Chat with us, powered by LiveChat What is the main contribution of the article which builds on existing literature by identifying an important research gap? 2. What is the methodological approach used (intuitively and not t | Wridemy

What is the main contribution of the article which builds on existing literature by identifying an important research gap? 2. What is the methodological approach used (intuitively and not t

 

What is the main contribution of the article which builds on existing literature by identifying

an important research gap?

2. What is the methodological approach used (intuitively and not the technical aspects)?

3. How does this research provide substantive strategic insights to managers?

4. What are the potential shortcomings of the article and how can future research overcome

them?

Requirements: 3 pages for each article, same questions  

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Can culture affect prices? A cross-cultural study of shopping and retail prices

David Ackermana, Gerard Tellisb,* aCalifornia State University Northridge, Department of Marketing, School of Business and Economics,

Northridge, CA 91330-8377, USA bUniversity of Southern California, Department of Marketing, School of Business Administration,

Los Angeles, CA 90089-1421, USA

Received 21 September 1999; received in revised form 22 August 2000; accepted 15 September 2000

Abstract

This study examines whether there are differences in consumers’ shopping behavior and product prices in grocery stores due to cultural orientation. The study uses a field setting in Southern California, comparing samples of American and Chinese culture on two occasions, each five years apart. Theory suggests that price sensitivity and the importance of the status of buyers differ substantially between Chinese and American cultures. Consistent with these differences, the study finds that these two cultural groups have dramatically different shopping practices. Chinese use multiple senses when examining unpackaged food, and do so far more than American shoppers. They also inspect many more items and take much more time to shop.

The differences in shopping behavior correspond to clear differences in prices between grocery stores serving the two cultural groups. Chinese supermarkets have substantially lower prices across a range of food products than mainstream American supermarkets. These differences ranged from 37% for packaged goods of the same brand and size to more than 100% for meats and seafood of the same type and description. These differences are similar across a span of five years. We argue that differences in culture provide the most likely explanation for the differences in prices between the two types of super markets. © 2001 by New York University. All rights reserved.

* Corresponding author. Tel.:11-213-740-5033; fax:11-213-740-7828. E-mail address:[email protected] (G. Tellis).

Journal of Retailing 77 (2001) 57– 82

0022-4359/01/$ – see front matter © 2001 by New York University. All rights reserved. PII: S 0 0 2 2 – 4 3 5 9 ( 0 0 ) 0 0 0 4 6 – 4

1. Introduction

The marketing literature differs in its findings about cross-cultural differences in behavior. One stream of research finds differences that are relevant to marketers. For example, Graham et al. (1988) and Graham (1983) find that Japanese, Chinese, Koreans and Americans differ in their business negotiating strategies. They also find that these cross-cultural differences in strategy affect the process and outcomes of negotiations. In a similar vein, Clark (1990) and others suggest that national characteristics of behavior are unique and consistent over time. These unique characteristics are due to shared norms, values and learned behaviors that relate to culture within national boundaries.

However, other studies find no cross-cultural differences among consumers. For example, Anderson and Engledow’s (1977) survey of German and American shoppers finds no significant differences in attitudes toward the purchase process. Douglas and Craig’s (1992) review of international marketing finds similarity in the cognitive processes of consumers. Dawar and Parker (1994) find that the relative importance of ‘brand name’, ‘price’, ‘physical appearance’ and ‘retailer reputation’ as signals of quality for consumer products do not change across cultures. Even studies that find differences in consumer behavior across national boundaries explain those differences by factors other than culture. For example, Tse (1989) attributes differences in the content of advertising across national boundaries to economic and political development. Douglas (1976) attributes differences in consumer attitudes to the working status of women. Gatignon et al. (1989) attribute differences in diffusion rates of innovations across nations to the sociological and demographic composi- tion of the nations.

These findings have implications for marketers. For example, Dawar and Parker (1994) conclude that “cultural segmentation based on signal-use levels may not be justified.” (p. 91). Douglas and Craig (1992) echo these sentiments when they state that “the increasing mobility of consumers across national boundaries together with increased exposure to international communications suggests a need to pay greater attention to examining the impact of such trends on consumer values, attitudes, preferences and purchasing patterns.” Levitt (1983) goes a step further. He assumes that differences across cultures and languages are small enough as to justify mass strategies such as standardized brand names, packaging, advertising and promotions across countries.

Why has this second set of studies not found cross-cultural differences in behavior? Many factors may be responsible. First, cultural norms or values are not easily measured and quantified. Since they are difficult to quantify for study, their effects may be ignored or attributed to structural factors. Second, some authors seek universals and in so doing, they may bypass important cross-cultural differences. Third, some past studies have focused on modern industrial products, which have not been established long enough in a particular society to have stimulated unique cultural meaning and use. Yet, cultural values and norms can have a profound influence on consumer behavior.

The current study tries to avoid these limitations and makes several contributions. First, the study posits major differences in shopping behavior across cultures. In particular, it suggests that Chinese, raised in a collectivist society that values price consciousness and sophistication in money-handling, differ from Americans raised in an individualistic society

58 D. Ackerman, G. Tellis / Journal of Retailing 77 (2001) 57– 82

that traditionally does not have the same values. Second, the study suggests that retailing strategy may vary in response to cultural differences. As a result pricing tactics may differ in response to or to attract consumers of different cultural orientation. Third, the findings of this study support the use of observation as an important tool for cross-cultural marketing research. The differences in shopping behavior observed between Chinese and American shoppers were large and immediately clear. Lastly, this study indicates that the above cross-cultural differences and retailer reactions are consistent across a span of five years. Thus, they are not easily explained by short-term trends or economic cycles.

We focus on Chinese and American cultures for several reasons. First, they are highly dissimilar. The Chinese have a rich cultural heritage that is distinct in origin and develop- ment from American culture. Second, Chinese and Americans live in the most populous and the most economically advanced nations of the world, respectively. These nations have had and will continue to have major impact on world culture and economy. Third, economic and political changes in the last few decades have brought these two cultural systems in direct contact, and often in conflict, in the states bordering the Pacific Ocean. Thus a study of their differential impact on shopping and retailing may be timely and revealing.

The rest of the article is organized into three sections. The first section discusses the impact of cultural orientation on shopping behavior, specifically its effect on price con- sciousness and the status of buyers. The second section describes two empirical studies. Study 1 observes measurable differences in shopping behaviors between “Chinese” and “American” consumers. Study 2 looks for systematic differences in pricing between super- markets serving different groups that may be due not to structural factors, but to shopping behavior. The final section discusses the implications of the study.

2. Cultural orientation and shopping behavior

For purposes of this study, we focus on the culturally based norms (appropriate behavior in a situation) and values (desirable behavior across situations) that would lead to differences in shopping behavior between Chinese and Americans. These values and norms are passed on from the community to an individual as he or she is socialized within the community. Consumers learn values and norms about the acquisition, consumption and disposal of products through socialization in their communities (Moschis, 1987). Thus cultural values and norms become a primary explanation of similarities in behavior of individuals within the community, and differences in the behavior of individuals across communities.

A community’s social behavior is heavily influenced by language, through which a culture’s values and norms are communicated (Lamal, 1991). Language, which is the principal means of communication, evolves closely with the culture of a community, and is a key means of cultural expression. Communication has been found to be a major determi- nant of cultural orientation among immigrants (O’Guinn & Faber, 1985; Kim, 1977).

This cross-cultural focus suggests two surrogate measures for it: primary language spoken at home and country of birth. Since language is closely related to and is an expression of the culture of an individual, the primary language spoken at home would indicate the cultural allegiance of that individual. Further, since an individual imbibes a community’s culture

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during the early years of socialization, the country of one’s birth would also indicate the individual’s culture.

Based on these principles, the term “Americans ” refers to those individuals who were born in the United States and whose primary language is English. Note, that this term includes Chinese Americans who were born in the United States and whose primary language is English. The term “Chinese” refers to those individuals who were born in the People’s Republic of China, Hong Kong or Taiwan and whose primary language is written Chinese and any spoken dialect of Chinese, the native language in their original country of affiliation. Initially, we grouped “Chinese” by country of origin, People’s Republic of China, Hong Kong and Taiwan, following Tse et al. (1989). The respondents from the People’s Republic of China were dropped from the study due to their small numbers in the sample. Preliminary results indicated no significant differences in either the survey or the observation between subjects from Hong Kong and Taiwan on the measured variables, so the two groups were merged into one “Chinese” category.1 The rest of the paper uses the terms “Chinese” and “Americans” to imply the specific meanings in the definitions above, and not the meaning of citizens of China and the USA, respectively, that these terms normally have.

Note that the definition of “Chinese” excludes individuals who emigrated from China but whose primary language is not Chinese, and individuals who were born in the US and whose primary language is Chinese. The definitions also exclude some bilingual individuals. Such individuals share more than one culture, but are not clear representatives of either one. Also, based on our explanation of culture above, we should have measured country of upbringing rather than that of birth, although we do not think our sample or results would have changed much.

Ethnicity is a demographic characteristic that describes the national or geographic origin of an individual. Thus people within the US may be ethnic Chinese or Armenian, if they or their ancestors came from China or Armenia respectively. Studies often measure ethnicity by surname (Stayman & Deshpande, 1989; Saegert et al., 1985). As with nationality, ethnicity alone may not be a good measure of cultural groups. The reason is that individuals of different ethnic groups can share the same culture through assimilation. For example, fourth generation descendants of German and English immigrants in the US are often culturally indistinguishable. Also, individuals who are part of the same ethnic group can have different cultures through dispersions. For example, fourth generation Chinese immigrants into Ma- laysia and the US are culturally distinct from each other and from Chinese in Mainland China.

2.1. Chinese immigrants in Southern California

Southern California is a good laboratory for studying cultural differences. Large segments of first generation immigrants from the same country live together in a city. They form spatially separate communities, immersing members in media, social life, shopping and language from their culture of origin. To preserve their cultural roots, they send their children to Chinese school on Saturdays, in addition to regular school on weekdays. The large Chinese speaking community in Southern California especially is more affluent, diverse in educational background and type of business operated than in other parts of the country. In

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large part, they do not live in deteriorating inner-core urban centers but in multicenter, middle-class suburban communities (Tseng, 1994). The majority of this population has been in the United States less than 10 years and retains strong connections with their place of origin. As Horton (1995) points out, the Chinese immigrants in this area have enough human capital and economic resources to avoid the traditional routes of assimilation. On the other hand, these immigrants share the same infrastructure, government and resources with surrounding communities. Thus with care, one can identify groups of individuals that have the same socio-economic status but differ by the norms and values of their respective cultures.

We recognize that there will be some degree of acculturation. The “Chinese” in Southern California will be more exposed to American culture than individuals in China. Also, because Southern California has so many Chinese-speaking residents, the “Americans” in Southern California are more likely to be exposed to Chinese culture than those in other parts of the country. These factors favor the null hypothesis of no differences in consumer behavior between the two groups.Any observed differences in behavior between these two groups suggest that such differences may be even more pronounced between better repre- sentatives of their cultures.

2.2. Distinction from research on subcultures and shopping

Some earlier studies looked at attitudes toward shopping and store pricing among ethnic groups in Southern California. They found differences between those groups in brand and store preferences as well as in the types of information sources used by consumers (Darymple et al., 1970). Results also indicate that the prices paid by non-Anglo consumers were higher than those paid by Anglo consumers regardless of the ethnicity of the merchant (Sturdivant, 1969; Sturdivant & Wilhelm, 1968).

Our study differs from those studies in three important aspects. First, the two groups we compare (“Chinese” and “Americans”) do not really constitute subcultures. In general, the “Chinese” as we defined them are members of a large and recent immigrant group that still speak their native language at home. As such, they are considered distinct from ethnic subcultures because they do not yet have enough contact with the mainstream culture (Miller et al., 1998; Penaloza, 1994). For example, Penaloza (1994) found that although there was adaptation by Mexican immigrants to new circumstances, in some areas such as food shopping, consumer patterns were very similar to that which they experienced in Mexico. They lived in close proximity to but were distinct from the Mexican American subculture. Similarly, the Chinese immigrant community in Southern California lives close to but is distinct from the English-speaking Asian American subculture.

Second, subjects in the “American” group could be part of any ethnic category, including Chinese American or Japanese American, as long as the country-of-birth is the United States and the sole language used at home is English. Similarly, subjects in the “Chinese” group only include only first generation immigrants whose primary language is Chinese. Ethnic differences become less pronounced after successive generations of residence in the country. Groups such as the Japanese Americans were quite well assimilated at the time of study (Darymple et al., 1970). However, cultural (as we define

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the term) differences are likely to be more evident, and more important in an age of increasing internationalization.

Third, we use a triangulation of methods to examine cultural influences on shopping behavior, including a survey, interviews and observation of shopping behavior and of store prices. Self-report methods alone, such as survey and interviews, may be imprecise methods for studying cultural differences, because the methods involve culturally based modes of communication.

2.3. Cross-cultural differences in shopping behavior

There is an extensive literature examining the influence of cross-cultural differences in consumption (Jacobs et al., 1991; Belk, Wallendorf & Sherry, 1989; Wallendorf & Arnould, 1988; Belk, 1988; Belk, Wallendorf, Sherry, Holbrook & Roberts, 1988; Gilly, 1988; Levy, 1959). Cultural orientation may have an effect not just on product meaning after acquisition, but on the actual process of shopping.

Shopping activity is a social event whose meaning is likely to be even more closely tied to culture than the meaning of the product. Although some early research does examine mundane consumer shopping using ethnographic methods (Wells & LoScioto, 1966), recent interest in the area has grown (e.g., Miller, 1998; Miller et al., 1998; McGrath & Otnes, 1995; Otnes et al., 1995). Miller et al. (1998) found that shopping as an activity was not just about product acquisition but was very much a part of social relationships. Miller et al. (1998) document how the shopping place can provide identity for its participants, especially for groups that might be gradually losing their distinctive identity.

Shopping does not have to be just for the functional purpose of product purchase. For example, Sherry (1990) examines the role of shopping in the flea market. He suggests that people are not just led to the flea market for the utilitarian function of the purchase, but also for the satisfaction they derive from the shopping environment itself, so that the shopping activity becomes more important than the purchase of products. Lehtonen and Maenpaa (1997) outline the differences between shopping as pleasure and task. They suggest that shopping for pleasure can be an end in and of itself. Some societies also place a high social value on the spending out of money while shopping. Miller (1997) finds that in some circumstances, for Trinidadians spending of money as quickly as possible while shopping demonstrates allegiance to friends and family.

Shopping behavior can be learned behavior from school or parents (Carlson & Grossbart, 1988; Wackman et al., 1977), but it can also be social behavior that is adopted from societal norms that define what is desirable (Cialdini et al., 1990). Shopping behavior like any other behavior is open to influence by the norms of the social group with which one identifies. One compares oneself and adjusts one’s behaviors more with similar others than with dissimilar others (Miller et al., 1988). If one’s social group values shopping in second hand thrift stores on Saturdays, one may then engage in that activity with a much greater intensity than those outside of the social or cultural groups.

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2.4. High price sensitivity: the frugal shopper

Chinese differ substantially in their attitude and behavior to public and private consump- tion goods. For public consumption goods and especially gifts, Chinese shoppers are status conscious and not frugal (Yau, 1994). Collectivist and individualist societies provide dif- ferent motives for luxury consumption (Ahuvia & Wong, 1998; Hofstede, 1980). In a collectivist culture such as China, the symbolic meanings of public goods are more important than in an individualist culture. Social recognition is more important when social relations are stronger (Schutte, 1998). Social norms of reciprocity in gift giving in China also contribute to the importance of the symbolic meaning of public consumption goods. Status goods and high prices symbolize the importance of the relationship to the giver.

On the other hand, for private consumption goods Chinese are probably quite price conscious and pragmatic shoppers (Li & Gallup, 1995). The description of Chinese as price conscious shoppers has not only been applied to developing Mainland China (Frankenstein, 1986; Pye, 1982), but also to Chinese in other countries, including Taiwan (Roo, 1989) and the affluent mercantile societies of overseas Chinese (Seagrave, 1995).

Collectivism may be an important factor leading to frugality in private consumption (Schutte, 1998). Chinese attach a higher value to personal relationships, but a lower value to material goods than consumers in more individualistic societies. This valuation leads to greater pragmatism in purchases of products for private consumption. This explanation is supported by recent surveys that indicate Chinese consumers place a low priority on spending for private consumption (Scarry, 1996).

A social norm of frugality among Chinese also contributes to price consciousness (Wei- denbaum, 1996; Redding, 1990). This norm may stem from a lack of external sources of social welfare outside of the family in traditional Chinese society (Fang, 1999). Chinese obtain security primarily through accumulation of wealth within the family, leading to frugality on purchases of goods for personal use. Note also that Chinese in China, Taiwan and Singapore (Cao, Fan & Woo, 1997; Leppert, 1990) presently have among the very highest household savings rates in the world.

There is a norm of sophistication with money handling that has long existed, especially in South China and the mercantile overseas Chinese communities (Redding, 1990; Freedman, 1979). These Chinese did not hoard money, but neither did they waste it. Rather they invested money to attain the highest return. Freedman (1979) suggests that this norm evolved from the respectability of accumulating wealth, the relative infrequency with which this wealth was confiscated and the high degree of financial dealings among friends and family in Chinese society.

Price consciousness may contribute to such shopping behavior as widespread haggling (Fang, 1999). For example, Jacobs et al. (1984) report that more than 50% of all stores they sampled in Hong Kong, Taiwan and Singapore were retailers that allowed bargaining. This proportion is several times higher than the that of 10% in Latin America and 3% in South Africa. Of specific interest to this study, Hong Kong, Taiwan and Singapore had the highest percentage of food and drug stores that allowed price bargaining.

The high price sensitivity of Chinese buyers should result in shopping differences between “Chinese” and “Americans.” In particular, Kolodonsky (1990) and Doti and

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Sharir (1980) use shopping time as an indicator of price search behavior. Others suggest that savings on a purchase is a benefit consumers derive from expending time on search (Urbany et al., 1996; Dickson and Sawyer, 1990). We apply this reasoning to shopping behavior within a retail market. We posit that price conscious shoppers would take more time and search through more items before purchasing the best for the money than other shoppers. Since the “Chinese” have grown up in a culture that values price consciousness we hypothesize that there will be more of this type of extensive in-store search by shoppers. Thus,

H1: When shopping, “Chinese” take more time to search per item purchased than “Americans” do.

H2: “Chinese” examine more items per product purchased than “Americans” do.

2.5. Impact of shopping behavior on retail prices

Could these differences in shopping behavior influence store pricing? The Chinese come from a society in which the “buyer is king.” Chinese business culture places a high degree of importance upon status (Fang, 1999). Due to the higher status of buyers, sellers more readily defer to their interests (Graham et al., 1994; Graham et al., 1988). Graham (1983) found that this status difference allowed buyers to do better than sellers relative to their counterparts in societies where status of buyers is not as important such as the United States.

If sellers yield more to buyers in business negotiations, we can expect them to do the same in retail settings. Studies on negotiation behavior have traditionally looked at buyers and sellers within the context of business-to-business negotiations (Graham et al., 1994; Graham et al., 1988; Schurr & Ozanne, 1985; Clopton, 1984). These findings can explain how consumer-shopping differences across cultures may affect prices and quality offered by retailers. Grocery retailing, especially in Southern California, is highly competitive with small margins and daily changes in prices. Thus profit maximization based on such consumer behaviors is likely to be not only normal but also necessary.

The economics of information suggests that differences in consumers’ search for prices can affect the prices that firms offer (Salop & Stiglitz, 1977; Varian, 1980). Cultural differences in the shopping behaviors of the consumers may affect their search for prices and thus the pricing strategy of firms. So, if H1 and H2 were true, then “Chinese” would be much more selective in the products they purchase than “Ameri- cans.” Customers who are informed and shop carefully for food prompt retailers to supply lower priced products. Similarly, for food products which have tangible or searchable attributes, quality conscious buyers would engage in a more extensive attribute search, and would be better able to determine whether levels of attributes match levels of prices (Rao, 1992). So if H1 and H2 were true, retailers would likely offer lower prices for comparable quality to “Chinese,” than to “Americans.” In contrast, in markets where consumers are less motivated to search for information, retailers would offer higher priced or lower quality products (Tellis & Wernerfelt, 1987).

Could lower costsalone drive lower prices? Not necessarily. Just because firms have

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lower costs, does not mean that they will have lower prices. In the absence of consumer sensitivity to low prices, a profit-maximizing retailer with low costs may still keep prices high to retain profits. Further, the force of demand can affect the way firms manage their costs. Demand for low prices can motivate retailers to improve quality or lower costs to meet demand adequately. Conversely, when demand is less sensitive to price, retailers may be less motivated to lower costs or increase quality, leading to the existence of inefficient firms (Salop & Stiglitz, 1977; Tellis & Wernerfelt, 1987). Thus demand can be more of an influence than supply in motivating firms to lower prices and improve quality. This line of reasoning suggests that:

H3A: Prices in Chinese supermarkets are lower than those in mainstream American supermarkets for comparable products.

In contrast to the above argument based on cultural orientation and the economics of information, traditional economic theory suggests a rival hypothesis based on economies of scale. The large chain supermarket can have lower costs because of its ability to buy in large quantities, or negotiate lower prices from suppliers (Lusch & Dunne, 1990; Porter, 1985; Berman, 1979). In addition, the large chain supermarket is better able to spread the fixed costs of building, inventory, and administration over a large base of sales. In the absence of differences in demand across “Chinese” and “Americans,” these economies of scale could translate into lower prices at large chain stores relative to nonchain or small chain stores (Mason et al., 1993). Now most Mainstream American supermarkets tend to be larger than Chinese supermarkets. Hence, a hypothesis based on traditional economic theory and parallel to the one we proposed in H3A is:

H3B: Prices in mainstream American supermarkets are higher than those in Chinese supermarkets for comparable products.

3. Empirical research

We conducted two studies to test these hypotheses. Study 1 tests hypotheses H1 and H2 through an observation of the behavior of “Chinese” and “Americans.” Study 2 tests the rival hypotheses H3A and H3B by observation of the differences in the retail prices in stores frequented by the two groups. We first discuss the data collection and sampling for the studies, and then proceed to describe each study.

3.1. Data collection

The primary method of data collection in this paper is direct observation of both s

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