The importance of retail service quality and store image

In creating customer loyalty

Alamanda, Dini Turipanam

School of Business and Management, Institut Teknologi Bandung
Ramdani,Abdullah
Faculty of Economic, University of Garut

ABSTRACT ability of employees in service, give comfort, ease of

Retail business environment is changing rapidly, it is location, competitive pricing, complete product, to
marked by the domestic retail business competition knowledge of employees about the product. Darshan
has been demanding Retail Company’s ability to (2005) mentioned that opinions of many experts who
improve ability to compete by offering quality service argued that the basic strategy of retail business in
which is capable of fulfilling customers’ expectations creating competitive advantage by providing high
and create a positive image on customers’ mind. The quality service.
purpose of this paper is to examine the role of retail
service quality and store image in creating customer In Indonesia, retail industry is a strategic industry for
loyalty. Through a survey conducted on 300 member economic development of Indonesia. Retail
modern markets at Garut regency and analysis of Indonesian Employers Association (APRINDO) stated
structural equation modeling (SEM) with maximum that retail sector is the second sector that absorbs most
likehood approach, showing that the model is workers in Indonesia, which is 18.9 million people
acceptable and in accordance with previous results absorbing capacity, under the agricultural sector
studies. Overall, the results may reflect that in the reached 41.8 million people. Retail is one of the
retail industry, customer loyalty is determined by how backbones of the national economy. Retail market
the consumer assessment of the quality of services potential is around Rp. 600 Trillion and modern retail
provided in a store as well as its image. is estimated to have reached 20% or about Rp 120
trillion. The contribution of retail sector to the Gross
1. INTRODUCTION Domestic Product (GDP) reached 20%. Also seen
from the quantity, from 22.7 million of business in
Service Quality is an important concept in marketing Indonesia as much 10.3 million or about 45% is a big
that is often discussed and debated in the marketing and retail .business
literature (Das et al., 2008). Even some experts say
that service quality can be a significant differentiator At Garut, retail businesses have entered the
for an organization (Wong & Sohal, 2003). supermarket and the minimarket. Retail business
Organization strives to maintain excellent service groups for large and medium scale at Garut can be
quality in order to increase customer loyalty. The seen by the existence of the Yogya department store,
concept of service quality is the most often used in the Asia department store, and Yoma Department Store.
extent of service to the customers’ needs, and this As for retail business minimarket modern groups are
involves a comparison between customers’ minimarket Alfamart, YOMART, and Indomart. With
expectations and customers’ perceptions of actual the increasing number of companies engaged in
performance (Parasuraman et al., 1988). similar retail industry, has encouraged increased
competition, so companies need to develop strategies
A company needs to provide quality services that can to re-create customer loyalty, which eventually can
fulfill or exceed customers’ expectations. Satisfied increase the profitability of the company.
Customers with the quality of service is likely to be
loyal. Quality of service is seen as a tool to increase This paper aims to identify the role of quality service
value for consumers and ensure the fulfillment of the store image in creating customer loyalty in the
customer satisfaction (Sivadas and Baker-Prewitt, retail industry. This is done by literature study and the
2000). results of previous research on customer loyalty in
retail business. Thus, a conceptual framework can be
Reciprocally in the retail business which is built. Furthermore, empirically research done by
experiencing rapid change. It is characterized by distributing questionnaires to customers who become
increased domestic competition. As a result, the members at some modern markets in Garut regency.
current retail companies must be able to distinguish
itself with customers’ needs better than competitors 2. LITERATURE REVIEW
(Darshan, 2005). As one form of business that
includes services in its offer, retail industry is required 2.1 Retail Service Quality
to be able to provide superior service to customers. In Service Quality defined as an assessment or attitudes
general, service in the retail industry includes the related to totality primacy (Parasuraman et al., 1988).
SERVQUAL model is based on measuring the gap the semantic differential and attitude scales,
consumers’ expectations and service performance. commonly used for this purpose.
SERVQUAL model from Parasuraman et al.
empirically evidently in some studies about service Research about store image is carried out through a
quality. However, in retail industry there are some survey of consumer perceptions and attitudes on the
fundamental differences. In retail industry, the service dimensions of the store. Frequently, the same
perspective is not only a service, but also goods attributes of each competing stores studied to compare
offered by retail itself. Therefore, the measurement of the strengths and weaknesses specific store image to
service quality in retail industry becomes more image of competitor. Developing a consistent image of
complex because it combines the sale of services and the store becomes an aim of retail business concerned
goods, such as how the employee's ability to help about coordinating the various aspects of the store
consumers who are shopping and how the quality of image in order to create attraction for specific market
goods supplied (Gagliano & Hathcote, 1994). segments.

Measurement of retail service quality in this paper Store Image according to Simamora (2003) has two
using a model developed by Dabholkar et al (1996). supporting factors namely, External and Internal
Retail service quality has a hierarchical structure Impression. External Impression includes location,
factor consists of five basic dimensions (Dabholkar et architect design appeal, visage look, placement of
al., 1996; Metha CS, et al., 2000). These five logos, design of entrance, front display windows.
dimensions are: These attributes is one of non-verbal communication
1. Physical Aspect (physical aspects), covering all tool in creating store image. While internal impression
functional elements such as layout, comfort and includes color of shop, shape of shop, internal display
privacy as well as aesthetic elements such as setting, layout goods setting.
architecture, color, material and style of the store.
2. Reliability (reliability), is a combination of Especially for internal store image election, a retailer
activities in providing services as promised. must consider intended target market. The difference
3. Personal Interaction (personal interaction), is a of consumers’ characteristic requires a retailer to be
courteous personal service, helpful, giving able in understanding this condition so the store
confidence and trust to customers. management can prioritize its potential customers.
4. Problem solving (problem solving), an exchange re-
handling activities and the handling of complaints. The image which is directed by a retailer may not be
5. Policy (policy), is a series of strategies, procedures suitable for everyone. Therefore, store image should
and operating principles such as the procurement be created according to the psychological needs and
of high quality store items, convenient operating physical needs of its target market (Simamora, 2003).
hours, availability of parking space and payment
options. 2.3 Customer Loyalty
Marketing emphasis to customer loyality from both
Some research found that service quality is one of key theoretical and practical has been increasing (Ruyter,
factor in establishing the image of the organization 1998). One of way to improve customer loyalty is
(Kandampully & Suhartanto, 2000). Study conducted providing good quality services, which is expected to
Das et al. (2008) in Department stores and make the customer do repeat buying t the same
Supermarkets examining Dabholkar model also vendor.
showed that the model can be accepted.
Sense of loyalty has been advanced by marketing
2.2 Store Image experts. In general, loyalty is often interpreted as
Image of an organization is an important variable that repeat purchasing of exactly same goods or services at
affects the marketing activities. The image is the same time. Griffin (2005) mentioned that a
considered to have the ability to influence customer customer can be considered as a loyal one if he/she
perceptions of goods and services offered by the shows the regular purchase behavior or there is a
company (Zeithaml & Bitner, 1996). Thus, the image condition in which the customer makes a purchase at
will have an impact on purchasing behavior. least twice in a period of time. Wong & Sohal (2003)
added that customer loyalty can be described as a
Similarly, in the retail industry, store image is an positive attitude shown by customers through goods
important component of consumer choices that can and services or companies that supply goods and
lead to loyalty (Thompson & Yat Ling, 1998). Store services. Thus, literally, customer loyalty at a vendor
image refers to what consumers think about the will cause customers do more transactions with these
particular store which includes perceptions and vendors.
attitudes based on the sensation of stimuli associated
with the store received through the senses. Store There are two dimensions of loyalty (Kandampully &
image is usually known by asking customers how Suhartanto, 2000), the behavior (behavioral) and
important or how nice the operational aspects of the attitude (attitudinal). Behavioral dimension refers to
retail stores. Scale of measurement techniques, such as the behavior of customers who make repeat purchases,
indicating a preference for a brand or service from showed a significant effect. Study conducted by
time to time. Dimension refers to the attitude of the Clottey et al. (2008) also found that service quality,
customer intention to repurchase and recommend to product quality and brand image is a key factor in
other consumers. encouraging customer loyalty.

The study of Wong & Sohal (2003) on service quality Based on these literature studies, the research model is
and two levels of customer loyalty in retail industry built as follows:

Figure 1 Model Diagram Structural

3 DESIGN, MEASURES AND METHODS customer attitudes about the external impression
(external impression) as the location, architect design
Research design used is causality. Survey approach appeal, visage look, placement of logos, design of
conducted to examine the causal relationship between entrance, front display window and internally (internal
variables empirically observed. The survey was impression) includes color of shop, shape of shop,
conducted on 300 member Supermarkets at Garut. internal display setting, layout goods setting.

Research model is built based on several research Other endogenous variables customer loyalty is
studies published in scientific journals including the measured by how the behavior and attitudes of
Journal of Services Marketing, International Journal of customers include repeat purchasing, purchasing
Retail and Distribution Management, and Journal of preferences, and recommendations for others.
Marketing Practice: Applied Marketing Science,
which compiled in a structural diagram above (figure Data analysis in this research is using structural
1). equation modeling which maximum likehood
approach (ML) as the estimation model.
Exogenous variable in this research is the Retail
Service Quality presented by Dabholkar et al. (1996) 4 RESULT
which was scale measured customer attitudes toward
physical condition aspect, reliability, personal Normality test is conducted first. Data can be
interaction, problem solving and policy. Endogenous considered normal if c.r. Multivariate special terms
variables consist of Store Image and Customer -2.58 <c.r. <2:58. Normality test results showed that
Loyalty. Store image measured by the scale of the data is not normal because it has a value of cr
 multivariate for 3.72> 2:58, so that should be the Estimat S.E C.R Labe
Variable P
removal of outlier data that has significance e . . l
(Mahalanobis distance) p1 and p2 <0.05. Based on the RSQ <-- **
RSQ 1.580 .385 4.100 par_8
results, there were 10 samples with outlier, and should 5 - *
be removed from the data. Elimination of 10 samples <-- Store **
yielded values c.r Multivariate as 1:35 (<2:58) and the SI1 - image
1.036 .141 7.361
*
par_9
value of p1 and p2 on Mahalanobis distance> from <-- Store
SI2 1.000
0001 which means the data in normal distribution and - image
there is no outlier data.
Table 2 shows that each latent variable is significantly
Testing suitability of the model using several criteria formed each observ variable. This is shown by p-value
namely Chi Square value, significance probability, < 0.05. In this case, the five aspects of retail service
Cmin / DF, RMSEA, TLI, NFI, and CFI. Initial test quality (physical aspect, reliability, personal
results were considered less fit model on several interaction, problem solving and policy) proposed by
indicators such as Significance Probability with 0:03 Dabholkar et al. (1996) established a significant retail
value (<0.05), so some modifications made that service quality. These results are also consistent with
followed modification indices. Test results after the research conducted Metha CS, et al., (2000) who
modifications are summarized in table 1 below. tested the quality of service in retail industry.
Likewise, the variable image store image and
Table 1. Results Measurement Model Goodness of Fit customer loyalty. Both variables are significantly
after Modifications formed by factors observed.
Cut-Off Model Explana
Criteria Causality test model can be analyzed through the
Value Result tion
results of the regression weights among latent
Chi-Square Margina variables. Results of causality test regression weights
Tend to 0 18.620
(CMIN) l as follows.
Significance
 0.05 0.286 Fit
Probability Table 3. Regression weights in the causality test
CMIN/DF  2.00 1.719 Fit Estimat S.E C.R Labe
Variable P
e . . l
RMSEA  0.08 0.050 Fit
Store <--
TLI  0.90 0.959 Fit RSQ .857 .222 3.864 *** par_2
image -
NFI  0.90 0.967 Fit Loyalt <--
Store
**
imag .552 .090 6.112 par_1
CFI  0.95 0.985 Fit y -
e
*
Loyalt <--
Table 1 show that the proposed model is acceptable, RSQ .550 .208 2.642 .008 par_3
y -
because the value of compatibility testing criteria
compared with the reference value (cut-off-value) Based on Table 3 can be seen that the retail service
equation model good results. quality variables has a significant affect on store
image. This is shown by the value of p <0.05.
Convergent validity of the test data obtained from Likewise store image variables significantly affect on
each variable model (measurement model), this test customer loyalty and retail service quality variable
was performed to determine the validity of each significantly affect on the customer loyalty.
indicator is estimated, by measuring the dimensions of
the concepts tested in the study.
Based on result of the research, can be obtained the
description about particular theory of service quality.
Table 2. Regression weight on each factor
Dimension of service quality in e retail industry has
Estimat S.E C.R Labe
Variable
e . .
P
l
differences with the concept proposed by Parasuraman
et al (1988). In the retail business, services provided
<-- Loyalt
Loy1 - y
1.000 by the company involve product offers. So that service
quality in retail industry becomes more complex.
<-- Loyalt **
Loy2 - y
1.153 .177 6.512
*
par_4
In general, it is known that the role of service quality
RSQ <--
RSQ 1.000 is very important in forming the store image itself and
1 -
will create customer loyalty. Store image as a
RSQ <-- ** perception that was formed from past experiences
RSQ 1.215 .293 4.145 par_5
2 - *
when consumers interacting, it will be able to
RSQ <-- ** encourage consumers to make repeat purchasing at the
RSQ 1.521 .377 4.037 par_6
3 - * same store.
RSQ <-- **
RSQ 3.130 .777 4.026 par_7
4 - *
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