1

Analysing the Consumer Buying Behaviour;A Comparative

Study of the Retail Industry in Sri Lanka

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Table of Contents

1.1. Introduction ...................................................................................................................... 3

1.1.1. Academic Aims and Objectives .................................................................................. 4

1.2. Initial Literature Review ................................................................................................. 5

1.2.1. Consumer Buying Behaviour ...................................................................................... 5

1.2.2. Factors Affecting Consumer Buying Behaviour ......................................................... 6

1.2.3. Factors Affecting Consumer Buying Behaviour in Retail Stores ............................... 7

1.3. Methodology ..................................................................................................................... 9

1.4. References ....................................................................................................................... 11

1.5. Bibliography ................................................................................................................... 21

1.6. Appendices ...................................................................................................................... 23

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1.1. Introduction

Customer buying behaviour can be defined as the decision process and physical activity

undergone by an individual in evaluating, acquiring, using and disposing a good or a service

(Madaan, 2009). Furthermore,Kotler, et al. (2010) states that retailing includes all the

activities involved in selling products or services directly to final consumers for their

personal or non-business use. Accordingly, there are various types of retailers such as:

specialty stores, department stores, supermarkets, convenience stores, discount stores, off-

price retailers and superstores. Moreover,Lanka Market Research Bureau Private Limited

(2010) states that the development of modern day retailing is a cause of constant change in

consumer behaviour and needs. Additionally, it is also stated that consumers demand value

for their money, mindful about special promotions, concerned about the best deals available

and they are willing to approach different channels to obtain these advantages.Furthermore,

Kodikara (2008) explains that the consumers are attracted by quality products at the lowest

prices and convenience as all the products are available under one roof. He also states that

the comfortable and clean surrounding together with the friendly service in the supermarket

industry is another key feature. Finally, the changing lifestyles of consumers and the

resulting changes in consumption patterns trigger changes in shopping styles of consumers

and also the factors that drive people into various retail stores (Prasad, 2012).

The supermarket industry in Sri Lanka has been growing drastically as Sri Lankans adopt

western lifestyles (Perera, 2004). Hence, there are over 600major supermarkets in the country

with an aggressive expansion by Cargills, Arpico, Keells and Sathosa which can be

categorised under supermarkets, hypermarkets and convenience stores (SundayTimes, 2003).

Furthermore, the supermarket industry in Sri Lanka is expected to grow by 25% - 30% per

annum with the increases in per capita income, increased employment and changing

consumption patterns (Razak, 2010). Moreover, CT Holdings PLC (2013) states that the

demand for retailer owned branded products are increasing due to high quality, expanded

variety and lower prices.

The researcher intends to research in depth of the underlying factors for the change in the

retail industry in Sri Lanka from the local retail stores to the supermarket chains in the

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Colombo District. Additionally, the researcher will conduct a comparison of the four largest

supermarket chains in Sri Lanka (Refer Appendix 1) and identify the differences in the

consumer buying behaviour within these selected supermarket stores.

Source: Author developed (2015) based on information from the company websites and news

articles: Arpico (2014), Cargills (2015),Keells (2012-2015) and Sunday Observer (Wedaarachchi, 2011).

The researcher also intends to carry out this in depth research as there were no other

researches carried out comparing the consumer buying behaviour specific to these

supermarket stores identified as per the best of author's knowledge.

1.1.1. Academic Aims and Objectives

To review literature on consumer buying behaviour and the factors affecting consumer

buying behaviour.

To review literature on the types of consumer buying behaviour and the factors of the

consumer decision making process as well as the factors affecting consumer buying

behaviour in the retail industry.

To conduct a mixed method research in the form of questionnaires and interviews to

identify the factors affecting consumers to select supermarkets as their retail store.

To formulate conclusions and make recommendations to consumer buying behaviour and

factors affecting their choice of retail outlets.

44%

7% 8%

41%

Market Share

Cargills

Arpico

Keells

Sathosa

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1.2. Initial Literature Review

1.2.1. Consumer Buying Behaviour

Consumer buying behaviour is the buying behaviour of the ultimate consumer(Banyte,

Joksaite and Virvilaite, 2007). Furthermore, Jeddi, et al. (2013) explains consumer buying

behaviour as mental, physical and emotional activities used by people when selecting,

purchasing and disposing a product or service in order to satisfy their needs and

desires.Moreover, Deypour (2013) describes consumer behaviour as a set of activities that is

directly related to the purchase of a product or service, its use and disposal. In addition, he

explains that these activities include the decision process before and after the aforementioned

activities takes place.Likewise, Sharma (2014) defines buying behaviour as the decision

processes and acts of people involved in buying and using products.

According to Shma (2012) there are four types of consumer buying behaviour: complex

buying behaviour, variety seeking buying behaviour, dissonance buying behaviour and

habitual buying behaviour. Furthermore, BMS Team (2012) explains complex buying

behaviour as a three step process where the consumer first develops certain beliefs about the

product. Secondly, the consumer develops an attitude about the product and finally, the

consumer makes a thoughtful choice. Additionally, complex buying consumers are also said

to be aware of the significant differences in the brands available in the market. Moreover,

Dogra and Ghuman (2008) defines variety seeking behaviour as a situation where consumers

perceive brand switching as there are significant differences in brands. According to

Govindarajan (2007), dissonance buying behaviour occurs when a product is expensive, risky

and purchased frequently. However, the differences between brands are insignificant.

Therefore, the consumers are highly involved in the purchase and spend time observing.

Masterson and Pickton (2010) describe that habitual buying behaviour occur when

consumers purchase low cost, frequently purchased products. In addition, they state that

habitual buying behaviour takes less time as there are no significant differences among

brands. Finally, there is no brand loyalty in habitual buying consumers as they tend to

purchase the products most familiar to them (Cant, et al., 2007).

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1.2.2. Factors Affecting Consumer Buying Behaviour

Unissa (2013) states that consumer buying behaviour is dependent mainly on four factors:

social, psychological, personal and cultural. In other words, customer buying behaviour is the

change of attitude of customers towards the modern retailers due to increased income levels,

strong economy, behaviour, demand, changing life styles and shopping habits (Thakur, and

Kumar, 2014). The social factors consists of factors such as the family, groups, roles and

status which influence a consumer's buying behaviour (Yakup and Jablonsk, 2012). The

psychological factors are dependent upon individual's motivations, perceptions, learning,

beliefs and attitudes (Callwood, 2013). The personal factors are considered to be unique for

each individual customer and they include age, personality, gender, self-consciousness,

occupational and economic conditions(Stavkova, Stejskal, and Toufarova 2008).

Furthermore, the cultural factors arecategorized as buyer's culture which consists of factors

influencing the consumer through family, friends and the society.Likewise, subculture is

defined as smaller parts of a particular culture or groups of people with shared value systems

based on common life experiences and situations. Finally, culture consists of social classes

which are a combination of occupation, income, education, wealth and other variables (Abdu

and Purwanto, 2013).

According to Mathur, Jain, and Sharma (2013), there are a wide range of factors which

influence the consumer such as: need recognition, information search, evaluation of

alternatives, the act of purchasing, consumption and finally disposal. Furthermore,Lee (2005)

states that need recognition is the most crucial stage in the consumer behaviour and decision

making process because a purchase will not happen unless a need is recognized. Moreover,

Hudson (2007) states that there are seven main factors which affect consumer buying

behaviour such as: motivations, culture, age and gender, social class, lifestyle, life cycle and

reference groups. In addition, Matipei (2014) explains that through the establishment of

beliefs, attitudes and purchase intentions a consumer evaluates the alternative choices

available. Moreover, Solomon et al. (2006) explains that the act of purchase includes three

behaviours. Firstly, product and brand are decided before visiting the store (fully planned

purchase), secondly, the intension to buy the product is developed but there is no specific

preferred brand until the customer is at the store (partially planned purchase). Finally, both

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the product and the brand is chosen at the store (impulse purchase). Furthermore, Liang,

Duoc, and Li(2006) describes that according to the decision making process of Henry Assael

(1985), at the final stage the consumer experiences a satisfaction or a dissatisfaction.

1.2.3. Factors Affecting Consumer Buying Behaviour in Retail Stores

Customer satisfaction is the most important factor that contributes to the success of a retail

store (Dineshkumar and Vikkraman, 2012). Therefore, it is very important for retail stores to

identify and implement factors which affect customer satisfaction in order to be customer-

oriented and competitive among rivals (Rana, Osman, and Islam, 2014).The consumer

buying behaviour towards different retail outlets may vary due to factors such as:selection,

atmosphere, convenience, sales people, refreshments, location, promotional activities,

merchandising policy and credit (Anselmsson, 2007). The modern retail outlets such as

supermarkets target at providing aforementioned factors to their customers to attract and

retain them and also to stay competitive with the rivals. Durmaz (2014) explains that

successful businesses understand how to leverage the different factors that influence

consumer buying behaviour to effectively market their products and maximize sales.

Furthermore, Anic (2010) explains that consumers mentally process objective information

about the product or retailer and form an impression of the benefits they provide. Moreover,

he states that customers express the preference or lack of preference for stores, brands and

other marketing stimuli by reflecting a favourable or unfavourable attitude, which might

affect their purchasing intention and purchases.

Ghosh, Tripathi, and Kumar (2010) states that according to Kotler (1973), factors affecting

the consumer buying behaviour at a retail outlet such as supermarkets can be categorised as

store attributes such as: colour, lighting, sales personnel, music and store location. According

to a previous research conducted by Lu (2011), there are eight main factors which affect

consumer buying behaviour in retail stores such as: location, product quality, facilities,

additional services, process, reliability, value for money and staff.Furthermore,

Chaiyasoonthorn and Suksa-ngiam (2011) states that store assortment is a key factor in

satisfying customers in a retail store since stores that provide multiple products outperform

those stores that focus on a single product. Moreover, Aghaei et al (2012) explains that retail

markets in the world are transforming from small scale retail stores to supermarkets and

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hypermarkets as consumers prefer to buy from supermarkets and hypermarkets to gain from

the benefits of offers, prices and the variety of goods provided to them.

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1.3. Proposed Methodology

Business research can be defined as the truth about business phenomena identified by

application of scientific methods in conducting activities such as: explaining the business

opportunities and problems, generating feasible alternative courses of action, evaluating

and monitoring the performance of the organization and employees(Zikmund, et al.

2013). Moreover, Rajasekar, Philominathan and Chinnathambi (2013) define research as

a search of information systematically and logically. Furthermore, business research is

explained as the process of collecting, recording, analyzing and interpreting information

in order to identify solutions for managerial problems (Wilson, 2013). Kothari (2004)

explains research methodology as solving a research problem systematically.Also,

research methodology describes how a research will be conducted; the procedure used by

researchers to explain and predict phenomena (Kuada, 2012).

Greener (2008) explains that there are three major methods to conducting research

identified as quantitative, qualitative and mixed method research. Qualitative research is

carried out to explore and understand experience, beliefs, ideas and values (Johnson and

Christensen, 2012). Moreover, qualitative research is said to provide a deeper

understanding into a problem which would help to develop ideas or hypotheses to

conduct quantitative research (Shields and Twycross, 2003). Furthermore, qualitative

research can be conducted as focus groups, interviews, telephone or online exchanges

(Boeije, 2010). Quantitative research is carried out to quantify a certain problem by way

of generating numerical data which can be transformed into useable statistics (Balnaves

and Caputi, 2001). Quantitative research quantifies opinions, attitudes and behaviours.

Also, quantitative research methods are much more structured when compared with

qualitative research (Watzlawik and Born, 2007). A mixed methods research on the other

hand is a combination of both qualitative and quantitative forms which involve

philosophical assumptions (Bergman, 2008).

The researcher intends to use mixed research method as questionnaires will be distributed

to randomly selected supermarket consumers which will consist of likert scale rated

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questions introduced by RensisLikert to enable quantifications of the opinions to be made

(McNabb, 2013). Moreover, interviews enable the researcher to collect information on

personalexperiences (Stommel and Wills, 2004). Hence, the researcher will conduct

interviews with managers from each of the four types of supermarket stores chosen.Face-

to-face interviews enable researchers to gather high quality data (Wyse, 2014). To

ethically conduct the interviews which will consist of planned questions, the researcher

intends to respect the interviewee's willingness to respond as explained byCampbell and

Groundwater-Smith (2007).Furthermore, as explained by Alcser et al. (2011), the

researcher will avoid unnecessary intrusion, obtain voluntary informed consent and

protect the privacy of the participants. Additionally,questionnaires will be distributed as

they are cheaper than personal interviewing and takes less time (Mathers, Fox and Hunn,

2009). Moreover, a prior request will be made for permission to distribute the

questionnaires to the consumers of the supermarket stores and the participants will be

allowed to decline to answer any questionas stated by Market Research Society

(2011).The researcher will use convenience sampling which enables the researcher to use

the most conveniently available participants as explained by Profetto-McGrath, Polit and

Beck (2010), since this research is conducted within the Colombo area. Furthermore, the

time and cost incurred in carrying out a convenience sample is relatively small compared

to probability sampling techniques (Skowronek and Duerr, 2009).

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23

1.6. Appendices

Appendix 1

Cargills Food City, with 266 outlets covering 23 districts in Sri Lanka is the largest

supermarket chain in Sri Lanka. It is the only retail network which has its own out-grower

networks which enables them to supply goods to consumers at the lowest prices. Cargills

Food City is rated as the fourth most valuable Brand in the country and also the most valued

Retail Brand. The company has also earned the highest brand equity in the Asia Pacific

region (Cargills (Ceylon) PLC, 2015). Furthermore, Business Times (2013) states that

Cargills has a 40 - 45% of the supermarket market share in Sri Lanka. The company further

aims to capture the market by strengthening its own-brand goods.

Richard Pieris Distributors Ltd. manages the Arpico Supercentres and Superstores in Sri

Lanka. There are fifteen supercentres and twenty four showrooms around the country. It

caters consumers with a wide variety of fast moving consumer goods, household goods,

furniture and electronics, apparels and other value added services such as bank service

points, ATMs, credit card and mobile payment facilities. Arpico Supercentres provides

consumers with the largest choice of products with over 45,000 (Richard Pieris and Company

PLC, 2014).

Keells Super which is a supermarket chain owned by John Keells Group is one of the leading

supermarkets in Sri Lanka aimed at supplying customers the best in range, quality products

and services. Currently there are 48 supermarkets island wide. Apart from the supply of

FMCG products, Keells Super also provides online shopping and delivery, tele - ordering, in

house bakery at selected outlets, coconut scraping at selected outlets, hampers, gift vouchers

and fruit baskets (John Keells Holdings PLC, 2015).

According to Wedaarachchi (2011) Lanka Sathosa supermarket is the largest supermarket

chain in Sri Lanka with over 250 outlets island wide. The main objective of Lanka Sathosa is

to provide the low income groups with essential goods at affordable prices (Ariyawansa,

2014).

24

Appendix 2

Proposed Timeline for the Project

Week

1

Week

2

Week

3

Week

4

Week

5

Week

6

Week

7

Submit Proposal

Prepare the Introduction

Search Literature

Write up the literature

review

Prepare the methodology

Prepare primary data

questions based on

literature review

Gather primary data

Write up the findings from

the primary data collected

Analyse and discuss the

data collected

Prepare the conclusion and

recommendations

Submit the project