The relevance of retailer

country-of-origin to
consumer store choice:
evidence from China
Allysha
Allysha Tifany
Tifany || Inas
Inas Syadzwina
Syadzwina || Nadia
Nadia Sabrina
Sabrina
Management Question:
Does retailer’s country of origin (COO)
affect consumer’s choice of retailers?
 Research Question:
• What are the consumers’ perception regarding the importance of
retailer COO (country of origin) in store decisions in China?

• Is the consumer’s perceived importance of retailer COO

influencing store choice decisions in China?
Research design,
Data collection,
and analysis
 Secondary data:
• The writer utilize past studies to build the current study conceptual background,
research hypotheses and model, and the questionnaire items.

• The conceptual background include explanations on:

-COO effects,
-CE (customer ethnocentrism),
-perceived importance of retailer COO (PIO), and
-perceived importance of supporting domestic retailers (PISD)
 Country-of-origin effects
• COO concept is now communicated through country of brand, and/or country of
association (Josiassen et al., 2013).

• COO effect à used as an extrinsic cue by consumers to identify product quality or

other product attributes, especially if other cues are unavailable or if consumers
aren’t familiar with the product/brand (Bilkey and Nes, 1982; Johansson et al., 1985;
Josiassen et al., 2008; Peterson and Jolibert, 1995)
• In developing countries, COO leads to the behavior where consumers prefer foreign
brands, motivated by a desire for status enhancement (Batra et al., 2000).
Country-of-origin effects
Josiassen et al. (2013) provided an integrative theoretical framework
and identified three perspectives on COO effects:
• The basic-origin,
• Product-origin, and
• Category-origin perspectives

The basic-origin perspective is used in this research (consumers

judge based on the retailer brand origins)
 Consumer’s ethnocentrism (CE)
• Domestic country biasà a phenomenon where consumers prefer domestically
produced goods to foreign produced goods à leads to the development of
consumer’s ethnocentrism (CE) in consumer behavior (Shimp and Sharma., 1987)

• CE is defined as the beliefs held by consumers about the appropriateness and

morality of purchasing foreign-made products.
• Ethnocentric consumers tend to avoid buying foreign products because they believe
that “buying foreign” behavior damages the domestic economy (Shimp and Sharma,
1987).
 perceived importance of
retailer COO (PIO)
• Store choice decisions involve various kinds of shopping risks, such as physical
risk (e.g. safety, quality of merchandise), financial risk (e.g. value for money),
psychosocial risk (e.g. atmosphere, service quality), and risk of social and time
loss (e.g. ease of finding items, speed of checkouts) (Mitchell, 1998).

• The perceived risk, uncertainty of product quality, and retailers’ intangible offers
may create a consumer perception of the retailer’s origin as an important piece
of information when making store choice decisions (Swoboda et al. 2012).
 perceived importance
of retailer COO (PIO)
• The PIO of retailer COO comes from the need of extrinsic cue of retailer products
and service quality.
• The PIO of retailer COO will influences consumer’s store choice decision between
foreign and domestic retailers.
• In this study, the writers supposed that consumers with higher level of PIO would be
more likely to shop at foreign retailers.

à Thus, H1: In developing countries such as China, the consumer’s perceived

importance of retailer COO (PIO) will be significant in shaping consumer store
choice towards foreign retailer, in a positive direction.
 Perceived importance of
supporting domestic retailers (PISD)
• Introduced by Shimp and Sharma (1987), the construct of CE can be
measured through the CETSCALE à to express consumer’s bias towards
foreign-made product. The CETSCALE has been widely used in previous
studies but never truly tested against actual consumer behavior (Bi et al.,
2012)
• Thus, in this study, the writers suggest an extension of Shimp and Sharma’s
(1987) idea and an empirical test of the effect of a similar construct on
consumer behaviour, namely, PISD.
 Perceived importance of
supporting domestic retailers (PISD)
PISD is different from CETSCALE.

• CETSCALE is weighted heavily towards consumer beliefs about local people

buying foreign products (a kind of collective behavior).
• PISD is an individual-specific construct that is believed to be closer to
behavioral decisions than CE.
 Perceived importance of
supporting domestic retailers (PISD)
• The desire or willingness to support domestic retailers is a perceptual construct
related to the importance that the individual attaches to supporting domestic
retailers. Hence, PISD is likely to be a better predictor of those decisions

à Thus, H2: In developing countries such as China, the consumer’s PISD

retailer will be significant in shaping consumer store choice towards domestic
retailer, in a positive direction.
Hypotheses and Model:
H1 Consumer store
Consumer’s PIO
choice towards
retailer COO
foreign retailer

H1: In developing countries such as China, the consumer’s perceived

importance of retailer COO (PIO) will be significant in shaping consumer store
choice towards foreign retailer, in a positive direction.

H2 Consumer store
Consumer’s
choice towards
PISD retailer domestic retailer

H2. In developing countries such as China, the consumer’s PISD retailer

will be significant in shaping consumer store choice towards domestic
retailer, in a positive direction.
 Type of research:
• Descriptive researchà the writer wants to better define a
behavior held by a group of people on the subject retailers’ COO.
• Cross-sectional
• Using survey method
 Measurement and scaling
• Retail store patronage are asked:
Which store do you shop most often? Foreign, domestic retailers, or don’t know?
adopted from Arnold et al. (1996) and Pioch et al. (2009) à multiple choice questions

• Retail marketing mix (22 store attributes) adopted from Chang and Luan (2010),
Lindquist (1974-1975), and Pan and Zinkhan (2006). à 5-point Likert scale to
measure the attributes importance
 Measurement and scaling
• PIO and PISD measured using single-item scale since the object and
attributes are concrete, easily and uniformly understood.
• The single-item scales is chosen for this research due to the practical
advantages.
• PIO and PISD were rated by respondents ranging from not at all important
(1) to very important (5).
 Sampling & data collection
Interview
• Detailed consumer survey from 9 November 2011- 30 November 2011
• 4 urban districts of Dalian were chosen (sample)
• Interviews carried out where both foreign & domestics retailer
available
• Interview person responsible for shopping in each household
 Sampling & data collection
Sampling Process and Size
• China’s grocery retailing industry as setting
• Survey in second-tier city of china: Dalian
• Population 6.6 million
• Second largest city of Liaoning Province
Sampling & data collection
Sampling Process and Size
§ 70% respondents are female, 30% males
§ Respondents were between 20-65 years old § Household Income
○Between 20 and 29 ( 29.8% ) ○Below 2000 ( 11.2 % )
○Between 30 and 39 ( 31.4% ) ○Between 2000 – 8000 ( 62% )
○Between 40 and 49 ( 17% ) ○More than 8000 ( 26.8 % )
○Over 50 ( 21.8% )
Perception regarding PIO and PISD
• 13.1% respondents do not think retailer COO as an
important factor
• 39.4% think retailer COO somewhat important
• 52% retailer COO important factor
Perception regarding PIO and PISD
 Influences of PIO and PSID on
consumer store choice
• KMO measure & Barlett’s test of sphericity
• KMO score 0.87
• Barlett’s test of sphericity: highly significant ( p <0.01 )
• Principal components with varimax rotation
• Number of factors extracted based on eigenvalues and screenplot
criterion.
 Influences of PIO and PSID on
consumer store choice
• Service (sales people’s service, salespeople communication, fast check out
and return policy)
• Quality (freshness, quality, and safety)
• Store environment (store interior, store atmosphere, and store display)
• Convenience (accessibility, store familiarity, and goods searching)
• Assortment (product width and product depth)
• Sales promotion (promote often, provide free bus, member card)
 Influences of PIO and PSID on
consumer store choice
• Examine effect of PIO and PSID on consumer choice, binary probit
models were selected for the empirical analysis.
• Dependent variable coded COO ( 0= Domestic, 1= foreign)
• Consumer demographic were included as Control Variable
 RESULTS
● Data do not support H1. as ● To examine whether incorporating
hypothesized, there are negative PIO and PISD can significantly
significant relationships (p<0.01) improve the estimation of the
between PISD and consumer store model, a likelihood-ratio test of
choice of foreign retailers the two models was examined
 RESULTS
● The result of the likelihood-ratio test shows that the full model is
significantly improved compared to the restricted model (LR 1⁄4
24.67, degree of freedom 1⁄4 2, po0.01), which means that PIO and
PISD exert a significant effect on consumer choice between
foreign and domestic retailers.
End of presentation.
Questions?