Country-of-manufacture/assembly (COM/A) effect on fast-fashion hy-brid products in Indonesia’s Market

By

Claudya Frisca Susanna

University of Groningen

Faculty of Economics and Business

Bachelor Thesis

Nieuwe Ebbingestraat 84a

9712 NN

(06) 639112369

claudya.frisca@gmail.com

Student number: s2343800

ABSTRACT

The purpose of this study is to analyze whether or not the indication of being a hybrid product with

COM/A in emerging countries affect Indonesian consumer’s quality perception by using fast-fash-

ion products. The study consist of a literature review followed by an empirical research through a

web-based survey. The study revealed that hybrid product indication alone does not lead to a lower

quality perception, however, emerging countries COM/A negatively affects the quality perception

significantly and the change quality perception did not depend on the product’s initial perception.

2

CONTENTS

INTRODUCTION 3

LITERATURE REVIEW3

METHODOLOGY: EMPIRICAL STUDY 3

FINDINGS 3

Table I. Changes in quality perception 3

DISCUSSION 3

Conclusion 3

Implications 3

Limitations 3

Future Research 3

Reflection 3

REFERENCES 3

3

INTRODUCTION

Originally, the concept of ‘country-of-origin’ (COO) was simply comparable to the term ‘made-in’.

As globalization push through and global supply chains become common practice amongst firms

worldwide, so does the perception of COO. It was first seen as having single-cue effect (Schooler,

1965; Nagashima, 1970), meaning that COO affects consumer product evaluation. It was then ar-

gued that in the simultaneous presence of multiple information cues COO effect decreased (Wall et

al, 1991; Agrawal and Kamakura, 1999). Some scholars argue that COO effect varies according to

product type (Roth and Romeo, 1992; LeClerc 1994). Others focused on consumers’ perspective

and its effects on COO; consumer country and cultural orientation effect (Gurhan-Canli and Mah-

eswaran, 2000), consumer expertise effect (Han, 1989), and consumer ethnocentrism (Balabanis et

al., 2001). After years of development of the concept, many begins to questions the significance of

COO as an information cue for quality perception, product evaluation, and purchase decisions.

However, in situation where absence of other cues (price, brand, warranty) persists, COO still stand

as a significant information cue for both product evaluation and purchase decision.

Many concepts are derived from the COO, including ones such as ‘country-of-design’ (COD), it

emerged with much credit given to Apple for their ‘Designed in California, Assembled in China’.

Another known concept is ‘country-of-brand (COB), where global companies utilizes brand names

to suggest a specific region (Aiello et al., 2009). What most people perceived as COO is now clas-

sified as ‘country-of-manufacture’ or assembly (COM/A). In the early development of the concept,

the studies shows that COM/A had a larger effect on product evaluation than COB (Han and Terp-

stra, 1988; Tse and Gorn, 1993). More recent work in the field have revealed otherwise (Hui and

Zhou, 2003), others even argued that it does not influence consumer behavior (Li, Murray, and

Scott, 2000; Usunier, 2011). However, the concept holds to be significant in consumer behavior, in

fact COM/A effect is found to be most powerful in developing countries (Hamzaoui-Essoussi and

Merunka, 2007).

4

These derived concepts are particularly important in the case of hybrid products. The proliferation

of hybrid products was the cause of the deconstruction of the COO concept to COD and COM/A

(Essoussi and Merunka, 2007). Globalization have encouraged firms to shift production overseas to

decrease cost and increase efficiency. In managing its global value chain activities, firms that once

was associated with a particular country may face changes (Funk, Arthurs, Treviño, and Joireman,

2010). Studies dedicated towards hybrid products have generally used cars (Funk et al., 2010;

Srinivasan, Jain, and Sikand, 2004), television (Li, Murray, and Scott, 2000; Chao, 2001; Insch and

McBride, 2002), both television and cars (Hamzaoui and Merunka, 2006; Essoussi and Merunka,

2010; Pappu, Quester, and Cooksey, 2007). However, both cars and television represent a narrow

segment of hybrid products that require medium to high consumer involvement, produced in ‘as-

sembly line’ manufacturing, and requires sophisticated technology. There is a need to conduct a

more diverse (product-wise) studies in hybrid products. Acharya and Elliott (2001) used 3 product

categories (cars, jeans, and tinned pineapple) based on consumer involvement, to test the effect of

COM/A and COD cues. The use of jeans, categorized as medium-involvement, is interesting be-

cause it reminds that most fashion products are hybrid products. Fashion is one of the application of

hybrid products and the use of it in the study will be incremental to the field, because it is a

medium-involvement product, however, it is also heavily affected by materialism and self-image

product-image congruence (O’Cass, 2004). Using fashion product in a study of hybrid products has

a high probability of yielding to a different and useful result.

One area of fashion products that might best contribute to the hybrid products literature is fast fash-

ion. It refers to a certain practice conducted by mass fashion retailers, in which they compresses the

lead time between the runway to the store in order to satisfy market demand (The Economist, 2005).

In normal practice the styles are usually presented in designer runway shows twice a year (spring/

summer, autumn/winter). Having been informed of the latest trends, ready-to-wear collection are

5

made by the retailers and will be ready for the stores. To cut lead times, fast fashion retailers takes

inspiration from famous celebrity styles and to cut costs, it allocates the manufacturing to low-cost

countries. It includes countries such as Bangladesh, India, Mexico, China and Indonesia. The prac-

tice, which improves efficiency, greatly affects the performance of the companies owning the

brands. Zara, one of the most famous fast fashion retailer, has expanded globally and quickly out -

performing more established retailers like Marks & Spencer (Pich, and Van der Heyden; 2002;

Hayes and Jones, 2006). However, the practice has been criticized for its ‘sweat-shop’ labor prac-

tices and consequently, selling low-quality garments (Dahan and Peltekoglu, 2011; Zarroli, 2013).

The concern for the issue have significantly risen since the tragedy in Bangladesh, where a garment

factory collapsed due to unfit building structures and overcrowding. Several popular fast fashion

brands, including Primark and Topshop are forced to take responsibilities for having parts of

their clothes made in the factory (BBC, 2012).

The fast fashion retailers, including Zara, H&M, and Topshop have been able to expand globally

in a rapid manner, entering both developed and developing countries in vast regions. In regards to

the emerging market, the relationship it has with COO has been explored by many scholars. A re -

cent study states that consumers in both developed and emerging markets prefer products imported

from developed markets (Sharma, 2011). Others reach an agreement that consumers in emerging

markets has strong desire for foreign brands, particularly ones with hedonic characteristic due to its

status enhancing effect (Batra et al, 2000; Klein, Ettenson and Krishnan, 2006). It would be inter-

esting and beneficial to study the emerging markets consumer’s perception of fast fashion hybrid

products made in another emerging market. Will the knowledge of having a trendy clothing made

not in Spain but instead in Bangladesh changes the purchase decision and product evaluation?

The fast fashion retailers’ expansion in Indonesia is particularly rapid compared to other countries

in Asia. Akin to other emerging markets, Indonesians are excited for foreign brands and much pre-

6

fer it compared to local brands. Despite the enthusiasm, the expansion is still significantly faster

compared to other emerging markets in the region, retailers have the opportunity to reach up to 50

cities in Indonesia though franchising or retail marketing company. The most recent entry to In-

donesia was made by H&M (via franchising). Considering the size of the market and the opportuni-

ties for a vast and rapid expansion, Indonesia should be an appropriate representation of emerging

markets in Asia. It would be incremental to the field to see the perception of Indonesian consumers

towards hybrid products made in other emerging markets and its effects towards product evaluation.

By using the fast-fashion retailers product, it would also provide another perspective because it rep-

resents medium-involvement shopping goods that also represent important self-image.

Therefore, the research question for the thesis is... Does the indication of being a hybrid

product with COM/A in emerging markets affect Indonesian consumers’ quality

perception regarding fast-fashion products?

To answer the research question, first a literature review was done in order to develop a series of

hypothesis. Afterwards, the hypothesis will be tested through an empirical research using Indone-

sian consumers by utilizing questionnaire as a method of survey. By following these methods, the

final goal is to answer the research question and also contribute to the field of study.

7

LITERATURE REVIEW

The research question are derived into three parts; consumers’ awareness of fast-fashion as hybrid

products, consumers’ quality perception of fast-fashion product, COM/A effect on consumers’ qual-

ity perception. Are consumers’ aware of the hybrid status of fast-fashion products? What are the

consumers’ current perception of fast-fashion retailers’ products in terms of quality? Does the

COM/A cue affect consumers’ quality perception? The reason for the split into three question is to

provide the necessary steps to find the answer, by focusing on each one after another. The split also

helps with the construction of the empirical research, which will be shown in the next chapter. The

research stream that gives the necessary information includes; COO, hybrid products, fast fashion,

consumer behavior, marketing, and emerging markets. The literature review was conducted using

journals published between the year 2000 - 2013 to ensure relevancy and accuracy of the journals.

The literatures were collected through these databases; EBSCOHOST, Elsevier Emerald, JSTOR,

Science Direct, and Taylor & Francis. The journals used covers a range of subject from the COO

concepts, with a focus on COM/A, emerging markets, consumer behavior, and fashion industry,

particularly the practice of fast-fashion. Some of the journals used include; International Marketing

Review, Journal of International Business Studies, and Journals of Consumer Research. First, a

brief review of the COO literature, followed by hybrid products with focus on research in emerging

markets, and also fashion products literature.

The broad conclusion of over 50 years of COO effect research is that COO does affect product eval-

uations (Pharr, 2005). According to Bloemer et al (2009), the primary theoretical clarification for

why COO affects product evaluation and purchase decision is that consumer decision making is

perceived as a cognitive process. Thus, consumers are faced with multiple information cues; intrin-

sic and extrinsic, by definition the latter is much more reliable for consumers to form product evalu-

ation and make purchase decisions. In a research done by Kardes et al (2004), it was shown that

consumers consider extrinsic cues as consistent and credible predictors for value and quality. How-

8

ever, the relevance of COO has been questioned by a lot of scholars, which argues that COO is ir-

relevant to the consumer based on empirical research (Arndt, 2004; Liefeld 2004). The relevancy of

COO is also questioned because it is becoming very hard for the consumers to correctly identify the

COO information (Lim and O’Cass, 2001; Samiee et al., 2005; Balabanis and Diamantopoulos,

2008). The reason for the rising difficulty of processing COO information is caused by the increase

of global sourcing, which results to proliferation of hybrid products.

The decomposition of the COO construct has significantly contributed to the study of its effects on

consumers’ quality perception (Insch and McBride, 2004). According to Li et al. (2000), COM/A

may affect consumer evaluation in functional quality dimensions (performance, reliability, con-

formity) and depending on the country COM/A, may affect the “prestige” image of a product. Re-

garding their effect towards consumer behavior, several studies (Nijssen and Douglas, 2004; Funk

et al., 2010) have shown that national or cultural animosity does affect consumer attitudes toward

products associated with particular countries. Under circumstances of import discrimination it

proves to be necessary to emphasize the origins of the product (through COD and COM/A) in order

to avoid consequences of consumer animosity. Funk et al. (2010) focused on the effects of pro-

duction shifts towards consumers’ willingness to buy hybrid products and concluded in deciding to

shift COM to countries with potential for consumer animosity, managers should conduct profitabil-

ity assessments beforehand. Hui and Zhou (2003) argues COM/A information is insignificant in

congruity between brand origin and COM/A (e.g Sony products made in Japan), and COM/A in-

formation is significant if incongruity exists (e.g Sony products made in Mexico). Incongruity af-

fects consumers’ product evaluation, and appears to be more damaging for low equity brands.The

importance of congruity between COM/A and COD in also expressed by Chao (2001), he also ar-

gues that there is a possibility that COM/A information is the first to influence consumer judgement

and can be adjusted with presence of other cues (COD, COC, COP).

9

There are conflicting views regarding the effects of COM/A on consumer behavior. Thakor and

Lavack (2003) argues that COO and COM/A produces country stereotyping effect and tested

whether perceived location of manufacture affects perception of overall brand quality. COM/A was

found to not affect perception of brand quality, if the country of corporate ownership is also pro-

vided, meaning that consumers wants to know where the brand is owned more than where the prod-

uct is manufactured. Usunier (2011) suggests that COM/A is irrelevant to the consumers, visual

cues are more important in conveying COO information to consumer. Hamzaoui-Essousi and

Merunka (2007) explains how brand image, COD, and COM/A jointly influence consumer evalua-

tion of hybrid product in an emerging country (Tunisia). COM/A was found to be the most influen-

tial in consumers’ perceived product quality in the emerging market. Also, if the brand is unknown

to consumers the congruity between both cues become more relevant. Indonesian consumer behav-

ior, purchase decision, quality perception, and product evaluation, has been a subject of many aca-

demic studies. Among those, Hamid and Elliot (2006) have examined the concept of consumer eth-

nocentrism and its impacts on product evaluation and preferences among Indonesian consumers. In-

donesian consumers are found to have high ethnocentrism with a total mean value of 74.50. This

finding is contrary to what theories previously mentioned, that consumers in emerging market tend

to evaluate products from developed countries more favorably. Indonesian consumers also ranked

COM/A and COD as important cues for tangible cues. Thus, the hypothesis was developed based

on those factors:

Hypothesis 1. Indonesian consumers awareness of incongruity be-

tween COD and COM/A negatively affects their perceived quality of

the products.

Fashion clothing has both important economic and social significance in many societies and long

has been an area of interest in consumer research (O’Cass, 2004). Piron (2000) utilized fashion

product to investigate the impact of COO on consumers’ purchasing intention of products that are

10

consumed (un)conspicuously, and shown that the COO effect is more significant in publicly con-

sumed fashion products. Wang, Siu, and Hui (2004) have distinguished the consumer behavior in

buying fashion products in an emerging market (China). The importance of the COM/A cue in con-

sumer behavior towards fashion products has also been criticized. According to Magnusson et al.

(2011), majority consumers are unable to correctly identify COO of the products. Using fast-fashion

retailer H&M, it was found that only half of the respondents have correctly identified Sweden. Hav-

ing known the correct home country, consumers’ attitudes changed. A negative attribute for the

country resulted in a less favorable brand attitude, and a positive attribute resulted in a more favor-

able brand attitude.

A lot COO studies which focused on consumer behavior in developed countries have concluded that

the process in which consumers’ evaluate product and make purchase decisions might differ from

those in emerging markets (Batra et al., 2000; Reardon et al., 2005). Research by Kaynak, Ku-

cukemiroglu, and Hyder (2000) examined Bangladeshi consumers’ quality perception of products

outsourced from nine foreign countries in comparison to domestic products. Bangladeshi consumers

showed overwhelming preference for western products and low-medium preference for products

from emerging market (India, Taiwan). Batra et al. (2000) argued that consumers in emerging

market (India) possess strong desire for foreign brands as it represent hedonistic characteristics,

functions as symbolic acquisition, giving social distinction, and seen as status enhancing. Piron

(2000) found that consumers’ purchasing intentions in emerging markets (Singapore) are higher

when COO information is excluded compared to when a moderate impression exists. However,

many of the COO studies in developing countries mainly only focused on individual variables (e.g

ethnocentrism) and are unable to address the distinction between COD and COM/A.

The buying behavior of fashion consumers are also quite different from other products. In studying

consumer decision-making on domestic and imported fashion brands in an emerging market, Wang

11

et al.(2004) stated that consumers that prefer foreign brands possess more hedonistic attribute and

has the tendency of being brand loyal, younger and highly educated. Although these frequent shop-

ping consumers are fashion-,brand-, and quality-conscious, they are not necessarily from the high-

est income group. They are not confused by overwhelming choices, the more the merrier. Most of

these fast fashion retailers (Zara, Topshop/Topman, Pull & Bear) entered Indonesia through

Mitra Adiperkasa (MAP), Indonesia’s top performing retail marketing company of premier lifestyle

brands and quality products. Through MAP these retailers may earn access to stores in roughly up

to 50 cities due to MAP’s status as an anchor tenant in shopping malls in Indonesia. Currently there

are 1383 stores with over 90 retail concepts under MAP alone (MAP, 2012).

In regards to the relationship between fast fashion retailers and emerging markets, a number of stud-

ies are focused on the impact that the retailers bring to these markets concerning fair trade and labor

practices (Shaw et al., 2006; Zarroli, 2013). Dahan and Peltekoglu (2011), investigated Zara’s

and the fast-fashion effect on the small business enterprises (SME) of Turkish clothing industry and

it is found to have an enormous influence, even changing the business environment. Most SMEs are

forced to find new market, and upgrade their manufacturing process to compete with the fast-fash-

ion retailer giant. The presence of fast-fashion retailers also affects the business climate of the

emerging markets in more ways than through the consumers. Thus, the next hypothesis was formu-

lated:

Hypothesis 2. Indonesian consumers’ awareness of emerging coun-

tries as COM/A negatively affects their quality perception

COM/A cue does affect consumer evaluation in functional quality dimensions, but this is specific to

products that possess complex technology in its manufacturing or assembly. Quality in fashion

terms has a different meaning, products of high quality in fashion may refer how it contribute to the

consumers’ style, or how fashionable the product is, and also how up-to-date the products are to the

12

current trend (Lloyd and Luk, 2010). It is also found that depending on the country, COM/A may

affect the prestige image of the product. A production shift to low-cost country may create con-

sumer animosity, however, if the brand has a strong brand image it may be shielded from that ef-

fect. Incongruity affects consumers’ quality perception, and appears to be more damaging for low

equity brands. In a separate study, Jo, Nakamoto, and Nelson (2003) suggest that low equity brands

should be more discreet than strong brands in revealing low quality COM/A information and that

strong brands could have a wider range of COM/A due to the brand shielding effect, providing

more cost advantage to them. Thus, the next hypothesis is presented below:

Hypothesis 3. The negative effect on the perceived quality of product

is stronger for brands that are perceived as having lower quality.

The hypotheses above focused on the changes of consumers’ quality perception, accounting the ef-

fect of COM/A of fellow emerging countries, by using fast-fashion product. As consumers in

emerging market has strong desire for foreign brands, the information of those products are pro-

duced in emerging markets or developing countries may negatively affect their quality perception.

The effect is proposed to be more negative if consumers are less familiar with the brand and conse-

quently perceiving the brands as having less quality.

13

METHODOLOGY: EMPIRICAL STUDY

To test the developed hypotheses, an empirical research is conducted. The literature review was also

done to help develop and administer a survey questionnaire to address the proposed research ques-

tion. The items in the questionnaire should be able to capture the respondents’; awareness of COO

and COM/A concept, perception of foreign fast-fashion brands, and hybrid products. It is very im-

portant to know the respondents’ quality perception of the fast-fashion retailer brand in order to

have a starting point of analysis. Next, it is crucial to examine if there are changes of quality percep-

tion with presence of COM/A cues, and finally finding out if the changes are significant or not.

Several studies regarding COO effect on fashion buying behavior have used the 5-point Likert scale

in their questionnaires (Wang et al., 2004; Aiello et al., 2009). In order to best capture and mea-

sure the items, respondents were given a series of statement in which they must choose between a 5-

point Likert scale to indicate where they stand between strongly disagree (=1) and strongly agree

(=5) (Page-Bucci, 2003). The 5-point scale was chosen because the possibility of respondents hav-

ing ‘neutral’ opinions are considered. To measure the familiarity of the respondents towards fast

fashion products, three brands were chosen; Zara, H&M, and Topshop. These retailers was cho-

sen because of their top performance in their field, having presence in Indonesia, and having lines

for both male and female customers of equal balance in terms of marketing efforts and sales. Three

countries were chosen to be the COM/A information cue; Bangladesh, China, and India. The retail-

ers; Zara, H&M, and Topshop have disclosed information to the public of having a factory or

sourcing their products from factories in these three countries (Inditex, 2010; Arcadia Group, 2012;

H&M, 2013).

The questionnaire was distributed online through SurveyMonkey, a provided of web-based sur-

vey solutions. The website was chosen because it allows practicality in constructing the question-

naire and provided an attractive interface for the questionnaire. It was target web survey, in which

14

the researcher retains control over who is allowed to participate in the survey by sending a survey in

an email or sending a web link to a survey server (Blumberg, Cooper, and Schindler, 2011). The in-

tended sample of this study is going to be Indonesian undergraduate students. The respondents were

reached through official group page of Indonesian undergraduate students societies in 7 universities

in multiple countries (Indonesia, Netherlands, Australia) on the social networking website, Face-

book. The target amount of sample is 100 respondents. The size of the sample was determined by

the margin of error (± 10%) and level of confidence (95%) as advised by the survey platform and

statistics websites (Hunter, 2010; SurveyMonkey, 2013). However, having set the margin of error

by ± 10% does have it consequences in interpreting the result.

The use of the student sample have been determined to be appropriate for the study as they repre-

sent a segment of the population that in the next few years will be able to earn the financial means

to be the consumers of various consumer goods in the market (Lim and O’Cass, 2001). In addition,

previous research has concluded there are no differences between studies using students and those

using non-students, in COO studies (Verlegh and Steenkamp, 1999; Peterson, 2001). Fashion prod-

ucts is found to be appealing to students, and also been identified as a significant purchase for

young (undergraduate students) consumers (Flynn and Goldsmith, 1999; O’Cass, 2000). Thus, a

student sample should be able to represent the fast fashion consumers. The questionnaire is in Eng-

lish, the process of translating the questionnaire to Bahasa Indonesia and back to English was seen

as unnecessary steps. The intended samples of undergraduate students in Indonesia are capable of

understanding academic english. Chances of respondents giving unintended answers from misun-

derstanding the questions are very slim.

In the first part of the questionnaire, the respondents were asked to indicate whether or not they are

familiar with Zara, H&M, and Topshop. The term ‘familiarity’ was elaborated by adding the

statement “I am aware of what kind of products they sell and also their price range.” Next, the re -

15

spondents were asked to indicate whether or not they agree with “products of this retailer are not

made where they are designed”, to see their awareness fast-fashion products as hybrid products for

each of the retailers. The respondents that answered yes to both questions were grouped as “famil-

iar, aware”. Next, the respondents were asked to rate the quality of Zara, H&M, and Topshop

using the 5-point Likert scale (1= strongly disagree, 5=strongly agree), ‘quality’ was defined as

“up-to-date with current trend and is fashionable.” The respondents were also asked where each of

the retailers originate from, and where each retailers’ products were manufactured. In the second

part of the questionnaire the respondents were given a text consisting of information. The text in-

formed respondents that all three retailers’ product are indeed hybrid and the correct COO and

COM/A of the retailers are also given. Next, the respondents were given this statement “My per-

ception of this retailer’s quality would change knowing their products are partly made in

Bangladesh/China/India.” for each Zara, H&M, and Topshop/Topman using the 5-point Lik-

ert scale (1=very negative, 5= very positive). This part is intended to examine whether or not a

change in quality perception exist.

16

FINDINGS

In this section the findings and results of the survey is presented and further discussed. For the sam-

ples, 128 participated in the survey and 100 completed the questionnaire. Indonesia’s current popu-

lation is 246.9 million, and the amount of college undergraduates in 2012 was 15.8 million (BPS,

2012). The target size of the sample was 100, and considering the margin of error (± 10%), level of

confidence (95%) and size of the population, this is deemed as an appropriate sample of Indonesian

undergraduate students. The confidence interval was conducted for the questions for quality percep-

tion, all the mean fell between the range. Two statistic tests are used to process the data of the sur-

vey; independent sample t-test (t2 test), and paired sample t-test (tD test). The first test was per-

formed to test H1, whether or not hybrid product awareness (0=no, 1=yes) negatively affects re-

spondents’ perceived quality of fast-fashion retailers. The test was applied to all three retailers;

Zara, H&M, and Topshop. The second test was done to H2 and H3, which measured changes in

quality perception of the fast-fashion retailers after the emerging countries COM/A cue was given

to the respondents. The test was also applied to the three retailers along with the three COM/A cue

countries; Bangladesh, China, and India, in order to see which brand and country suffer the most

impact.

The respondents were made up of 55 female and 45 male, which presents a good balance gender-

wise for the sample. In order to analyze whether or not male and female differs regarding their fa-

miliarity of the three fast fashion retailers and awareness of their hybrid product status, the cross ta -

ble with Chi-square was performed with gender, familiarity (0=no, 1=yes), and awareness (0=no,

1=yes). The Chi-square tests was not significant for familiarity (P > 0.05) and hybrid product

awareness (P> 0.05) of Zara, H&M, and Topshop. Thus, gender does not influence the familiar-

ity of the retailers and the hybrid product awareness.

17

The fast-fashion retailer that is most familiar to the respondents is Zara (98), followed by H&M

(95), and lastly Topshop (90). All of the respondents that are familiar with the retailers are also

aware of their hybrid product status. Those who are unfamiliar with the retailers are also unaware of

status as hybrid product. Then, Cronbach’s alpha was performed for the variable ‘familiarity’ and

‘awareness’, to see if the two variables can be summed for each three retailers. The test revealed

that the two variables cannot be summed (α = 0.199). To check whether or not quality perception

of the fast-fashion retailers differ between those aware of the hybrid product status and those who

do not, the independent samples t-test was performed with hybrid product awareness and quality

perception. The independent sample t-test for Zara was not significant (t=(100) = -0.272, p =

0.787), also for Topshop (t=(100) = -1.150, p = 0.253, but was found to be significant for H&M

(t=(100) = -2.532, p < 0.05. This means that the average quality perception hybrid product aware-

ness group (Zara, M= 4.13, SD= 0.949 ; Topshop, M= 4.07, SD= 0.931) does not differ from the

average quality perception of those unaware of hybrid product status (Zara, M= 4.08 ,SD = 0.796;

Topshop, M= 3.83, SD= 0.986). In the case of H&M there is a difference of quality perception

between those aware (M= 3.91, SD = 0.917) and unaware (M= 3.33, SD = 0.989). The result shows

that hybrid product awareness do not lead to a lower quality perception for Zara and Topshop,

there are no significant difference between those who are aware and those who are not. For H&M,

there seem to be a significant difference between the two groups, however, those who are aware ap-

pears to have a higher quality perception compare to those who are not. The difference between

H&M’s result compared to Zara and Topshop may be contributed to H&M’s relatively new pres-

ence in the Indonesian market, less familiarity leads to a lower quality perception. Thus, the result

indicated that Indonesian consumers’ hybrid product awareness do not negatively affect their per-

ceived quality of the products, therefore rejecting H1.

Regarding the identification of the correct COO and COM/A of the three retailers, most of the re-

spondents are able to correctly identify the COO and COM/A for each one. Topshop’s COO and

18

COM/A is most identifiable (88, 81), followed by Zara (75, 75), and H&M (69, 74). For Zara and

Topshop, more respondents are able to identify the correct COO compared to the correct COM/A.

On the contrary, H&M’s COM/A appears to be more identifiable than its COO. According to

Usunier (2011), the absence of language cues for acronyms like H&M leads to lower level of recog-

nition and consequently, lower rates of correct origin identification. The result also show similar re -

sult to Magnusson et al’s (2011) findings. Whereas, Topshop often include the UK flag and rec-

ognizable British icons in their advertisements, which may contribute to its higher COO identifica-

tion. The relatively high rate of COM/A identification for all three brands can be attributed to the

‘made in xy’ in the clothing labels. The media is also a major contributor. The news regarding

garment factory collapse in Bangladesh and unethical labor practice in India and China has been

gaining a lot of attention through the media.

The respondents’ quality perception for the fast-fashion retailers prior to the COM/A information is

comparable for Zara (M= 4.13) and Topshop/Topman (M= 4.12). While H&M (M= 3.5) is

significantly lower. All three retailers were perceived as having above average quality in terms of

being up to date with current trend and fashionable. In order to analyze whether or not a change in

quality perception exists after the COM/A cue of emerging countries were given, the paired samples

t-test on the initial quality perception and the later quality perception after COM/A cue;

Bangladesh, China, and India, were given. The paired samples t-test was significant for all three re -

tailers for Bangladesh, China and India (p < .001).

19

Table I. Changes in quality perceptionInitial COM/A Cues

Bangladesh China IndiaMean Mean Differ-

enceMean Differ-

enceMean Differ-

enceZara 4.13 2.69 1.44 2.81 1.32 2.77 1.36

H&M 3.5 2 1.5 2.42 1.08 2.2 1.3

Topshop 4.12 2.64 1.48 2.82 1.3 2.7 1.42

From the mean differences it is clearly shown that after the respondents were given the COM/A in-

formation of Bangladesh, China, and India, their perception of quality appears to decline. Thus,

confirming H2. For all three brands, the most significant decline is for Bangladesh. As stated before

H&M has significantly lower initial quality perception compared to Zara and Topshop, there-

fore it was predicted that H&M will be affected the most from the emerging countries COM/A cue.

This holds true for Bangladesh, although the result between the retailers is comparable. H&M’s

quality perception for China (M= 2.42) and India (M= 2.2) are also the lowest, however, compared

to Zara and Topshop, H&M’s mean difference appears to be less in China (1.08) and India (1.3).

In China, Zara declined the most, from M= 4.13 to M= 2.81. In India Topshop declined the

most, from M= 4.12 to M= 2.7. Bangladesh is shown to have the most negative impact on quality

perception of all three retailers. However, the assumption that H&M will suffer the most impact

from all three countries regarding the change in quality perception did not hold. The retailer that is

most negatively affected by the emerging countries COM/A cue differs per country. The negative

effect on the perceived quality is not stronger for brands perceived as having lower quality, thus re-

jecting H3.

20

DISCUSSION

The present study examined the relationship between hybrid product awareness and Indonesian con-

sumers’ quality perception regarding fast-fashion products. The study used COM/A in emerging

countries as a cue to measure changes in the quality perception of three fast fashion retailers; Zara,

H&M and Topshop. This research provides incremental findings for the literature and offers sup-

port to some existing findings.

ConclusionThis study revealed that Indonesian consumers’ awareness of hybrid product alone does not lead to

a lower quality perception of fast-fashion retailer products. All three retailers; Zara, H&M, and

Topshop was rated relatively high in terms of being fashionable and up-to-date with current

trends. H1 was constructed under the assumption that Indonesian consumers might differ from con-

sumers from other emerging countries. Hamid and Elliot (2006) have pointed out that Indonesian

consumers have a relatively high consumer ethnocentrism, meaning that they favor Indonesian

products more than foreign ones. However the result revealed that Indonesian consumers still favor

foreign fast-fashion retailers. Similar findings was also found by Kaynak et al.(2000) for

Bangladeshi consumers, Piron (2000) for Singaporean consumers, and Wang et al. (2004) for Chi-

nese consumers. This could also be attributed to the nature of fast-fashion product itself, since it has

hedonistic attributes. Another explanation would be that COM/A effect is product specific, as

COM/A study has been known to use products such as cars and electronic gadgets (Hui and Zhou,

2003; Pappu et al., 2007).

The present study provided a perspective from an emerging country (Indonesia) and the consumers’

perception towards products made from other emerging countries (Bangladesh, India, and China).

The study also revealed that having emerging countries as COM/A does lead to a significantly

lower quality perception of fast-fashion retailer products. H2 was constructed under the assumption

21

that consumers in an emerging country like Indonesia, has lower perceived quality of products

made from fellow emerging countries like China and India, as previous studies has shown (Batra et

al., 2000; Kaynak et al., 2000). In addition, Funk et al. (2000) argued that the shifting produc-

tion to COM/A with potential consumer animosity will lead to significant decline in quality percep-

tion and financial performance. The result differs from Thakor and Lavack’s (2003) research, which

found that COM/A does not affect quality perception if COO is also given. The COO of each three

retailers was also given in the second part of the survey, and the result of the present study shows a

significantly lower change in quality perception.

After the emerging countries COM/A cue was given, H&M, with lower initial perceived quality did

not experience stronger effect in quality perception. The retailer that experienced most decline in

quality perception differs per COM/A cues. It could be interpreted as COM/A effect being either

product specific, country specific, or both. The result shows Zara, H&M, and Topshop was af-

fected the most for having Bangladesh as its COM/A cue. It may be contributed to the media expo-

sure given towards 2013’s garment factory collapse in Bangladesh, which created consumer ani-

mosity towards fashion brands associated with the tragedy, such as H&M and Primark (BBC,

2013). Explaining why the decline in quality perception of fast-fashion products made in

Bangladesh resulted most profoundly compared to China and India. Lower quality perception for

China as COM/A cue, the difference between the three retailers is comparable. The study revealed

that for India, Topshop suffers the most decline compared to the others. It could be explained by

Topshop’s strong association with United Kingdom in its advertisements, giving more advantage

in terms of authenticity for the retailer, resulting in drastic decline when the products was partially

made in its former colony of India. Similar findings was also found by Hui and Zhou (2003).

Referring to the research question of this study, does the indication of being a hybrid product with

COM/A in emerging countries affect Indonesian consumers’ quality perception regarding fast-fash-

ion products? The answer is yes, the indication of being hybrid product alone did not lead to a lower

quality perception for all three retailers, but after the emerging countries COM/A information cue 22

was given, it lead to lower quality perception. However, the strength effect was not determined by

lower initial quality perception. The effect on the quality perception differs per emerging countries,

with Bangladesh giving the most significant change of quality perception to all three retailers.

Implications

The results indicated that COM/A cue significantly affect quality Indonesian consumers’ quality

perception of fast-fashion products. The findings suggest that consumers are already aware of the

hybrid product status of fast-fashion products, and it alone does not affect the perceived quality.

The implication for managers is to be cautious in incorporating COM/A cue for fast-fashion prod-

ucts. With fair labor practice under scrutiny, it is best for managers to be more transparent regarding

the countries in which the products are manufactured. Consequences of doing the opposite may re-

sult in consumer boycott and losing shareholders. The emerging countries COM/A cue has varying

effect per country, meaning that managers should not generalize the production locations. Since not

including COM/A cue is not a favorable option, managers must find a way to best incorporate the

cue. For example, emphasizing on fair-labor practice in the labels or joining a coalition supports it

(e.g Ethical Trading Initiative). Since the nature of fashion products are status enhancing, by reveal-

ing emerging country COM/A in the right manner may affect the quality perception positively. As

consumers’ will feel that they are contributing for a better cause. The implication for scientific re-

search in the COO field is that the study provides the much needed emerging country perspective

towards another. By using fast-fashion retailer product as a medium-involvement product, with sta-

tus enhancing nature and hedonistic characteristic, the study gave a fresh perspective to the field

dominated by cars and electronic equipment.

Limitations

There are some limitations given the nature of the sample, however, researchers (Verlegh and

Steenkamp, 1999; Peterson, 2001) have noted that no difference exist between using student and

23

non-student sample in COO research. The present study used Indonesian undergraduates which also

studies abroad, which means that their quality perception was also affected by the retailers’ pres-

ence in Australia and Netherlands. Most likely, their judgments are not purely based on their fast-

fashion experiences in Indonesia. The result of this study is still limited in its representativeness to

the whole population. The brands chosen to represent the fast-fashion industry varies in terms of es-

tablishment in Indonesia (e.g H&M just entered in mid-2013), which may affect the respondents’

answers. The study is also limited by its method of survey, problems encountered from using web-

based survey include participants’ inability to complete an internet survey due to technological

problems, which may be caused by using different computer platforms, operating system, or soft-

ware (Blumberg et al, 2011), which resulted in incomplete and unusable responses. The consider-

ably high margin of error of ± 10% may also affect the interpretation of the result. In addition, this

study only focuses on quality perception, rather than also including purchase intentions, which will

add significant value to the study. The present study is also limited in its scope, by using fast-fash-

ion products the result may not apply to other products that have different characteristics.

Future Research

A lot of research in COO focused on perception between consumers in emerging market towards

products from developed market and vice versa. Little has been done on consumer perception be-

tween emerging markets. More COO studies should be done in Asia, as the field often seem Euro-

centric. Countries such as Vietnam, Thailand, and Myanmar should be included, as potential pro-

duction location for fast-fashion products. Future studies should use non-students to add more value

to the field of study. It would also be interesting find out consumers‘ perspective in more developed

countries in Asia such as Hong Kong, Singapore, and Japan towards fast-fashion products made in

emerging markets. On top of that, future research should take into account factors such as country

image of the COM/A (Pappu et al., 2007), and the also the country attributes (Aiello et al.,

2009), not only will it add value to the study, it will give a significant contribution towards COO

studies in Asia. The present study was only able to focus on quality perception, future studies

24

should also tackle purchase intention, as will also contribute better managerial implications in the

future.

Reflection

The present study initially began with a different approach. Initially it was intended to do analyze

consumers’ product evaluation and purchase decision, as a lot of literatures in the research stream

has done so. Consequently, the study was also intended to analyze factors affecting the product

evaluation (price, brand). However, it was decided to focus on consumers’ quality perception as it

proves to be an equally important subject and far more simpler to survey compared to product eval-

uation. The period of the survey in the empirical research was shorter than planned, if the survey

was better planned it may result in more participants in the survey. A number of topics have been

left out of the study, e.g the study was unable to find out factors affecting the quality perception of

the product. Nonetheless, the study was still able to give incremental contribution to the field by

giving emerging country’s perspective, using fast-fashion products, and proving that COM/A is

matters.

25

REFERENCES

Acharya, C., & Elliott, G. 2001. An examination of the effects of ‘country-of-design’ and ‘country-of-assembly’ on quality perceptions and purchase intentions. Australian Marketing Journal, 9(1): 61-75.

Agrawal, J., & Kamakura, W. K. 1999. Country of origin: a competitive advantage?. Interna-tional Journal of Research in Marketing, 16: 255-267.

Aiello, G., Donvito, R., Godey, B., Pederzoli, D., Wiedmann, K., Hennigs, N., Siebels, A., Chan, P., Tsuchiya, J., Rabino, S., Ivanova, S. I., Weitz, B., Oh, H., Singh, R. 2009. An international per-spective on luxury brand and country-of-origin effect. Journal of Brand Management, 16(5/6): 323-337.

Arcadia Group. 2012. Fashion footprint: our product, ethical trading. Arcadia Group. https://www.arcadiagroup.co.uk/fashionfootprint/our-products/Ethical%20Trading (accessed: 7/11/13 )

Batra, R., Ramaswamy, V., Alden, D. L., Steenkamp, J., & Ramachander, S. 2000. Effects of brand local and nonlocal origin on consumer attitudes in developing countries. Journal of Consumer Psy-chology, 9: 83–95.

Balabanis, G., & Diamantopoulos, A. 2004. Domestic country bias, country-of-origin effect, and consumer ethnocentrism: a multidimensional unfolding approach. Journal of the Academy of Marketing Science, 32(1): 80-95.

BBC. 2012. H&M and Zara to sign Bangladesh safety accord. BBC. http://www.bbc.co.uk/news/business-22520415 (accessed: 7/11/13 )

Bloemer, J., Brijs, K. & Kasper, H. 2009. The Coo-Elm model: a theoretical framework for the cog-nitive processes underlying country-of-origin effects. European Journal of Marketing, 43(1/2): 62-89.

Blumberg, B., Cooper, D. R., & Schindler, P. S. 2011. Business Research Methods. Berk-shire: McGraw-Hill.

Badan Pusat Statistik Indonesia. 2013. Angka Partisipasi Sekolah Menurut Provinsi. Jakarta, DKI Jakarta: Badan Pusat Statistik Indonesia.

Chao, P. 2001. The moderating effects of country of assembly, country of parts, and country of de-sign on hybrid product evaluations. Journal of Advertising, 30(4): 67-81.

Dahan, G. S., & Peltekoglu, F. B. 2011. The effects of Zara to the SMEs of an emerging market. Journal of Global Fashion Marketing, 2(1), 1-10.

The Economist. 2005. Inditex: the future of fast fashion. The Economist. http://www.economist.com/node/4086117 (accessed: 7/11/13 )

26

Essoussi, L. H., & Merunka, D. 2007. Consumers’ product evaluations in emerging markets: does country of design, country of manufacture, or brand image matter?. International Marketing Review, 24(4): 409-426.

Flynn, L., & Goldsmith, R. 1993. A causal model of consumer involvement: Replication and cri-tique. Journal of Social Behavior and Personality, 8(6): 129-142.

Funk, C. A., Arthurs, J. D., Treviño, L. J., & Joireman, J. 2010. Consumer animosity in the global value chain: The effect of international production shifts on willingness to purchase hybrid prod-ucts. Journal of International Business Studies, 41: 639–651

Gurhan-Canli, Z., & Maheswaran, D. 2000. Determinants of country-of-origin evaluations. Journal of Consumer Research, 27: 96-108.

H&M. 2012. Annual Report 2011. H&M. Stockholm, Stockholm County.

H&M. 2013. About H&M: Sustainability, our supplier list. H&M. http://about.hm.com/en/About/Sustainability/Commitments/Responsible-Partners/Supply-Chain/SupplierList.html (accessed: 7/11/13 )

Hamid., & Elliot, Greg. 2006. A less-developed country perspective of consumer ethnocentrism and “country of origin” effects: Indonesian evidence. Asia Pacific Journal of Marketing, 18(2); 79-92.

Hamzaoui, L., & Merunka, D. 2006. The impact of country of design and country of manufacture on consumer perceptions of bi-national products’ quality: an empirical model based on the concept of fit. Journal of Consumer Marketing, 23(3): 145-155.

Hamzaoui-Essoussi, L. 2010. Technological complexity and country-of-origin effects on binational product Evaluation: investigation in an emerging market. Journal of Global Marketing, 23(4): 306-320.

Hamzaoui-Essoussi, L., Merunka, D., & Bartikowski, B. 2011. Brand origin and country of manu-facture influences on brand equity and the moderating role of brand typicality. Journal of Busi-ness Research, 64: 973-978.

Han, C.M., & Terpstra, V., 1988. Country-of-origin effects for uni- national and bi-national prod-ucts. Journal of International Business Studies, 19: 235–255.

Hayes, S. G., & Jones, N. 2006. Fast fashion: a financial snapshot. Journal of Fashion Market-ing and Management, 10(3): 282-300.

Hui, M. K., & Zhou, L. 2003. Country-of-manufacture effects for known brands. European Jour-nal of Marketing, 37(1/2): 133-153.

Hunter, P. 2010. Margin of error and confidence level made simple. Six Sigma. http://www.isixsigma.com/tools-templates/sampling-data/margin-error-and-confidence-levels-made-simple/ (accessed: 20/12/13 )

Inditex. 2011. Corporate responsibility: Achieving the zero discharge. Inditex. http://www.inditex.com/en/corporate_responsibility/social_dimension (accessed: 7/11/13 )

27

Insch, G. S., & McBride, J. B. 2002. The impact of country-of-origin cues on consumer perceptions of product quality: a binational test of the decomposed country-of-origin construct. Journal of Business Research, 57: 256-265

Jo, M.-S., Nakamoto, K., & Nelson, J. E. 2003. The shielding effects of brand image against lower quality countries-of-origin in global manufacturing. Journal of Business Research, 56: 637-646.

Kaynak, E., Kucukemiroglu, O., & Hyder, A. S. 2000. Consumers’ country-of-origin (COO) per-ceptions of imported products in a homogenous less-developed country. European Journal of Marketing, 34(9/10): 1221-1241.

Kardes, F. R., Cronley, M. L., Kellaris, J. J. and Posavac, S. S. 2004. The role of selective informa-tion processing in price-quality inference. Journal of Consumer Research, 31(2): 368-374.

Klein, J. G., Ettenson, R., & Krishnan, B. C. 2006. Extending the Construct of Consumer Ethnocen-trism: When Foreign Products Are Preferred. International Marketing Review, 23(3):304-321.

Leclerc, F., Schmitt, B. H. & Dube, L. 1994. Foreign branding and its effects on product percep-tions and attitudes. Journal of Marketing Research, 31(2): 263-270.

Liefeld, J. P. 2004. Consumer knowledge and use of country-of-origin information at the point of purchase. Journal of Consumer Behaviour, 4(2): 85-96.

Li, Z. G., Murray, L. W., & Scott, D. 2000. Global sourcing, multiple country-of-origin facets, and consumer reactions. Journal of Business Research: 47: 121-133.

Lim, K., & O'Cass, A. 2001. Consumer brand classifications: an assessment of culture-of-origin versus country-of-origin. Journal of Product Brand Management, 10(2):120–36.

Lloyd, A. E., & Luk, S. T. K., 2010. The devil wears Prada or Zara: a revelation into customer per-ceived value of luxury and mass fashion brands. Journal of Global Fashion Marketing, 1:3, 129-141.

Magnusson, P., Westjohn, S. A., Zdravkovic, Srdan. 2011. “What? I thought Samsung was Japa-nese”: accurate or not, perceived country of origin matters. International Marketing Review, 28(5): 454-472.

Mitra Adiperkasa. 2012. Annual Report 2011. MAP. Jakarta, DKI Jakarta.

Nagashima, A. 1970. A comparison of Japanese and US attitudes toward foreign products. Journal of Marketing, 34(1): 68-74.

O’Cass, A. 2000. An assessment of consumers product, purchase decision, advertising and con-sumption involvement in fashion clothing. Journal of Economic Psychology, 21: 545-576.

O’Cass, A. 2004. Fashion clothing consumption: antecedents and consequences of fashion clothing involvement. European Journal of Marketing, 38(7): 869-882.

Page-Bucci, H. 2007. The value of Likert scales in measuring attitudes of online learners. HKA Designs. http://www.hkadesigns.co.uk/websites/msc/reme/likert.htm (accessed: 11/11/13 )

28

Pappu, R., Quester. P. G. and Cooksey, R. W. 2007. Country image and consumer-based brand eq-uity: relationships and implications for International Marketing. Journal of International Business Studies, 38(5): 726-745.

Peterson, R. A. 2001. On the use of college students in social science research: insights from a sec-ond‐order meta‐analysis. Journal of Consumer Research, 28(3): 450-461.

Pharr, J. M. 2005. Synthesizing country-of-origin research from the last decade: is the concept still salient in an era of global brands?. Journal of Marketing Theory and Practice, 13(4): 34-45.

Pich, M., and Van der Heyden, L. 2002. Lean, mean fashion machine- Marks & Spencer and Zara: Process competition in the textile apparel industry. Management Today UK. http://www.managementtoday.co.uk/news/549367/Lean-Mean-Fashion-Machine---Marks--amp-Spencer-Zara-Process-Competition-Textile-Apparel-Industry/?DCMP=ILC-SEARCH (accessed: 10/11/13)

Piron, F. 2000. Consumers’ perceptions of the country- of-origin effect on purchasing intentions of (in)conspicuous products. Journal of Consumer Marketing, 17(4): 308-321.

Reardon, J., Miller, C., Vida, I. and Kim, I. 2005. The effects of ethnocentrism and economic devel-opment on the formation of brand and ad attitudes in transitional economies. European Journal of Marketing, 39(7/8): 737-54.

Roth, M.S., & Romeo, J.B. 1992. Matching product category and country image perceptions: a framework for managing country-of-origin effects. Journal of International Business Studies, 23(3): 477-497.

Samiee, S., Shimp, T. A. & Sharma, S. 2005. Brand origin recognition accuracy: its antecedents and consumers’ cognitive limitations. Journal of International Business Studies, 36(4): 379-97.

Schooler, R. 1965. Product bias in the Central American common market. Journal of Marketing Research, 2: 394-7.

Sharma, P. 2011. Country of origin effects in developed and emerging markets: exploring the con-trasting roles of materialism and value consciousness. Journal of International Business Studies, 42(2): 285-306.

Shaw, D., Hogg, G., Wilson, E., Shiu, E., & Hassan, L. 2006. Fashion victim: the impact of fair trade concerns on clothing choice. Journal of Strategic Marketing, 14(4): 427-440.

Srinivasan, N., Jain, S. C., & Sikand, K. 2004. An experimental study of two dimensions of coun-try-of-origin (manufacturing country and branding country) using intrinsic and extrinsic cues. Inter-national Business Review, 13: 65-82.

SurveyMonkey. 2010. How many respondents do I need? SurveyMonkey. http://help.surveymonkey.com/articles/en_US/kb/How-many-respondents-do-I-need(accessed: 20/12/13)

Thakor, M. V., & Lavack, A. M. 2003. Effect of perceived brand origin associations on consumer perceptions of quality. Journal of Product and Brand Management, 12: 394–407.

Tse, D. K., & Gorn, G. J. 1993. An experiment on the salience of COO in the era of global brands. Journal of International Marketing, 1(1), 57–76.

29

Usunier, J.-C. 2011. The shift from manufacturing to brand origin: suggestions for improving COO relevance. International Marketing Review, 28(5): 486-496.

Verlegh, P. W. J., & Steenkamp, J.-B. E. M. 1999. A review and meta-analysis of country-of-origin research. Journal of Economic Psychology, 20(5): 521-46.

Wall, M., Liefeld, J., & Heslop, L.A. 1991. Impact of country-of-origin cues on consumer judg-ments in multi-cue situations: a covariance analysis. Journal of the Academy of Marketing Sci-ence, 19(2): 105-13.

Wang, C. L., Siu, N., & Hui, A. 2004. Consumer decision-making styles on domestic and imported brand clothing. European Journal of Marketing, 38(1/2): 239-252.

Zarroli, J. 2013. The fast world of fast fashion: in trendy world of fast-fashion, styles are not made to last. NPR. http://www.npr.org/2013/03/11/174013774/in-trendy-world-of-fast-fashion-styles-arent-made-to-last (accessed: 12/11/13)

30