Understanding the nature and determinants of store loyalty in China

Abstract

Store loyalty is confirmed to be important for retailers as it can help them gain and retain a competitive advantage over their counterparts. Researchers suggest that to achieve store loyalty the retailer needs to cope with competition from both the task environment and the institutional environment. The task environment may require the retailer to provide merchandise of good quality and price and with a broad range of choice. In the institutional environment, consumers may develop diversified requirements towards a specific store where they conduct their shopping because they have diversified roles in society, e.g., as an employee, a member of the community, and/or as a religious believer. To meet challenges from the institutional environment, a store may donate to the community or ensure a good working environment for employees. According to institutional theory, once these rules are followed consumers perceive the store to be legitimate in the current institutional environment. This is referred as organizational legitimacy. Therefore, it is suggested that the consumers will support the store. This argument builds a solid foundation for the current research. It signifies the importance of institutional environment for establishing store loyalty. The current research further explores the influence of the institutional environment on store loyalty. According to institutional theory, the development of institutions is history-based and context-specific. Stakeholders based in different institutional environments may develop different institutional requirements. Therefore, it is necessary to investigate specific institutional requirements within their specific institutional environments. Furthermore, the formulation of organizational legitimacy can be categorized at a collective level or an individual level. Past research has explored the formulation of organizational legitimacy on the collective level. The individual level needs to be explored because it can influence the establishment of organizational legitimacy on the collective level. Finally, institutional theory also suggests that international companies will face many more challenges from the institutional environment when they expand into overseas markets. These three facets construct the three angles for the current research. Past research suggests that performative actions (measured by store image), and symbolic actions (measured by corporate social responsibility), can be employed to satisfy both the requirements of task environment and institutional environment, then to formulate organizational legitimacy, and then store loyalty. In the current research the influence of performative actions and symbolic actions on organizational legitimacy are explored from the abovementioned three facets. Firstly, the specific requirements of performative actions and symbolic actions in the specific context are investigated. The Chinese retail market is chosen as the investigation context due to its attractiveness in the international retail market. Secondly, the performative and symbolic actions influencing the formulation of organizational legitimacy on the individual level are explored. Thirdly, whether consumers in the host country develop higher requirements of performative and symbolic actions towards international retailers compared with local retailers is investigated. From the qualitative research, the consumers’ performative and institutional requirements towards the store operated by foreign or domestic retailers in the specific context are investigated, i.e., the Chinese retail market. Face-to-face in-depth interviews were conducted with 20 Chinese consumers from Ningbo (a city located in Eastern part of China). The results show that the respondents have clear economic and institutional requirements regarding stores operated by foreign or domestic retailers. From the economic perspective, store location, merchandise (assortment, price, and quality), store environment, and service are the focus. Interviewees also show their interest concerning the institutional actions taken by the store. They expect a store to show concern about the provision of a good working environment and equal payment for employees, donations they make to charity, and assurance of fair trade with local suppliers. For the second facet, questionnaires delivered to respondents from Ningbo resulted in the collection of 607 useful questionnaires. The statistical software Smart PLS is employed to analyse the data. The results show that individual consumers develop instrument evaluation towards the performative and symbolic actions of a store. Also, the consumer evaluates the symbolic actions from relational-moral perspectives. Both the instrumental evaluation and the relational-moral evaluation help the store achieve the perceived organizational legitimacy on the individual level and then the store loyalty. This signifies that the consumer may evaluate whether the store can bring economic benefits, efficiency, and so on. It is also important that the strategies of a store make consumers feel respected and reach their moral standards. It is suggested that the formulation of perceived organizational legitimacy on the individual level will influence the formulation of perceived organizational legitimacy on the collective level. As a result, the store needs to pay attention to the how its strategies, such as performative and symbolic actions, are evaluated by the individual consumer because it may influence the support of the group of consumers’ judgement towards the store. To achieve the third research goal, the data collected from the questionnaire are also investigated by multigroup analysis. The data are split into two groups, those consumers who show loyalty towards the store operated by domestic retailers or those who demonstrate loyalty to foreign retailers. The significant differentiations between the two groups show that consumers have higher instrumental evaluation towards the performative actions of a store operated by international retailers. For the store run by the international retailers, instrumental evaluation plays a more important role in formulating the perceived organizational legitimacy on the individual consumer. Other relationships within the conceptual framework reveal no significant differentiations between the two groups. This implies that the liability of foreignness from the institutional environment does not have significant influence on the international expansion of international retailers in the current research context. International retailers have not faced more institutional challenges from consumers in their host countries. Part of the reason for this is because the research is based on the grocery industry in which consumers show more concern about efficiency. Furthermore, it is possible that the institutional actions taken by international retailers are good enough to conquer the problem of the liability of foreignness. On the contrary, stores run by international retailers win consumers’ support by better performative actions compared with those of stores operated by domestic retailers.

Date of Award	10 Jul 2021
Original language	English
Awarding Institution	Univerisity of Nottingham
Supervisor	Christine Ennew (Supervisor) & Martin Liu (Supervisor)