention to choose a brand of retail chain stores.

Perception of risk: Previous studies have shown that if brands have a good image, consumers will have a more positive attitude towards the brand and their buying intention is increased. Consumer perception of financial risk will negatively affect brand and brand choice intentions (Diallo, 2012). The risk from store brand selection addresses a concern that the chosen store may not be as expected when they do not provide consumers with the expected benefits. In this case, the consumer faces risks. In the process of shopping, Vietnamese consumer usually has a mindset of wanting to choose store brands that brings both economic, health and psychological benefits. Therefore, they feel worried and often compare different store brands to find the desired benefits for themselves. From these studies, hypothesis 3 is proposed:

H3: Perception of risk has a negative impact on consumers’ intention to choose a brand of retail chain stores.

Brand Attitudes: The attitude of customers toward a brand has a significant impact on its purchase intention, as brand attitude is the most important determinant of purchase intention. A better or worse attitude toward a brand leads to a higher or lower belief level in the evaluation of a brand. Similarly, higher or lower belief level alters attitudes towards the same brand. In the area of consumer choice research, researchers have established a positive relationship between brand attitude and choice intention and purchase intention (Fishbein & Ajzen, 1975; Ryan & Bonfield, 1975).

The attitude is often negative or not enthusiastic towards new products appearing for the first time on the market because the consumer is not familiar with and does not believe in products. Consumer attitudes about retail store brands influence their buying tendency and choice behavior (Burton et al., 1998). A few empirical studies have also found a positive and direct effect of attitude towards store brand on purchase behavior in emerging market context (Jin & Suh, 2005). Therefore, hypothesis H4 is proposed as follows:

H4: Brand attitude has a positive impact on consumers’ intention to choose a brand of retail chain stores.

Brand awareness: Keller (1998) describes the degree of consumer recognition of a product by its name. Creating brand awareness is a key step in promoting a new product or reviving an older brand. Ideally, awareness of the brand may include the qualities that distinguish the product from its competition. The brand name helps retailers and consumers discover the services and the expected results of the services offered. A well-recognized brand will contribute to an increase in the market share and the belief in quality (Pham, 2020). Lin and Chang (2003) in their research showed that brand awareness has a strong influence on consumer’s purchase decisions and ultimately results in brand loyalty of consumers. In the Vietnamese market, the concept of brand awareness is quite new to the majority of consumers. However, a segment of young people is interested in, knows about brands, and chooses goods based on their brand perception. Therefore, it is expected that in the context of the Vietnamese retail market, better brand awareness will accelerate brand choice to purchase goods. So, hypothesis H5 is built based on these arguments:

H5: Brand Awareness has a positive impact on consumers’ intention to choose a brand of retail chain stores.

Brand Familiarity: Brand familiarity influence significantly consumer’s brand choice by i) increasing brand awareness and perception, ii) increasing the likelihood that the brand is included in the evoked set (iii) creating a positive effect on brands, and (iv) driving purchase behavior. Some other empirical evidence proved the effects of brand familiarity on store brand choice. Dick et al. (1995) found that there is an association between store brand familiarity and store brand choice behavior perhaps because more familiarity enhances consumer experience and understanding through storing good quality brands. Based on these reasons, hypothesis H6 was proposed as follows:

H6: Brand familiarity has a positive impact on consumers’ intention to choose a brand of retail chain stores.

4. Research Results and Discussion

4.1. Survey Respondents

According to the statistical results, the number of men and women are respectively 248 (37.5%) and 413 (62.5%) out of 661 interviewed people in total. In terms of age, 335 people or 50.7% of the people were in the age group of 18–25. Between the age group of 26–35 years old, there are 160 people or 24.2%. The numbers of consumers between the age group of 36 to 54 years old are 119 people or 18% and only 47 respondents (7.1%) are over 55 years old. Regarding income, 26.9% of interviewees are mainly students or retirees earning less than 5 million Vietnam Dong (equivalent to approximately 220 USD) per month. 41.3% of surveyed consumers have a monthly income of 5 to 10 million. Consumers having a monthly income of 10–15 million VND account for 22.4% and only 9.4% of respondents were getting over 15 million per month. In terms of education, 65.1% of respondents graduated from colleges and universities and 23.9% from high school. Even 8.8% of interviewees have post-graduate degrees while only 2.3% of them do not have a high school diploma. The results reveal that the education level in Hanoi is quite high, which is completely consistent with consumer conditions in the Vietnam capital.

4.2. Extracted Factor Analysis

The EFA analysis is perfectly suited to perform factor analysis. KMO value of 0.864 (>0.5) means that factor analysis is appropriate with research data. Barlett’s test result is 8455,542 with a significance level of less than 5%, so the hypothesis of the factor model is not appropriate and will be rejected. Data used for multiplication factor analysis is quite appropriate and the observed variables are correlated in the population.

For the rotated factor matrix, variables with a factor loading of less than 0.3 are rejected and the total extracted variance must be greater than 50%. The results from Table 1 show that 33 observed variables can be grouped into 8 groups of factors.

Table 1: Rotated Factor Matrix

4.3. The Reliability of the Scale

With a sample of 661 units, in the process of assessing the reliability of the scale, the authors keep the scales with Cronbach’s alpha coefficient greater than or equal to 0.6; Correlation coefficient with the total variable greater than or equal to 0.3. According to the results, all scales meet the requirement of reliability, and no scales are eliminated. Thus, it is reasonable to use these scales for the next steps.

After evaluating the values of the scales by EFA factor analysis and the reliability by Cronbach’s alpha coefficient, all scales of the model and variables are retained. The theoretical research model and research hypotheses were adjusted as follows:

H1.1: Store image - display of goods has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H1.2: Store image - goods has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H1.3: Store image - service has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H2: Price perception has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H3: Risk perception has a negative impact on consumers’ intention to choose a brand of retail chain stores.
H4: Brand attitude has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H5: Brand awareness has a positive impact on consumers’ intention to choose a brand of retail chain stores.
H6: Brand familiarity has a positive impact on consumers’ intention to choose a brand of retail chain stores.

Figure 2: Adjusted Research Model

4.4. Correlation Analysis

According to the results of the correlation analysis, all variables have correlation coefficients of 0.01 corresponding to the significance level of 99%. The correlation coefficient between the mean values of the independent and dependent variables ranged from 20.5% to 49.7%. Thus, it can be temporarily concluded that these independent variables are suitable for inclusion in the model

4.5. Regression Analysis

The result shows that the adjusted R2 coefficient when independent variables are included in the model and if not included in the model is 0.442. This suggests that the independent variables to be included in the model are quite compatible. The adjusted R2 of the model including independent variables for the control variables is 44.2%, which means that eight significant independent variables together with the control variable explain 44.2% of the variation of the intention to choose the retail chain store brands - in particular, the chain stores of grocery and consumer goods.

Multicollinearity was measured by variance inflation factors (VIF) and tolerance. If the VIF value exceeds 4.0, and the tolerance value is less than 0.2 then there is a problem with multicollinearity (Hair et al., 2009). Thus, the result of independent variables in the model is satisfactory, so no multicollinearity phenomenon occurs.

The relationship between the independent variables and the dependent variable is shown through the following linear regression equation:

\(\begin{aligned} \mathrm{QD}=& 1.203+0.089 \mathrm{HA} 1+0.099 \mathrm{HA} 2+0.095 \mathrm{HA} 3 \\ &+0.31 \mathrm{CNG}-0.193 \mathrm{CRR}+0.132 \mathrm{TD}+0.111 \mathrm{NT} \\ &+0.058 \mathrm{QT} \end{aligned}\)

The results of regression analysis on the testing of hypotheses, variables with p-value less than or equal to 0.05 will affect the dependent variable. The variables with a p-value of more than 0.05 will be excluded from the research model. According to the results in Table 2, hypothesis H6 is rejected, the remaining variables all satisfy the condition.

Table 2: Regression Results

5. Conclusion and Limitations

First, store image including commodity layout, commodity store image, and service store image does not seem to be a key factor affecting the consumer’s intention to choose a retail chain brand as these factors indirectly have an impact on the use of products sold in retail stores. This result is quite contradictory to the studies in other developed and emerging countries. Therefore, the relationship between the perception of retail store brand image and the use of products sold at these store brands is further considered. This study complements previous studies in Vietnam that focused only on perceptions of store image. Second, this study also found that familiarity with the retail store brand was not correlated with the intention to choose a chain brand. However, if the confidence interval drops to 90% then a relationship between this factor and the retail brand selection intention of Vietnamese consumers is found.

Some recommendations are made to retailers from the research results. First, the effect of the price perception variable is stronger than store image and brand familiarity variables, suggesting that Vietnamese consumers seem to have a higher preference for price-related factors in their selection and shopping. Therefore, retailers need to focus their communication strategies on these aspects. However, since price does not guarantee that association with a brand equates to long-term brand loyalty, it is recommended that they should not only focus on price perception but also should pay attention to other factors. Second, retailers should minimize consumers’ perception of risk such as clearly stating the price and promotion (if any) of each item on the website or the advertisement at the store so that customers can use it as a basis for comparing with other retail store brands. For product risks, stores need to state the origin of each item. Third, giving a campaign that helps consumers to engage with the brand more is the way to build brand awareness and build positive relationships with retail stores as well as with the products or services offered. Fourth, no matter how business is organized, retailers in the Vietnamese market should also focus on measures to enhance consumers’ attitudes towards store brands.

Some suggestions are also proposed for manufacturers of fast-moving consumer goods (FMCG) products: In addition to the measures that retailers are actively taking in their chain of stores, the manufacturers of FMCG products must also implement promotion and trade marketing activities at Points of Purchase Marketing (POP) to help customers reduce risk perception and increase awareness and attitudes towards the brand of retail store chains

First, in this study, the author focuses on discovering and studying 6 independent variables: store image, price perception, risk perception, brand familiarity, brand attitude, and brand awareness. However, there are still many other factors that can affect consumers’ branding behavior that the author has not studied. Therefore, further studies can explore and consider other factors influencing the behavior of Vietnamese consumers’ choice of retail store brands. Second, this study has only initially been researched with a specific type of retail store and specific grocery industry. However, each item and type of store has its own characteristics. Specialist store chains, for example, may differ from this study. Therefore, subsequent studies can also choose different categories and types of stores to study whether the brand selection behavior of those stores is different.