Forghing Trade Practice - Harmonized System

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“Commerce, trade and exchange make other people more valuable alive than dead, and mean that people try to anticipate what the other guy needs and wants. It engages the mechanisms of reciprocal altruism, as the evolutionary biologists call it, as opposed to raw dominance”.

                                                                        Steven Arthur Pinker (born September 18, 1954)

Introduction

International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP).  Trading globally gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments. Harmonized System (HS) is for classifying goods is a six-digit code system in international Market.

The Harmonized System (HS) is an international nomenclature defined by the World Customs Organization (WCO) for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes. At the international level, the Harmonized System for classifying goods is a six-digit code system.

The HS comprises approximately 5,000 article/product descriptions that appear as headings and subheadings, arranged in 96 chapters (Chapter 77 is reserved for future use) and grouped into 21 sections.

Of the six digits, the first two digits identify the chapter the good is classified in, e.g. 09 = Coffee, Tea, Maté and Spices. The first four digits identify the heading, a finer breakdown of the chapter, e.g. 09.02 = Tea, whether or not flavoured. The full six digits identify the sub-heading, and are even more specific, e.g. 09.02.10 = Green tea (not fermented). Up to the HS-6 digit level, all countries using the Harmonized System have the same codes.

History

As early as a century ago, the lack of uniformity between the many different classification systems that had grown up throughout the world had become a major concern. Since that time, several attempts have been made to create an international system of classification.

In 1950, the Customs Cooperation Council was formed in Brussels. Shortly thereafter, the classification system it developed, known as the Customs Cooperation Council Nomenclature, came into use. By 1970, it became apparent that this system would have to be revised both in order to make it usable by more countries and to ensure compatibility with modern, computerized methods of doing business. Thus the development of the Harmonized Commodity Description and Coding System began.

On January 1, 1988 most members of the WTO adopted the new Harmonized System. In the United States, the HTSUS (Harmonized Tariff Schedule of the United States) was enacted by subtitle B of title I of the Omnibus Trade and Competitiveness Act of 1988, and became effective on January 1, 1989 – replacing the TSUS (Tariff Schedules of the United States).

There are now more than 200 countries using the international Harmonized Tariff. So are they all the same? Yes, and No. Yes to the 6 digit level. No beyond that level. Before being adopted into law by a country, the WTO Harmonized System is augmented to accommodate particular national goals. For example, most add additional levels to provide a finer breakout of products. Duty rates and units of measurement are added — generally at the 8^th digit level, but often enough at the 10^th digit level.

Harmonized System 

The Harmonized System is an international nomenclature for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes. At the international level, the Harmonized System (HS) for classifying goods is a six-digit code system.

Under the HS Convention, the contracting parties are obliged to base their tariff schedules on the HS nomenclature, although parties set their own rates of duty. The HS is organized into 21 sections and 96 chapters, accompanied with general rules of interpretation and explanatory notes. First, the system assigns goods to sections, and then proceeds to assign these goods to their specific chapter, heading, and subheading, in that order, as necessary. The HS therefore assigns up to a total of 8 digits at the tariff-rate (legal) level. Two extra digits may also be assigned as statistical reporting numbers for a total of 10 digits to be listed on entries.

To ensure harmonization, the contracting parties must employ at least 4- and 6-digit provisions, international rules and notes, but are free to adopt additional subcategories and notes. Chapter 77 is reserved for future international use only. Chapters 98 and 99 are reserved for national use. Chapter 98 comprises special classification provisions, and chapter 99 contains temporary modifications pursuant to a parties' national directive or legislation.

The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international trade is classified in terms of the HS. 

The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.

It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.

Importance

For Government

For government, a tariff classification system enables "uniform identification of imported and exported goods for purposes of duty and tax collection, enforcement of national laws and international treaties, analysis for economic and business planning, and international trade negotiations."

For Companies

For users of the tariff (importers and exporters of all types and sizes), correct classification is a legal responsibility. Non-compliance can mean shipment delays, increased inspections, fines, and other administrative penalties.

Correct classification often saves money, both in the short and long term. When examining a company's past imports, customs consultants find that overall, too much duty has been paid, indicating that full advantage of provisions of the tariff were not taken. Making use of these provisions requires a precise knowledge of the product to be classified, something that the importer or exporter has, as well as knowledge of the Tariff and the principles of classification, something readily know-able.

Whether goods are eligible for any of the special provisions of the Tariff that allow for lower duty rates usually depends on the use or purpose for which they are being imported, or on the availability of certificates of origin. Again, the importer is in the best position to know these facts.

Verifying the classification decisions of customs brokers and professional classification suppliers is a good way of protecting both compliance records and revenue outlay in the form of duties and taxes. By understanding how the tariff classification process works, importers will be able to work together with their classification provider (usually a customs broker or consultant) to ensure that their goods are classified correctly.

An international "Harmonized System" for the description and classification of goods was created in 1988, and soon after adopted by nations around the world. The broad, core specifics and structure of Harmonized System classifications is universal, with each participating country eligible to add and define specific detail items, and to create and assign rates of duty in any required categories for all classifications.

Reff; http://www.globaltariff.com/; retried on 3rd may 2015

HU codes are availbale @ https://www.foreign-trade.com/reference/hscode.htm

 Read More @ http://www.globaltariff.com/aboutHTS.cfm

Retail Service Quality Scale RSQS Model

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The retail environment today is changing more rapidly than ever before (Dabholkar, 1996). It is characterized by intensifying competition from both domestic and foreign companies, a spate of mergers and acquisitions, and more sophisticated and demanding customers who have great expectations related to their consumption experiences (Sellers, 1990; Smith, 1989). Existing research indicates that consumers satisfied with service quality are most likely to remain loyal (Wong and Sohal, 2003). Service quality is perceived as a tool to increase value for the consumer; as a means of positioning in a competitive environment (Mehta, Lalwani and Han, 2000). By satisfying customers through high quality service, business firms not only retain their current customers, but also increase their market share (Finn and Lamb, 1991). Many studies on service quality relied on service quality construct and scale by Parasuraman et al. (1988). However, this application to the retail industry may not be appropriate for service quality in retailing industry seems to be different from other services (Kaul, 2005; Dabholka et al, 1996). In retail setting, especially retail stores where there is a mix of product and service, retailers are likely to have impact on service quality more than on product quality (Dabholkar et al., 1996). As retailers can create such effects, service quality plays a significant strategic role in creating quality perceptions.

Service quality

Service quality is a critical component of customer perceptions about the service. Customers perceive services in terms of its quality and how satisfied they are overall with their experiences (Zeithaml, 2000). As thus, service quality is defined as customers’ perception of how well a service meets or exceeds their expectations (Czepiel, 1990). In the retail context, perceptions of service encounters accumulate over time and a customer’s relationship with an organization are a continuation of exchanges or interactions both past and present” (Czepiel, 1990). When customers evaluate retail service, they compare their perceptions of the service they receive with their expectations. Customers are satisfied when the perceived service meets or exceeds their expectations. They’re dissatisfied when they feel the service falls below their expectations (Levy and Weitz, 2005).

Service quality is consumers’ comparisons between service expectations and service performance (Parasuraman et al. (1985). In other words, service quality is “the degree and direction of discrepancy between consumer’s perceptions and expectations in terms of different but relatively important dimensions of the service quality, which can affect their future purchasing behaviour”. Service quality with reference to a product or service as “the consumer’s evaluative judgement about an entity’s overall excellence or superiority in providing desired benefits” (Arnauld et al. 2002). Service quality is perceived as a tool for increasing value for the consumer; as a means of positioning in a competitive environment (Mehta, Lalwani and Han, 2000) and for ensuring consumer satisfaction (Sivadas and Baker-Prewitt, 2000), retention, and patronage (Yavas, Bilgin and Shemwell, 1997).

As a gap or difference between customer ‘expectations’ and ‘perceptions’, service quality is viewed as lying along a continuum ranging from ‘ideal quality’ to ‘totally unacceptable quality,’ with some points along the continuum representing satisfactory quality. When perceived or experienced service is less than expected service, it implies less than satisfactory service quality. But, when perceived service is less than expected service, the obvious inference is that service quality is more than satisfactory Parasuraman, et al 1988). Service quality is one of the most influencing factors in a consumer’s purchase decision process. According to Buzell and Gale (1987) empirical research clearly shows the positive relationship between service quality and organisational performance. Using a large database with thousands of strategic business units, research shows that the most critical factor affecting a business unit’s performance is the service quality of its products and services as perceived by the market relative to the perception about its competitors.

From the previous definitions of service quality it is apparent that they include the perception and expectations of services. Perception of service is the customer’s opinion of the service or product (Foster, 2004) or the general judgment of a service which is affected by many factors such as the education level, background and others (O‘Neill & Palmer, 2003). Perception could be a one time or single perception of the company, such as an experience buying a product at a specific time, or an overall perception of the company based on many experiences with the organisation. The perception of service quality is not constant which means that it changes for many reasons such as time, culture, consumer taste and promotional activities of the company (Zeithaml, Bitner & Gremler, 2009).

SERVICE QUALITY MODELS

Most of the service quality models suggest a multidimensional conceptualisation of service quality that leads to the measurement of service quality from a consumer‘s perspective (Akinci, Atilgan-Inan & Aksoy, 2010; Martinez & Martinez, 2010). There is a need to have a clear understanding of the service quality models because they help managers to identify quality problems which leads them to plan programmes to improve the quality which in turn will lead to better performance (Ahmad et al., 2009; Seth, Deshmukh & Vrat, 2005). Two major schools of thought dominate the literature; the American school and the Nordic school (Caro & Garcia, 2007; Karatepe, Yavas & Babakus, 2005) and researchers generally adapt one of the two schools (Ahmad et al., 2009).

 Nordic School

The main contributor to the Nordic school service quality model is Gronroos’. This model is not as widely known as the American school (Kang & James, 2004; Woodall, 2001). As discussed earlier, Gronroos’ service quality model consists of three dimensions:

1. Technical quality

2. Functional quality

3. Image (Gronroos, 2007)

According to Gronroos, the customer can measure the outcome of service in an objective manner while, the functional quality of the service encounter is concerned with the interaction between the provider and recipient of a service and is often perceived in a subjective manner (Ghobadian et al., 1993). Moreover the corporate image will influence the perception of the customer towards the image of the service provider.

Lehtinen and Lehtinen (1991) also proposed three dimensions of service quality, which is another service quality model of the Nordic school (Athanassopoulos, 2000).

Following are the dimensions of service quality according to Lehtinen and Lehtinen (1991):

1. Physical quality

2. Corporate quality

3. Interactive quality

Physical quality is the quality that results from the physical element of the service. It includes the physical products (goods) that are consumed during the service process and this is usually evaluated in an objective manner, and physical support which aids the production of the service. The interactive quality is the interaction with the employees or any other elements of the service provider. This also includes interactions that customers have with each other. Finally, the corporate quality is the history of the organisation and the image people form about the organisation. The corporate quality takes time to evolve whereas the physical quality might improve faster depending on the improvements made by the organisation (Lehtinen & Lehtinen, 1991).

The North American School

The North American School is more widely known than the Nordic school, and it is based on Parasuraman, Zeithaml & Berry (1988) gap model (Prayag, 2007; O’Neill & Palmer, 2003). The American school, also known as the disconfirmation model, was developed in 1985 then later modified in 1988, 1991 and 1994 (Akbaba, 2006). The gap model is about giving managers the tools to improve service quality. In the GAP model, five gaps are identified, taking into consideration the possible discrepancies between the elements of the service management process.

Gap 1: Difference between consumer expectations and management                perceptions of consumer expectations.

Gap 2: Difference between management perceptions of consumer expectations and service quality specifications.

Gap 3: difference between service quality specifications and the service actually delivered.

Gap 4: difference between service delivery and what is communicated about the service to the consumer.

Gap 5: difference between consumer expectations and perceptions.

The Hierarchical Model

Brady & Cronin (2001) acknowledge that the American school and the Nordic school are the most adopted conceptualisation of service quality by researchers. They integrated the Nordic school model and the North American model into a new hierarchical model; they adapted the view of Rust & Oliver (1994) that perceived service quality depends on three dimensions; the customer employee interaction, the service environment and outcome. Brady & Cronin (2001) also adapted the view of Dabholkar, Thorpe & Rentz (1996) that service quality is a multidimensional and multilevel construct. Therefore, the model by Brady & Cronin (2001) integrates the conceptualisation of service quality by suggesting a service quality model with three dimensions. The three dimensions are:

1. Interaction quality

2. Physical environment quality

3. Outcome quality

Each of these dimensions consists of three sub-dimensions and the aggregate evaluation of the sub-dimensions forms the perception of that dimension. The combined perception of these dimensions leads to the overall service quality perception. The Brady & Cronin (2001) model is presented below.

BRADY AND CRONIN HIERARCHICAL MODEL

Further, Martinez & Martinez (2010) classifies the service quality models into three main models to help conceptualise service quality:

The multidimensional reflective model: This model is a multidimensional and a multi-level (hierarchal) model. This means that variation in the service quality construct causes variation in the dimensions and the variations in the dimensions causes variations in the sub dimensions. An example of this type is the retail service quality scale by Dabholkar, Thorpe & Rentz (1996).

Multidimensional formative models: These models are multidimensional models and they assume that variations in the dimensions cause variations in the service quality construct which is opposite to the reflective model. This model conceptualizes service quality as shaped by its dimension; this is different to the multidimensional reflective model which conceptualizes service quality as defined by its dimensions. Examples of this type of model are the SERVQUAL, SERVPERF and the Nordic model.

The Multidimensional formative-reflective models: This model is a combination of the formative and reflective models. This model is similar to the formative model, it conceptualizes service quality as formed by its dimensions and it is similar to the reflective model in that the dimensions are reflected by its sub-dimensions. An example of this type of model is Brady and Cronin hierarchical model.

SERVICE QUALITY MEASUREMENT

Service quality is defined as ‘a global judgment or attitude, relating to the overall superiority of the service’ (Parasuraman, Zeithaml and Berry, 1988, p16). The measurement of service quality becomes vital for the industry to attain competitive advantage. Service quality knowledge   There are many retail service quality models. The main service quality models are SERVQUAL and GAP model by Parasuraman et al. (1988), SERVPERF by Cronin and Taylor (1992), Retail Service Quality Model by Dabholkar et al. (1996).

SERVQUAL and Gap Model: In 1980s, in the attempt to define service quality and develop a model of service quality, Parasuraman et al. conducted an exploratory investigation. The results showed that regardless of the type of service, consumers used basically the similar criteria in evaluating service quality (Parasuraman et al., 1985). They labeled those 10 criteria “service quality determinants”. Since then, service quality was defined through 10 dimensions: access, communication, competence, courtesy, credibility, reliability, responsiveness, security, tangibles and understanding/knowing the customer. Later, they were simplified into five dimensions including tangibles, reliability, responsiveness, assurance and empathy. This model indicates that consumer perceptions of quality are influenced by five gaps occurring in the internal process of service delivery. The basic premise is that service quality can be defined by the difference between expected service and perceived service (Parasuraman et al, 1985). The first four are those on the service provider side of service. Gap 5 is related to the customer side of service. These gaps are (1) the difference between what customers expected and what management perceived customer expected; (2) the difference between management’s perceptions of customer expectations and the translation of those perceptions into service quality specifications; (3) the difference between actual service quality specifications and the delivery of those specifications to customer service actually delivered; (4) the difference between the services delivered to customers and the external communications about the service; and (5) the difference between customer expectations and perceptions. Although SERVQUAL has been applied in the study of different types of service industries, there are certain limitations and criticisms. Some of the widespread concerns are the 5 dimension configuration of the scale, the appropriateness of operationalizing service quality as the expectations-performances gap score, and the scale’s applicability to a retail setting (Bakakus and Boller, 1992; Finn and Lamb, 1991; Reeves and Bednar 1994).

SERVPERF: With an argument that Parasurman et al.’s gap theory of service quality was supported by little empirical or theoretical evidence, Cronin and Taylor (1992) developed a "performance-based" service quality measurement scale called SERVPERF. The major difference between these two scales is that SERVQUAL operationalises service quality by comparing the perceptions of the service received with expectations, while SERVPERF maintains only the perceptions of service quality. The SERVPERF scale consists of 22 perception items excluding any consideration of expectations. The superiority of SERVPERF over SERVQUAL has been demonstrated in numerous studies including those by Avkiran (1999), Lee et al. (2000) and Brady et al. (2002). However, the continued use of and reference to SERVQUAL in marketing literature suggest that “consensus has not yet been reached relative to the superiority of performance-only measures of service quality” (Brady et al. 2002, p. 18).

Retail Service Quality Scale (RSQS): Similar to and originating from the SERVPERF, the RSQS is a performance based measure of service quality but specific to the retail context. To contextually fit the retail industry, Dabholkar et al. (1996) developed Retail Service Quality Model (RSQS). Based on SERVPERF, RSQS includes 28-item scale, of which 17 items are from SERVPERF and 11 items are developed by qualitative research. It composes of 5 dimensions, namely (1) Physical aspects – Retail store appearance and store layout; (2) Reliability – Retailers keep their promises and do the right things; (3) Personal interaction – Retail store personnel are courteous, helpful, and inspire confidence in customers; (4) Problem solving – Retail store personnel are capable to handle returns and exchanges, customers’ problems and complaints; and (5) Policy – Retail store’s      policy on merchandise quality, parking, operation hours, and credit cards. Retail Service Quality Scale (RSQS) developed in the U.S. for applicability to Indian retail. This scale has been found appropriate in a variety of settings – across different countries such as South Africa and Singapore and across a variety of store types such as supermarkets, department stores and hyper stores. The RSQS model is also applicable to Indian scenario (Subhashini Kaul, 2005).

Customer Loyalty

Customer loyalty is defined as repeated purchasing and referring a company to other customers (Heskett et al., 1997), generating positive and measurable financial results (Duffy, 2003). Pearson (1996) has defined customer loyalty as the mind-set of the customers who hold favourable attitudes toward a company, commit to repurchase the company’s product/service, and recommend the product/service to others. In other words, customer loyalty is the degree to which a customer exhibit repeat purchasing behaviour from a service provider possesses a positive attitudinal disposition toward the provider, and considers using only this provider when a need for this service exists.

Loyalty is developed over a period of time from a consistent record of meeting, and sometimes even exceeding customer expectations (Teich, 1997). Improvements in retention and increase in the share of the company are the obvious economic benefits of customer loyalty. Customer loyalty is an indispensable performance measurement tool for profit as well as non-profit organisations to sustain competitive advantage (Kotler, 1998) and to enhance business/service performance measures. Therefore, loyalty is essential for the organisation because it is cheaper to retain its old customers than to find new customers; in addition to this customer retention is linked to the company’s profit. Customer loyalty (or the absence of it) is exhibited both through customer behaviour and also through attitude.

The customer loyalty as “the market place currency of the twenty-first century” suggested by Singh and Sirdeshmukh (2000). Customer loyalty is concerned with the likelihood of customer returning, making business referrals, providing strong word-of-mouth references and publicity (Bowen and Shoemaker, 1998). Loyal customers are less likely to switch to a competitor due to price inducement, and these customers make more purchases compared to less loyal customers (Baldinger and Rubinson, 1996). However, customers who are retained may not always be satisfied and satisfied customers may not always be retained. Customers may be loyal due to high switching barriers or the lack of real alternatives, customers may also be loyal because they are satisfied, thus wanting to continue with the relationship.

People become loyal customers in stages, according to Griffin (1995) and Vavra (1995). In the first stage, the prospective customer becomes a suspect, who may be anyone that might buy the product or service. In the second stage, a prospect must have a need for the product or service. In the third stage, the customer is a disqualified prospect as the company has discovered that the customer does not need the product or does not have the ability to buy the product. First-time customers are those who have bought once and repeat customers have bought twice or more. A client purchases regularly and retailer has on-going relationship with this customer. The customer as advocate is the last stage. An advocate purchases regularly as a client, but additionally encourages others to buy from the company. An inactive customer has bought from the company, but has not purchased from the company for a period that is longer than the normal purchase cycle (Griffin, 1995).

Jacoby and Chestnut (1978) have explored the psychological meaning of loyalty in an effort to distinguish it from behavioral (i.e., repeat purchase) definitions. Their analysis concludes that consistent purchasing as an indicator of loyalty could be invalid because of happenstance buying or a preference for convenience and that inconsistent purchasing could mask loyalty if consumers were multi-brand loyal. More specifically, all three decision making phases must point to a focal brand preference if true brand loyalty exists. Thus, (1) the brand attribute ratings (beliefs) must be preferable to competitive offerings, (2) this “information” must coincide with an affective preference (attitude) for the brand, and (3) the consumer must have a higher intention (conation) to buy the brand compared with that for alternatives.

In marketing literature, the word loyalty is used in at least three different senses:

a) As transactional retention: Customers or employees are retained to act repeatedly in favour of the company’s interests in exchange for something attractive. This, for example, is what happens when newspapers include collectible items so that buyers will not cease to purchase the same newspaper, or when businesses or commercial chains offer certain advantages to customers who make repeat purchases in the same establishment or chain. Managers and employees are also retained by the firm by means of economic compensation or other personal or family perks.

b) As sentimental attraction: This is present when someone more or less habitually chooses a certain product or brand because he likes it, or because it inspires a feeling of confidence: the man, for instance, who always buys the same newspaper because he enjoys it, has grown accustomed to it, or because its editorial line appeals to him. This kind of “loyalty” is also generated when one works for a company that he finds comfortable, or trustworthy. This feeling may arise in very different ways. One of these is “falling in love” with a business when one notices how it takes a genuine interest in intelligently meeting a customer’s or employee’s needs. This leads a person to believe that he can place his trust in it.

c) As willingness to commit oneself: This is the case when a person understands that he ought to dedicate his activity perseveringly to a person, cause, or institution that he considers valuable and to which he has made some sort of commitment. In contrast to transactional retention, which corresponds to an instrumental, calculating, self-interested rationality, loyalty understood as willingness to commit is based on a deliberately created bond that obliges the person to maintain this commitment. Such loyalty is considered intrinsically valuable. This understanding of loyalty is also distinct from a mere sentimental attraction or reflexive habit, which occurs without reflection or responsible decision. Every company makes effort to transform its first time customer into a life time buyer. Below are the reasons:

·         Sales go up because the customer is buying more from XYZ

·         Strengthen XYZ’s position in the marketplace when customers are buying from XYZ instead of its competitors

·         Marketing costs go down when XYZ don’t have to spend money to attract a repeat customer, since XYZ already have him. In addition, as a satisfied customer he tells his friends thereby decreasing XYZ’s need to advertise.

·         XYZ is insulated from price competition because a loyal customer is less likely to be lured away by a discount of a few rupees.

·         Finally, a happy customer is likely to sample XYZ other product lines thus helping XYZ in achieving a larger share of customer.

Today’s companies must manage a strange paradox: in the race to win market share and its promise of profit, a company risks (and often loses) the highest margin customers and in doing so worsens profitability rather than improving it. A company interested in building a solid, loyal customer base uses an approach different from that of a company interested in simply building market share. Loyalty building requires the company to emphasize the value of its products or services and to show that it is interested in building a relationship with the customer. The company recognizes that its business is to build a stable customer base rather than make a single sale.

            

Retail Store Image

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Introduction

According to many researches a brand is one of the most important sources of acquiring competitive advantage. This attitude is confirmed by the fact that there are many scientific works on store image. As Hirschman (1981) pointed out, the understanding of how consumers acquire cues from shopping experiences, advertising, peer report, and so forth, and how these cues are translated into a cognitive con- figuration which forms their store image.  According to marketing theoreticians a strong private store image is one of the factors that determine consumer satisfaction and their loyalty to a certain store. Performed scientific research confirms that there are links between a private brand and a store’s image. In the scientific works of Lindquist (1974), Bearden (1977), Ghosk (1990), Chang and Tu (2005), and Pajuodis (2005) factors that influence store image are distinguished. But it must be emphasized that the above-mentioned scientists distinguish different factors that determine a store’s image.

This paper consists of private labels and its impact on store Image. Chang and Tu (2005) assessed only four factors that influenced a store’s image in their work: infrastructure, services, provided by the store, store activity, and convenience. Vahie and Paswan (2006), summarizing the results of theoretical and empirical research of Martineau (1958), Lindquist (1974), Doyle and Fenwick (1974), Bearden (1977), Chowdhury et al. (1998), Burt and Carralero-Encinas (2000), Kim and Jin (2001), Chang and Tu (2005), state that six factors that influence a store’s image are: services, convenience, quality, product variety, product price, and store atmosphere.

A strong private label brand has a big influence on the store image and strategy. There are various conceptions of a brand in scientific literature. Each author proposes and interprets conceptions of a brand differently, but most of them agree that it is a sign, given to a certain company or a certain product (or product group) that is easily recognizable by consumers. Vahie and Paswan (2006), based on Aaker (1991), Keller (1993, 2003), Faircloth et al. (2001), state that it is very important for store managers to create a positive brand image, because brand image and its value are directly related. Scientific research, performed by Keller (1993), Faircloth et al. (2001), Ailawadi et al. (2003), emphasize the importance of a private brand image for increasing consumer loyalty. Batra and Sinha (2000) confirm that in order to retain loyal consumers it is necessary to strengthen the image of a private brand.

According to Janonis and Virvilaite (2007) consumers identify a brand with a company’s intangibles that need to be managed for effective use. According to Keller (1993, 2003) a brand image as well as a private brand image is defined as a whole of associations in a consumer’s consciousness, linked with the product, that determine brand perception. These associations related to a store image encompass many factors.

Definitions of Store Image

Store Image is defind by differently by many authers. Assael (1992, p. 633) states that the ‘… measurement of store image assists retailers in determining their competitive strengths and weaknesses. Store image is built up through experience and totally conceptualized or expected strengthening that urge consumers to purchase at the specified store  Kunkel & Berry (1968).  Store image is a complex of attributes that consumers feel about the store and it is more than a simple sum of objective individual attributes since parts of attributes interact in consumers’ minds Oxenfeldt (1974). Store image means a complex in total dimensions of store attributes that consumer feel and a complex means that store image consists of various attributes  Zimmer & Golden (1988). Store image consists of functional and emotional attributes, these are organized in the perceptual structures of purchasers, and the structures are expectation on overall policies and executions of retailers. Berman & Evans  (1995).  

For more than forty years, academics have assessed the influences and antecedents, of retail image. Among the many areas of consideration is the conceptualization and operationalization of the construct’s measurement. Studies have assessed and developed measures based on multi-attribute, multi-dimensional definitions, as well open-ended and observational designs. Through in depth literature review, the authors identify seven reoccurring dimensions that have been hypothesized to represent different facets of the image construct. Further, it is demonstrated that no conceptualization to date has incorporated all of these dimensions into an operationally defined measure. This study proposes a new, seven-dimensional definition for retail image that is both consistent in concept and operation.

Merchandise 

The attributes of merchandise that are included in the current study are merchandise assortment, merchandise style, merchandise price and merchandise quality. Thang and Tan (2002) included selection and assortment, styling and fashion as attributes, while Birtwistle et al. (1999) included assortment, merchandise quality and merchandise style. According to Collins-Dodd and Lindley (2002), as well as Thang & Tan (2002), merchandise is considered the most important factor contributing to consumer store preference. This view is supported by Birtwistle and Shearer (2000), Collins-Dodd and Lindley (2003), Sullivan et al. (2002) and North et al. (2003), who found that merchandise has a significant influence on brand perception and store choice across consumer segments. Brand and product assortment are part of the assortment strategies followed to satisfy consumer needs and influence brand perception. Consumers tend to seek stores with a greater assortment of merchandise to satisfy their needs (Sullivan et al., 2002). But brand assortment is also a strategy to build a store’s image through developing a private brand label (Ailawadi & Keller, 2004). According to Ailawadi and Keller (2004), the consumer segment most likely to buy private brand labels are price sensitive, of middle income, and educated. This then indicates that merchandise strategies should be formulated on the basis of target market demographics, as it influences consumer preference and patronage behaviour. 

Promotion

Integrated Marketing Communications (IMC) focuses on building a clear position and image through integrated marketing, with advertising being an important channel (Kliatchko, 2005). Sales incentives, displays and advertising are attributes of promotion.  Form a part of IMC; by incorporating promotion into the IMC strategy the gap between promotion and sales can be eliminated, thereby increasing profit (Smith, Gopalakrishna & Chatterjee, 2006). The goal of IMC is to build a stronger brand and increase sales through the influence of consumers. Promotions are a precondition of brand recognition and enhancement, which influence sales (Ratnatunga & Ewing, 2005). One of the major changes in marketing includes new technology in which advertising is consumer focused to nurture customer satisfaction and loyalty (Kliatchko, 2005). The promotions dimension is therefore a significant tool in the IMC process because of its proximity to consumers and its direct influence on consumer behaviour. Although promotion is viewed as a positive stimulus by management, a study of patronage motives and product purchase patterns found that special events/exhibits and promotions were among the least mentioned motives for product purchase, and were therefore indicated as less important that other store image attributes (Yavas, 2001). This is in contrast to other research. Paulins and Geistfeld (2003) reported a distinct difference between highly educated and less educated consumers in the response to advertising. The fact that educated consumers are more selective makes them more difficult to entice through advertising. Thang and Tan (2003) found that promotions have a significant influence on consumer preference. Consumers have to be constantly attracted by advertising to stimulate interest and create store awareness. But consumers are exposed to a large amount of information and advertising messages; therefore an integrated and consistent marketing communication strategy is critical for strengthening the message which marketers strive to send. A strong communication strategy is vital in competing in the marketplace and in managing the corporate identity, while promotions provide the key in conveying information to consumers (Markwick & Fill, 1995). Lincoln and Samli (1981) assessed the influence of actually promoting store image attributes. They found that consumers who had seen the relevant advertisements gave higher image scores than the consumers who did not see the advertisements. Du Frene, Engelland, Lehman and Pearson (2005) found that consumer-centric advertising through interactive e-mailing changed consumers’ attitudes towards the brand, which, in turn, affected intention to purchase. According to Sen, Block and Chandran (2002), displays do not hold high incentive value for consumers, but rather act to make customers aware of the possible purchase and usage of the merchandise. Window displays, for example, relay information before a client enters a store and contribute to store entry and product purchase. It is evident that the expenditure on promotions should be viewed as a contributing factor to building store image and subsequent profit.  

Convenience

Convenience is a vital part of society at present. With expanding internet facilities and individuals spending more time at work and less time at home, time spent on shopping is an expensive resource. Chowdhary (1999) notes that convenience is a specifically desirable characteristic for older consumers. Hyllegard et al. (2005), however, found that convenience was less important to consumers aged 56 to 88, but very important to the age groups between 18 and 55. They furthermore established that the preference for convenience differed across nationalities (Spanish, European and American consumers). They, however, did not find any gender differences in terms of preference. In a study by Kim and Jin (2001) convenience was cited as a reason for consumers preferring multi-national discount stores over national stores. Store hours comprise another aspect of convenience. Hyllegard et al. (2005) found that store hours are less important to older consumers, because older consumers have more time to shop. They concluded that store hours and convenience have the strongest influence on patronage behaviour across nationalities. Retail stores focusing on younger markets should therefore incorporate a focus around convenience and extended shopping hours. This greater concern identified in the younger market could be due to changing lifestyles and busy social lives (Hyllegard et al., 2005) A vital part of convenience is site selection/ location planning, because it influences parking, location and transportation. This is a significant decision because it cannot be altered once made. Location, transportation and traveling time influence the consumer market patronizing the store and, inevitably, sales (Wood & Browne, 2007). Thang and Tan (2003), for instance, note that retailers are chosen on the basis of accessibility, ease of transportation and time duration of traveling. They found that accessibility of a store is rated second to merchandising and that even stores located on the same street still engendered varying perceptions with regard to accessibility. The smallest distance can however influence a store’s success or failure (Wood & Browne, 2007). The importance of traveling distance in influencing intention to remain loyal to a store was noted by Miranda et al. (2005). Newman and Patel (2004) reported that, by focusing on features which influence the ease of shopping, retailers are able to differentiate themselves from the competition. Koo (2003), on the other hand,investigated the inter-relationships among store images, store satisfaction, and store loyalty among Korean discount retail patrons, and found that convenience has a direct and indirect impact on store loyalty, but not on store satisfaction. This is contradicted by Chang and Tu (2005), who found that convenience, has a direct relationship with customer satisfaction and customer loyalty, as well as an indirect relationship with customer loyalty through customer satisfaction. Retailers should therefore consider convenience and its sub-dimensions carefully as this can help build a consumer base and consumer loyalty. 

Store Facilities

Facilities refer to the provisions made to ease the shopping process and the infrastructure that enhances the consumer’s comfort while shopping (Nevin & Houston, 1980). According to Thang and Tan (2003), consumers tend to view a store with good facilities in a favourable light. Consumers’ shopping orientations determine their preference for facilities (Moye & Kincade, 2002), therefore facilities contribute to differentiate the retailer from its competition. Features which could differentiate a store by easing the shopping process are the availability of changing rooms, fast checkout facilities and layout (Newman & Patel, 2004). These authors postulated that customers’ perceptions and behaviour could be altered through any small change made in store image, specifically store entrances, checkouts and queuing. However, if inappropriate, these features could also create an unwillingness to remain in a store. Lee, Ibrahim and Hsueh-Shan (2005, p. 333) investigated the importance that male consumers place on certain attributes and found a friendly design layout to be one of the few variables obtaining high scores, ‘… which is not difficult to rationalize given [its] prominence in shaping the retail environment and…enjoyment level’. Kent (2003; 2007) focused on the design behind a store image. This 2003 study focused on the design of the brand with the retailer environment centered on consumer buying behaviour. He found that the interior design as well as the functional elements enhance the brand identity and create a strong experience. The focus of design therefore is also on the facilities now, not only on merchandise and store fronts. Kent (2003) concentrated on factors such as the ability to actually reach products, the significance of floor space and the maximization of sales space by arranging a lot of stock in a manner that seems spacious through the use of open aisles. Hence, by changing a store’s style of layout, specifically, facilities can create and support the brand identity. A 2007 study by Kent extends this idea of design to focus on stores and facilities that the store could offer. The space chosen for a store ideally is what will affect the layout and store appearance; the decision, for example, cannot solely be based on location. Even though the importance of facilities is established, Marianne (2003) reports that fitting rooms and fitting room lighting have not received enough attention over the years, due to the fact that management perceive these aspects to be less important to customers.

Store Service

Service is a crucial element of a brand; this includes staff-customer interaction (sales) (Newman & Patel, 2004). As shown above, sales personnel are responsible for the social interaction with customers through this interplay between service and sales personnel. Service builds customer relationships and leads to positive-word-of- mouth and customer loyalty (Newman & Patel, 2004). Customers’ perception of social cues, which includes service, improves their perception of merchandise (Hu & Jasper, 2006; Newman & Patel, 2004). Teller, Kotzab and Grant (2006) found that sales personnel service greatly affect store choice, even more than modern services, such as home delivery. Service by sales personnel through knowledge and courteousness is emphasized by Berman and Evans (1995). Good service therefore contributes toward forming a positive store image. Thang and Tan (2003) concluded that stores that provide good service leave shoppers with a more favourable perception which promotes repeat visits and has a positive impact on consumer purchase behaviour. Miranda et al. (2004) underscored this by concluding that intention to remain loyal to a store is influenced by several factors, including service. Hellier et al., (2003) also showed that customers’ repurchase intention is influenced by service. While the repurchase intention is thus influenced by service quality, Wirtz et al. (2007) stated that the effect of service on consumer behaviour is moderated by emotional arousal. Huddleston et al. (1990), found that mature female consumers’ lifestyle characteristics influence their preferences for services. In contrast, Oates et al. (1996) showed that the perception of the importance of the service dimension is not notably different among elderly consumer segments on the basis of lifestyle. Research results, however, highlight the fact that management should take note of the impact that service can have on consumer behaviour and that the preference for service is influenced by independent consumer variables. 

Store Atmosphere 

Store atmosphere plays a vital role in the consumer’s experience. Atmospherics involve a conscious designing of space to affect customers’ sensory experience. It mostly has to do with the ‘spatial aesthetic’ features of the store and serves as a ‘silent language’ in communication to consumers (Kotler, 1973-1974, p. 48 & 50). These sensory experiences affect a person’s emotional state and therefore the way in which product information will be evaluated. A positive store experience enhances satisfaction and will lead to increased shopping frequency, and therefore lead to increased sales (Koo, 2003). Store atmosphere, specifically in reference to design and ambient factors, is a significant variable as it influences consumer preference, interpersonal service quality, merchandise quality and monetary price perception, as well as shopping experience cost (Baker et al., 2002; Thang & Tan, 2003). Furthermore, Newman and Patel (2004) reported that store atmosphere is one of the crucial factors and determinants of store choice. Richardson et al. (1996) found that the aesthetics of a store can improve the evaluation of the quality of products by customers. Samli et al. (1999) included the attribute interior décor in their study on the contrast between management and customer perceptions of store image. The results indicated that décor is perceived as slightly less important by management than by customers. However, this attribute was included in their service quality dimension with the notation that the retailer could very easily exceed customer expectations through the use of these attributes. Terblanché and Boshoff (2006) supported this by indicating that store décor is important to the store environment as it is a controllable aspect that can contribute to creating customer satisfaction through fulfilling expectations. This is due to the fact that décor and popular music can align a store with its target market (Newman & Patel, 2004). Smell (as part of store interior) is a very strong emotional trigger. The sense of pleasant arousal derived from fragrance increases exploratory tendencies behaviour (Orth & Bourrain, 2005). The emotional experience is as important as the shopping experience, because consumers have affective expectations too (Wirtz, Mattila & Tan, 2007). According to Sway (2007), scent marketing can make a consumer feel comfortable and put consumers in a good mood that could positively influence purchasing decisions. Smell is a strong emotional trigger. However, Donovan and Rossiter’s (1982) evaluation of the emotional states aroused by store atmosphere and the effect on approach/ avoidance behaviour came to the conclusion that research on store atmosphere does not achieve strong results because it affects an emotional state which is difficult to verbalize and is transient, therefore difficult to recall. Their research therefore proposed that store atmosphere affects emotion and this, in turn, affects shopping related intention. This research was extended by Donovan, Rossiter, Marcoolyn and Nesdale (1994), who found that emotional state not only affects intention but actual purchase behaviour as well. A positive emotional experience engendered by store atmosphere will increase the estimated spending and time spent in the store. According to Donovan et al. (1994), this is partly due to the emotional variable being evaluated apart from cognitive variables, e.g. quality and price perception. Wirtz et al. (2007) confirmed the positive effect of emotional arousal congruence on in-store behaviours. Based on the expectations of the target market, store designers should therefore make tactical decisions regarding store atmosphere, in order to positively influence consumers’ in-store experience (Hartman & Spiro, 2005). From the above-mentioned, it is clear that atmosphere is a significant tool, since it provides management with the power to manipulate the effect of store environment on consumer behaviour.  

Store Brand 

Store image is considered an important factor influencing store choice and patronage behaviour and has received increased attention from practitioners and academics (Berry, 1969). Store image influences the way in which consumers evaluate and choose a store (Kleinhans, 2003). Patronage behaviour is associated with acts a consumer performs for the purpose of making a purchase from a store. The identity of a store, presented in the store image, communicates useful information to consumers that they utilize during pre-purchase decision-making (North et al., 2003). Store image cues therefore influence consumers’ decision-making processes, which result in store choice (Baker et al., 2002). Store image and store positioning also greatly predict store choice and, ultimately, retail success (Baker et al., 2002). Knowledge about the influence of store image perception on patronage behaviour may empower retailers to design their stores according to the desired store image that could lead to consequent store choice (Kleinhans, 2003). The relationship between store image and patronage behaviour has been examined by numerous researchers. Results indicate that a customer’s perception of a store influences store patronage. Moye and Giddings (2002), as well as Moye and Kincade (2002), investigated the effect of shopping orientation on consumers’ perception of store image and the resulting patronage behaviour. Both studies confirmed that shopping orientation indirectly influenced store choice through store image. Several researchers also found that the importance that consumers place on store image attributes influenced patronage behaviour (Shim & Bickle, 1994; Shim & Kotsiopulos, 1992; Baker et al., 2002. Donovan and Rossiter (1982) suggested that consumer behaviour is mostly due to emotional response brought about by the store environment. In this scenario, it is then astute to not only assume, but to know that the consumer’s affective state (mood) affects judgment or information processing (Bakamitsos & Siomkos, 2005). A person’s mood can act as an object or as a tool. When affective state is an object, it acts as a heuristic cue and therefore bases judgment on heuristic cues and not on information. A consumer’s mood therefore affects how the consumer evaluates, and a positive mood is more likely to lead to a positive evaluation and thus store choice (De Ruyter & Bloemer, 1999).  

Store Loyalty 

Customer loyalty can be classified into brand loyalty, vendor loyalty, service loyalty, and store loyalty (Dick and Basu 1994). With lack of consistency, marketing researchers have defined customer loyalty. We can classify these definitions into a behavioural approach, an attitudinal approach, and a combined approach. Behavioural Definition Early studies on loyalty have been done on individual brand which can be measured from panel data and brand loyalty largely was understood as behavioural concept. They focused on observing and measuring the continuation of purchases in the past (Brown 1952-1953). Kuehn (1962) used stochastic approach to find behaviour of brand loyalty of customers. He saw brand loyalty a function of purchasing history of customers. Lipstein (1959) thought brand loyalty as a function of probability of purchase of the same product or a function of time for a specific brand. Jacoby and Chestnut (1978) summarized 53 early definitions of loyalty and made a conceptual definition. According to their definition, loyalty is a biased behavioural reaction of consumers in the choice of one among many alternatives in a period of time and it can be represented as a function of decision-making process. Jeuland (1979) also used stochastic model to define brand loyalty. In his study, it was defined as long-term probability of choice or purchase ratio of a specific brand among total product categories and such behaviour was named as inertia