Experience, brand prestige, perceived value (functional, hedonic, social, and financial), and loyalty among GROCERANT customers

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Experience, brand prestige, perceived value (functional, hedonic, social, and financial), and loyalty among GROCERANT customers Seoyoung Kima, Sunny Hama, Hyeyoung Moona, Bee-Lia Chuab, Heesup Hanc,

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a Department of Food & Nutrition, Institute of Symbiotic Life-TECH (Techonology, Ecology, Culture, Human), Research Center for Food, Nutrition and Foodservice Management, College of Human Ecology, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, Seoul, 03722, South Korea b Department of Food Service and Management, Faculty of Food Science and Technology, Universiti Putra Malaysia, 43400, Serdang, Selangor, Malaysia c College of Hospitality and Tourism Management, Sejong University, 98 Gunja-Dong, Gwanjin-Gu, Seoul, 143-747, South Korea

A R T I C LE I N FO

A B S T R A C T

Keywords: Grocerants Experience Brand prestige Value Loyalty Restaurants

The food service industry has already observed that a merely good quality of products/services cannot make a business successful and has emphasized the importance of delivering unique and memorable experiences. Grocerants meet customer demand by filling the roles of grocery stores and restaurants, while offering novel and special experiences to customers. This study explores the unique experiences staged in grocerants by applying the experience economy and associates such experiences to brand prestige, customer perceived value, and loyalty. Data was collected at grocerants in Korea, using a mall-intercept survey. Our results identify the positive effects of entertainment and escapist experiences on brand prestige which significantly triggers functional, hedonic, social, and financial values. The three values (functional, hedonic, and financial) also affect loyalty. Overall, the proposed theoretical framework sufficiently accounts for customer loyalty. This study was the first attempt to investigate grocerant patrons’ behaviors and thus includes a high degree of originality.

1. Introduction “Customer experience is the last source of sustainable differentiation and the new competitive battleground” (Afshar, 2017, p. 1). With more and more choices available in the market, the McKinsey report (2016) stressed the importance of the customer-experience business. In addition to the food and services that restaurants have traditionally sold, establishments are now required to meet customer expectations by providing environments that deliver consistently engaging and memorable experiences to customers at every touch point of the operation (Deloitte, 2017). Grocerants have emerged as a new food service segment that differentiates itself from the others by offering unique food service experiences to customers (Topper, 2016). While grocerants have emerged as “the blurring of the line between restaurants and grocery stores” (Celentano, 2017), they have transformed groceries into destinations with fun food and shopping experiences (Dixon, 2017). Forbes magazine stated that “neither restaurants nor grocery stores are the future of food shopping. Instead, what could dominate is a hybrid of the two, ‘grocerants’” (McGrath, 2016, p. 1). According to a report from the National Purchase Diary Panel Incorporation, grocerants in the US, in 2016, amounted to US $10 billion in sales, generating 2.4 billion new

visits (Charlebois, 2017). A grocerant, a term blending groceries and restaurants, is a new concept that reflects the changing perspectives of customers who feel that supermarkets are not mundane places to just shop for food, but are experiential food destinations (Dixon, 2017). Grocerants offer a formalized dining experience with a fast-casual and ambient atmosphere, as well as restaurant-quality, fresh, chef-driven food (Allen, 2016). For instance, Mariano in Chicago offers a new class of fun and engaging experiences, including live pianists, grill outs, wine tastings, gelato shops, and more (Dixon, 2017). Grocerants can range from upscale (e.g., Eataly and Wholefoods) to seemingly conventional grocers (e.g., H-E-B and Hy-Vee) (McLynn, 2016), while more and more grocerants are targeting upscale segments. Eataly, starting in Italy in 2004, entered the US with a first store in New York City. Currently, it has imported its stores to ten countries in the continents of North America, South America, Western Europe, and Asia, and it plans to launch stores in Hong Kong, Las Vegas, London, Brussels, Sydney, and more (Skrovan, 2017). It features a retail-restaurant combination that sells signature meals according to different locations, in addition to imported and rare items (Skrovan, 2017). Eataly is famous for Fico Eataly World, the world’s largest agri-food theme park

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Corresponding author. E-mail addresses: [email protected] (S. Kim), [email protected] (S. Ham), [email protected] (H. Moon), [email protected] (B.-L. Chua), [email protected] (H. Han). https://doi.org/10.1016/j.ijhm.2018.06.026 Received 2 March 2018; Received in revised form 13 June 2018; Accepted 27 June 2018 0278-4319/ © 2018 Elsevier Ltd. All rights reserved.

Please cite this article as: Kim, S., International Journal of Hospitality Management (2018), https://doi.org/10.1016/j.ijhm.2018.06.026

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Grocerants have emerged and grown as a new food service segment that signifies customer experiences, and there is a need to study the experience in grocerants and its impact on business success. While grocerants are targeting upscale segments, the novel and special experiences that customers receive form brand prestige (Ergin and Akbay, 2010). To understand customer experiences in grocerants, this study explores the relationship between experience, brand prestige, customer perceived value, and loyalty. To this end, this study applied Pine and Gilmore (1998)’s experience economy concept. From a service provider’s standpoint, the customer experience should be carefully managed, because it significantly influences customer attitudes and perceptions (Lemon and Verhoef, 2016), which lead to the success of businesses by influencing important purchaserelated factors. This study is meaningful to academia and industry. This is the first study of grocerants. In particular, it focuses on the experiences that comprise one of the key factors for a brand or company to achieve or maintain a competitive advantage. The findings of this study will offer practical implications for the experiences to be managed in grocerants.

located in Bologna, which offers a unique experience in two hectares of open-air fields. The Fico Eataly World offers experiences in and out of the building, such as farms and factories where you can attend 30 events and 50 classes per day, while theaters and learning facilities also play a role in offering holistic food and agricultural experiences (Ginsberg, 2017). Wholefoods is another prime example of upscale grocerants. Founded in the US in 1980 as promoting organic and healthy food and furnished with eco-friendly wood, Wholefoods expanded to Canada in 2002 and the United Kingdom in 2004. As of January 2017, Wholefoods operates 467 stores, of which 446 are in the United States, nine in the United Kingdom, and twelve in Canada. Wholefoods transformed food shopping into a showtime place, appealing to customers with a sensory, emotional, and experiential experience. It offers fun experiences like Candy Island, where customers enjoy chocolate-dipping fresh strawberries in a fountain and smell scorching nuts; Lamar Street Greens, where customers can shop for organic produce, salads, and wines; and Street Seafoods, where customers can enjoy 150 kinds of fresh seafood in one spot (Matson, 2018 n.d.). As people’s lives become more hectic, time-starved consumers look for the convenience of not shopping merely for prepared foods but also experiencing a full-service or semi-service type of restaurant, which looks like a fast-casual restaurant space (Dixon, 2017). To take in more food revenue, grocery stores are increasingly developing restaurantstyle services, and they have spawned the new hybrid of grocerants (Crepeau, 2015). By now, the new segment of grocerants has caught the eyes of those with higher income in urban areas and those who are more stressed for time than money (McLynn, 2016). Millennials show interest in the unique benefits and experiential offerings that grocerants deliver (McGrath, 2016). Millennials are sophisticated consumers who are motivated by the variety of prepared meals, healthy options, and freshness that grocerants offer (McLynn, 2016). The grocerant concept also appeals to both young and old. Seniors visit grocerants, because they can buy small portions of prepared food for one- or two-person households and obtain both groceries and food services, which offers convenience by saving time and labor, which otherwise would be spent preparing food at home (McGrath, 2016). While customers look for special experiences, such experiences are meaningful to companies both financially and non-financially. McKinsey (2016) reported that well-performed customer-experience businesses improved revenues by 5–10% while achieving a cost reduction of 15–25% in two or three years, which ultimately gained customer loyalty. A survey by Deloitte (2017) reported that, among customers having positive experiences, 60% would visit the restaurant again more frequently. While experience may come from many elements, it shapes or changes customer perception of a brand (Morgan, 2017). For every company, customer satisfaction is a prime achievement. Meyer and Schwager (2007) indicated that every point of the customer experience adds customer satisfaction, which can rise to a culmination with a series of well-designed customer experiences. However, a good experience that customers feel does not come from the multiplicity of experiences. Instead, a good experience that shapes a successful brand should be “embedded in the fundamental value proposition” in every experience feature (Meyer and Schwager, 2007, p.3). Prior studies examined experiences in hospitality and tourism. While the Oh et al. (2007) study was a pioneer in developing a measurement scale of the experience economy applicable to the hospitality and tourism industry, it also tested the measurement in the bed-andbreakfast industry. Other studies applied the experience economy and empirically tested the luxury cruise and casino industry (Hwang and Han, 2014, 2016a, 2016b), rural tourism (Loureiro, 2014; Sidali et al., 2015), the museum industry (Radder and Han, 2015), and the temple stay (Song et al., 2015). In addition, the experience economy constructs were shown to be pertinent and applicable to wine tourism (QuadriFelitti and Fiore, 2012).

2. Literature review 2.1. Emergence and growth of grocerants A grocerant is defined as a grocery store that offers groceries as well as prepared foods and “a sit-down dining experience” (Crepeau, 2015, p. 4) or “a freestanding restaurant that is located either adjacent to or within a supermarket” (Dixon, 2017, p. 7). While the term indicates “the trend of groceries implementing restaurant footprints either inside or adjacent to their stores” (Sanders, 2017), the term of grocerants is generally restricted to stores with “a fully-embedded restaurant-style experience (i.e., an in-house Starbucks)” (Sanders, 2017). The emergence of grocerants signifies “the blurring of the line between restaurants and grocery stores,” and it aims to serve time-starved consumers who look for ready-to-eat or ready-to-heat food that can be consumed at home with little or no preparation (Celentano, 2017) or further restaurant-type food services where consumers can eat meals as in fastcasual restaurant spaces (Dixon, 2017). While restaurants are fighting supermarkets for consumers’ food dollars, grocerants have entered the mainstream of food retailers (The Hartman Group, 2017). According to the Food Retailing Industry Speaks 2016 Report (Dixon, 2017), about 90% of food retailers are planning to furnish space allocated to fresh-prepared dinner meals. This indicates that grocerants are reflecting consumer demand and finding ways to provide higher-quality culinary experiences (Burfield, 2017). Wegmans Market Café is an early pioneer of grocerants. It is a US supermarket chain located on the East Coast, with 95 stores in states, including Massachusetts, Maryland, New Jersey, New York, Pennsylvania, and Virginia. While some conventional supermarkets are moving to grocerants (e.g., H-E-B and Hy-Vee), most primary grocerants are upscale (McLynn, 2016). The prime examples are Eataly and Wholefoods, which are described in the Introduction, along with special experiences that each offers. Le District in New York offers three sections labeled as café, market, and garden districts. Other examples in the US include Il Buco Alimentary and Vineria in New York, selling Italian food and cuisine. In Europe, Urban Deli in Sweden, Dayles for organic in England, and Bilder & de Clercq in Denmark are operated. Further, upscale grocerants in France are successful with a French version of Dean & Deluca called “Maison Plisson,” premium food courts in the department store “Le Bon Marché,” and “Lafayette gourmet.” Peck, SSG, and Gourmet 494 are upscale grocerants operating in Korea. 2.2. Experience economy “Innovation to create high-quality experiences that customers will pay for is even more important than goods or service innovation” (Pine 2

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guest satisfaction and overall quality (Oh et al., 2007). Using the scale developed by Oh et al. (2007), other studies investigated the experience economy in different contexts. Hwang and Han (2016a), for example, applied the concept to the luxury cruise industry and showed that all four domains of experience significantly affected customer value and loyalty, mediated by brand prestige. Radder and Han (2015) examined the experience economy in a museum context and found that edutainment (education and entertainment) significantly affected overall satisfaction, revisit intention, and word-of-mouth. Escapism, however, did not have any significant effect on dependent variables, and esthetics affected only overall satisfaction. Song et al. (2015) also investigated the influence of experiences in the temple stay context and revealed that the entertainment and escapist experience significantly affects both functional and emotional value, while the educational experience affects only functional value and the esthetic experience influences only emotional value. Loureiro (2014) also investigated the experience economy in rural tourism. Further, Pine and Gilmore’s concept was applied to food tourism, such as wine and rural tourism. Quadri-Felitti and Fiore (2012) and Sidali et al. (2015) contextualized the dimensions of the experience economy pertinent to illustrating the experiential nature of wine and rural tourism. Experience was also an important research topic in the restaurant industry (Chen et al., 2014; Beldona et al., 2014; Zhao, 2016), including in nostalgic-themed restaurants (Chen et al., 2014), etablet restaurant menus (Beldona et al., 2014), and queuing management in a restaurant service (Zhao, 2016).

and Gilmore, 2014, p. 25). Because companies cannot differentiate their offerings with only a high quality of products and services any more, the need for memorable experiences has emerged in the consumer retailing and service industries (Pine and Gilmore, 1999; Gilmore and Pine, 2002a, 2002b). The concept of experience has been most wellknown in the “experience economy” suggested by Pine and Gilmore (1998). The experience economy is based on the theory of experienced utility in the field of behavioral economics (Kahneman and Thaler, 1991), where utility is defined as “the benefits consumers get from an experience” (Read, 2007, p. 45). Pine and Gilmore (2014) defined an individual’s experience “as commercial offerings that engage customers in memorable ways” (p. 24). Pine and Gilmore (1998) described experience as the fourth economic offering, followed by commodities, goods, and services, in the progression of economic value, which illustrates that “staging experiences” create a new source of value, which results in the development of economic value as a final stage and which is added to the functional quality of products and services. Pine and Gilmore (1998) demonstrated the shift of the business paradigm from commodities production, high quality goods, and delivery-focused services to staged experience. This signifies consumer demand for distinct experiences aside from product and service delivery. Leading-edge companies should respond to the fast-growing consumer demand for unique and memorable experiences. The next competitive business battleground will be how staging experiences occur (Pine and Gilmore, 1998), because the provision of memorable experiences that customers desire results in enhanced customer satisfaction and purchase-related behavioral intentions (Chen and Chen, 2012; Hosany and Witham, 2010; Hwang and Han, 2016a). According to Pine and Gilmore (1998), the experience economy consists of four realms (dimensions) classified by two criteria: the level of consumer involvement (i.e., passive and active participation) and consumer connection with certain events or performances (i.e., absorption and immersion). The four experiential realms are education (active participation and absorption), entertainment (passive participation and absorption), esthetics (passive participation and immersion), and escapism (active participation and immersion). Educational experience indicates some events to involve people to learn something new, such as taking a cooking class or attending a ski lesson. As it is a learning process, people get engaged in more active participation, although they are rather absorbed than immersed in the event. Entertainment experience includes events to have people enjoy and entertained (Chang, 2018), such as watching a baseball game or attending an opera concert. Thus, people participate in the entertainment experience more passively than actively, while they are still outside the entertainment, and thus rather absorbed than immersed. Esthetics experience refers to the event which offers the environment where people feel indulged, such as visiting an art gallery, or enjoying exotic restaurant interior. Through the experience, people feel the event, and thus immersed, while they make no impact on the event, and thus passive. Escapism experience makes people diverging to a new self, or being away from the present real life through events, like taking a role in a play, playing a piano in an orchestra. Thus, although they provide education or entertainment, people participate in the event more actively and get immersed. A number of studies of tourism and hospitality have investigated the role of the four E’s in important business variables (e.g., Chang, 2018; Hwang and Han, 2016a, 2016b; Loureiro, 2014; Hwang and Hyun, 2017; Oh et al., 2007; Quadri-Felitti and Fiore, 2012; Radder and Han, 2015; Sidali et al., 2015; Song et al., 2015; Byun and Jang, 2018). While the study of Oh et al. (2007) was the first to develop a measurement scale of the experience economy for the hospitality and tourism context, it also empirically validated the application of the experience economy to the bed-and-breakfast industry. In the empirical study to the B&B experiences, the esthetics dimension was a primary determinant of experiential outcomes. However, the entertainment and escapism dimensions did not have significant effects on dependent variables, like

2.3. Brand prestige Brand prestige refers to the comparatively high positioning of a product related to a brand (Steenkamp et al., 2003), which represents individuals’ status or esteem in association with the brand (StokburgerSauer et al., 2012). The brands of products that are inherent or unique, which signifies “a specific attribute or the overall quality and performance of the produce,” are deemed to be prestigious (Dubois and Czellar, 2002, p. 4). According to Vigneron and Johnson (1999), who proposed the concept of “conspicuous consumption,” people pay higher prices for prestigious brands than normal, or standard brands, because they believe that doing so signals their social status and wealth. Therefore, prestigious brands have a scarcity nature, and they receive attention and interest from consumers who hold economic power (Vigneron and Johnson, 1999). Because prestigious brands represent consumers’ social status, wealth, or power, consumption of prestigious brands enhances their self-concept and social image (Vigneron and Johnson, 1999). Vigneron and Johnson (1999) suggested five values that prestige brands can provide to prestige-seeking consumers, including conspicuous value (to signal wealth or social status), unique value (scarcity), social value (the social group an individual belongs to regard the brand highly), hedonic value, and quality value. While the first three values are associated with social or interpersonal effects, the latter two values present personal effects. The study clearly states that consumers select prestigious brands because of the view of others, and not only because of quality or personal pleasure. Previous studies demonstrated important variables relating to brand prestige in the consumer industry. Customer experience is a significant antecedent of brand prestige, while brand prestige positively affects customer perception and behavioral intentions, including satisfaction and loyalty. The antecedents and consequences of the brand prestige variable are discussed in Section 3 (Research framework and hypothesis development). 3. Research framework and hypothesis development 3.1. Experience and brand prestige The brand prestige that consumers perceive is created by a 3

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H2-1. Brand prestige has a positive influence on utilitarian value among grocerant customers.

multitude of experiences that customers receive from a brand (Ergin and Akbay, 2010). The positive influence of experience on brand prestige was empirically tested in the restaurant industry, including in luxury restaurants (Hwang and Hyun, 2012), coffeehouse brands (Choi et al., 2011), the tourism industry, the airline industry (Ahn et al., 2015), and the luxury cruise and casino industry (Hwang and Han, 2014, 2016b). The literature also demonstrated that each dimension of experience affects brand prestige. Educational experience offering new knowledge and skills positively influenced brand prestige among luxury cruise passengers (Hwang and Han, 2016a). This study also showed that entertainment experience affects brand prestige, because entertainment improves perceived value toward a brand by enabling consumers to have fun (Suh and West, 2010; Teng and Chang, 2013). Similarly, because people’s emotional responses are easily influenced by the physical environment around them, esthetic attributes affect the evaluation of brand prestige. Further, feeling of escape from routine daily lives improves the quality of life (Allison et al., 2010), which leads to perceived prestige toward a brand (Hwang and Han, 2016a). Therefore, the experience will positively affect perceived brand prestige and, thus, the following hypotheses are posited.

H2-2. Brand prestige has a positive influence on hedonic value among grocerant customers. H2-3. Brand prestige has a positive influence on symbolic value among grocerant customers. H2-4. Brand prestige has a positive influence on financial value among grocerant customers. 3.3. Value and loyalty Prior research has identified perceived value as a major determinant of customer loyalty. If customers encounter experiences, when they are more familiar with the product or brand, such enhanced familiarity improves customer knowledge about the brand, and the customers tend to purchase more of the brand (Hwang and Hyun, 2012). Previous studies verified a positive effect of customer’s perceived value on loyalty, including WOM (Grisaffe and Kumar, 1998; Pura, 2005), purchase intention (Chang and Wildt, 1994; Pura, 2005), and willingness to pay a price premium (Homburg et al., 2005; Pura, 2005). Sirdeshmukh et al. (2002) claimed that customer value regulates “behavioral intentions of loyalty toward the service provider as long as the relational exchanges provide superior value” (p. 21). The previous literature also supports the idea that each sub-dimension of value affects loyalty. In a study of luxury fashion brands by Kim et al. (2010), all dimensions of customer value (social, utilitarian, emotional, and financial value) affect brand loyalty. Wang et al. (2004) found a significant effect of customer value (functional, social, emotional, and perceived sacrifices) on brand loyalty through customer satisfaction. Pura (2005) also showed that monetary value, emotional value, and social value affect loyalty. Thus, all the customer value dimensions are linked to loyalty.

H1. Experience has a positive influence on brand prestige among grocerant customers. H1-1. Education experience has a positive influence on brand prestige among grocerant customers. H1-2. Entertainment experience has a positive influence on brand prestige among grocerant customers. H1-3. Esthetics experience has a positive influence on brand prestige among grocerant customers. H1-4. Escapist experience has a positive influence on brand prestige among grocerant customers.

H3. Consumer perceived value has a positive influence on loyalty among grocerant customers.

3.2. Brand prestige and value

H3-1. Customer perceived utilitarian value has a positive influence on loyalty among grocerant customers.

According to the cue utilization theory, customers perceive the value of a brand from an array of cues (Richardson et al., 1994); Richardson et al. (1994) claimed that, for grocery items, extrinsic cues, like brand name, are stronger than intrinsic cues, like real differences in ingredients, in forming the product value. When customers view a brand as prestigious, a brand identification is more likely to be formed, which will influence the perceived product value. Hence, the level of prestige that customers perceive affects customer perception of the product value (So et al., 2017). Baek et al. (2010) stated that prestigious brands convey cue signals to customers, such as the social benefit cue and quality cue, which leads to an enhanced perception of customer value. While the prestige that a brand holds positively influences customers’ perceived value, the effect that a specific value receives may vary. For example, Baek et al. (2010) stated that brand prestige positively influences the hedonic and social values that customers perceive, because a prestigious brand is considered to enhance customers’ social status and wealth. To the contrary, in the Yang and Mattila (2016) study, grocerant customers who shop for upscale items, such as high quality, fresh, and varied groceries and foods, perceived utilitarian, hedonic, and financial value, while social value was not significant. Because consumers purchase luxury brands in pursuit of high quality exchanged for high cost, customers perceive utilitarian and financial values from prestigious brands (Wiedmann et al., 2009). This study selected four values based on the Yang and Mattila (2016) grocery context study. Hence, the following hypotheses are proposed:

H3-2. Customer perceived hedonic value has a positive influence on loyalty among grocerant customers. H3-3. Customer perceived social value has a positive influence on loyalty among grocerant customers. H3-4. Customer perceived financial value has a positive influence on loyalty among grocerant customers. 3.4. Proposed model The proposed theoretical framework is shown in Fig. 1. The model encompasses such concepts as experience (education, entertainment, esthetics, and escapist), brand prestige, customer perceived value (functional, hedonic, social, and financial), and loyalty. The hypotheses proposed for the variables are included in the model. 4. Methodology 4.1. Survey instrument A survey was used as the research instrument of the study. A draft of the survey was developed based on the previous literature and modified to fit the grocerant context. A survey was designed to test the effect of experiences in grocerants on brand prestige, perceived value, and customer loyalty. The draft survey was then reviewed by experts, comprising three faculty members in food service management and five

H2. Brand prestige has a positive influence on consumer perceived value among grocerant customers. 4

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Fig. 1. Proposed research framework.

5. Results

managers in grocerants. A pilot study was conducted with thirty customers in grocerants, to check the clarity and relevance of the items. Slight modifications were made to some items, which removed ambiguity and thus improved the clarity of the items. The introduction of the survey provided a brief description and some examples of grocerants. A screening question was posed to ensure the inclusion of participants who visited grocerants in the last six months prior to the survey. The survey consisted of two parts. Part 1 of the survey asked the respondents to assess the individual’s experiences, perceived brand prestige, perceived value, and loyalty toward the grocerant he/she visited. Grocerant experience, adapted from Hwang and Han (2016a), was measured using twelve items, representing education, entertainment, esthetics, and escapist experience. Brand prestige was adapted from Baek et al. (2010) and measured with three items. Perceived value contained eleven items, to assess the four dimensions (functional, hedonic, social, and financial) of perceived value, based on the work of Yang and Mattila (2016). Lastly, the loyalty construct comprised three items, adapted from Han and Ryu (2009). All measures employed a five-point Likert type scale (1=strongly disagree, 5= strongly agree). Part 2 asked about respondents’ demographics, including gender, age, education, marital status, occupation, household monthly income, and number of family members. The survey was approved by the Institutional Review Board of the University.

5.1. Demographics of respondents The demographic profiles of the participants are examined. Among the 359 usable responses, 64.5% were females and 35.5% were males. In terms of age, 22.1% of the respondents were 20–29 years old, 49.2% were 30–39 years old, 16.8% were 40–49 years old, and 8.4% were 50 or older. Regarding educational attainment, 66.9% had completed college. Household income was almost evenly distributed. Among the participants, about 62.0% were married, and 48.0% were singles. In terms of education level, about 66.9% of the participants had bachelor’s degree, followed by graduate-degree holders (17.6%), high school graduates or less (8.2%), and 2-year/some college graduates (7.4%). 5.2. Measurement model Table 1 shows the results of confirmatory factor analysis. Convergent validity examines how much common variance is shared between the items and the latent construct (Boley et al., 2018). To establish convergent validity, factor coefficients of variables should be significant and greater than the minimum threshold value of 0.5 (Hair et al., 2010). In this study, several items were deleted, because the standardized factor loading of three items, each item from entertainment and esthetics experience and hedonic value, were less than the minimum threshold value of 0.5 (Hair et al., 2010). Other than these items, all standardized factor loadings ranged from 0.550 to 0.908. To assess a model fit of the measurement model, several fit indices were applied; the application results were as follows: χ(279)2 = 542.929, χ2/df = 1.946, GFI = 0.900, CFI = 0.953, NFI = 0.909, RMSEA = 0.051. The model fit was satisfactory. All loadings (standardized) were high and significant (p < .01). Thus, unidimensionality of the measures was evident. The measurement model was also checked for composite reliability (CR). All the CR indices were above the threshold limit of 0.60 (Fornell and Larcker, 1981). The average variance extracted (AVE) for each construct was calculated to test convergent validity. All calculated AVE values were between 0.536 and 0.800. These results were evidence of the convergent validity of the measures (Anderson and Gerbing, 1988). The Cronbach’s α in each construct ranged from 0.610 to 0.893, which satisfied the minimum threshold value of 0.6 (Nunnally, 1978). Table 2 reports mean, squared correlations and AVE among all constructs included in the study model. To evaluate the discriminant validity, the AVE of each latent construct of the proposed model was compared with the squared correlation coefficient (Fornell and Larcker, 1981). All diagonal values (AVE) exceeded the squared correlation of

4.2. Sampling and data collection A mall-intercept survey was conducted at grocerants in South Korea. The sample of this study consisted of customers who visited grocerants. The researchers of the study, three graduate students in the hospitality management major, trained for the survey and conducted an intercept survey at major grocerants in Korea. Four grocerants in Korea were selected, including Eataly, PK Market, Olive Market, and Shinsegae (SSG) food court, for the survey sites. Participants were recruited at the grocerants, from those who exited the grocerants after shopping. The survey was conducted on three weekdays and two weekend days at different times of the day over a five-week period from November to December, 2017. The data were collected through a self-administered survey. The participants were approached by the researchers and surveyed with the questionnaire when they agreed to the study. The participants in the survey totaled 367, while eight responses were incomplete and thus deleted. Finally, 359 usable responses were entered for data analysis.

5

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Table 1 Confirmatory factor analysis for measurement items. Constructs

Items

Factor loading

Education

Education 1 Education 2 Education 3 Entertainment 1 Entertainment 2 Esthetics 1 Esthetics 2 Escapist 1 Escapist 2 Escapist 3 Brand prestige 1 Brand prestige 2 Brand prestige 3 Functional value 1 Functional value 2 Functional value 3 Hedonic value 1 Hedonic value 2 Social value 1 Social value 2 Social value 3 Financial value 1 Financial value 2 Financial value 3 Loyalty 1 Loyalty 2 Loyalty 3

.694 – .901 22.757 .897 15.316 .668 – .657 10.484 .824 – .786 14.256 – .813 16.253 .825 16.022 .798 – .656 12.221 .889 10.780 .674 .643 – .814 10.956 .569 8.830 .576 – .868 9.896 – .771 18.282 .912 17.496 .868 – .830 19.777 .874 19.803 .875 – .867 18.689 .821 19.784 .857 χ(279)2 = 542.929, χ2/df = 1.946, GFI = .900, CFI = .953, NFI = .909, RMSEA = .051

Entertainment Esthetics Escapist

Brand prestige

Functional value

Hedonic value Social value

Financial value

Loyalty

Model fit statistics

t-value

Cronbach’s α

C.R.a

AVEb

.861

.886

.724

.610

.698

.536

.786

.853

.744

.852

.836

.630

.765

.831

.626

.694

.791

.563

.661

.706

.556

.884

.884

.719

.893

.923

.800

.884

.920

.793

Note 1 All factor loadings were significant at the 0.001 level. Note 2 Chi-Square (χ2); df (Degrees of Freedom); Goodness of Fit Index (GFI); Comparative Fit Index (CFI); Normed Fit Index (NFI); Root Mean Square Error Approximation (RMSEA). a Composite Reliability. b Average Variance Extracted.

(β = 0.271, p < 0.01), supporting H1-2 and H1-4, while H1-1 and H13 were not empirically supported. Next, brand prestige significantly affected all experimental values (functional value/β = 0.767, p < 0.001; hedonic value/ β = 0.812, p < 0.001; social value/ β = 0.658, p < 0.001; financial value/ β = 0.783, p < 0.001). Therefore, H2-1, H2-2, H2-3, and H2-4 were supported. Finally, loyalty was positively affected by the three factors of experimental value, comprising functional value (β = 0.162, p < 0.05), hedonic value (β = 0.300, p < 0.001), and financial value (β = 0.417, p < 0.001), and supporting H3-1, H3-2, and H3-4. However, social value did not significantly affect loyalty (β=-0.086, p > 0.05). The results from the structural model with the parameter path coefficients are described in Fig. 2.

coefficients between all pairs of constructs, thus indicating adequate discriminant validity. 5.3. Structural model A statistical analysis of the collected data was conducted using SPSS 24.0 for Windows and AMOS 24.0. The proposed model and hypotheses were tested by structural equation modeling (SEM), because it provides an appropriate analytical method for examining the relationships among variables in multivariate structures (Anderson and Gerbing, 1988). The model fit for the proposed model was in an acceptable range. The model fit indices were as follows: χ2(306) = 839.006, χ2/ df = 2.742, GFI = 0.843, CFI = 0.905, NFI = 0.859, RMSEA = 0.070. As indicated in Table 3, all the hypothesized paths were significant except for three. Brand prestige was significantly affected by entertainment experience (β = 0.500, p < 0.05) and escapist experience Table 2 Mean, Squared Correlations, and AVE. Constructs 1. Education 2. Entertainment 3. Esthetics 4. Escapist 5. Brand prestige 6. Functional value 7. Hedonic value 8. Social value 9. Financial value 10. Loyalty

1

2

3

4

5

6

7

8

9

10

.536a .569 (.32) .469 (.22) .435 (.19) .433 (.19) .356 (.13) .321 (.10) .424 (.18) .470 (.22)

.744a .399 (.24) .412 (.24) .409 (.30) .401 (.44) .279 (.35) .413 (.39) .477 (.45)

.630a .319 (.10) .330 (.11) .479 (.23) .612 (.38) .458 (.21) .380 (.14)

.626a .455 (.21) .320 (.10) .313 (.10) .434 (.19) .446 (.20)

.563a .399 (.16) .357 (.13) .541 (.29) .451 (.20)

.556a .518 (.27) .555 (.31) .467 (.22)

.719a .548 (.30) .351 (.12)

.800a .591 (.35)

.793a

a

.724 .569 (.32) .596 (.36) .491 (.16) .487 (.17) .301 (.17) .442 (.16) .350 (.08) .393 (.17) .454 (.23)

Note 1. Squared correlations between constructs are in parentheses. a AVE (Average Variance Extracted). 6

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Table 3 Structural parameter estimates of the study model. Hypothesized path

Standardized coefficients

t-value

Results

H1-1: Educational experience → Brand prestige H1-2: Entertainment experience → Brand prestige H1-3: Esthetics experience → Brand prestige H1-4: Escapist experience → Brand prestige H2-1: Brand prestige → Functional value H2-1: Brand prestige → Hedonic value H2-3: Brand prestige → Social value H2-4: Brand prestige → Financial value H3-1: Functional value → Loyalty H3-2: Hedonic value → Loyalty H3-3: Social value → Loyalty H3-4: Financial value → Loyalty Model fit statistics

.043 .432 Not supported Supported .500 2.013* .090 .580 Not supported .271 2.924** Supported .767 7.060*** Supported .812 6.479*** Supported .658 7.308*** Supported *** Supported .783 8.016 * .162 2.019 Supported *** .300 3.411 Supported −.086 −1.451 Not supported .417 5.663*** Supported Measurement model fit: χ2(306) = 839.006, χ2/df = 2.742, GFI = 0.843, CFI = 0.905, NFI = 0.859, RMSEA = 0.070

Note 1. Chi-Square (χ2); df (Degrees of Freedom); Goodness of Fit Index (GFI); Comparative Fit Index (CFI); Normed Fit Index (NFI); Root Mean Square Error Approximation (RMSEA). n.s.=not significant. * p < .05. ** p < .01. *** p < .001.

6. Conclusion and discussion

brand prestige of grocerants. However, each dimension of experience differed in its effect. Among the four realms of experiences, the strongest relation was found between entertainment and brand prestige. This result was consistent with previous research, including the positive effect of entertainment on brand prestige in in-flight airline services (Ahn et al., 2015) and themed flagship brand stores (Kozinets et al., 2002). Further, Hwang and Han (2016a) showed that all the sub-dimensions (entertainment, education, esthetics, escapist) of experience affected brand prestige in the luxury cruise industry. A positive impact of escapist experience was also found on brand prestige, which is consistent with Hwang and Han (2016a). Such findings imply that, when customers feel entertained by something fun at the grocerants and escaped to get away from their routine lives, they tend to form the prestige of the grocerant brand. In Korea, grocerants offer cooking demonstrations by renowned chefs using fancy equipment during the weekend, contract with famous restaurants from all parts of the country, and sell exotic food ingredients, cuisines, and wines, which allure customers and provide entertainment and escapist experiences. This study showed insignificant effects of educational and esthetics experiences on brand prestige, which is not consistent with a previous

This study was the first attempt to examine customer experience at grocerants, based on the experience economy, which consists of multiple dimensions of experience. By investigating four realms of the experience economy (education, entertainment, esthetics, and escapist) that customers perceive at grocerants, the study demonstrated the importance of experiences for customer perception and behavioral intention. This study explored the unique experiences staged in grocerants and associated the experiences to brand prestige, customer perceived value, and loyalty. The results of the study, overall, supported our hypotheses, showing positive effects of entertainment and escapist experiences on brand prestige, while brand prestige influenced functional, hedonic, social, and financial values. Three values (functional, hedonic, and financial) also affected loyalty, while only social value was not significant. The findings of the study provide important theoretical and managerial implications. This study is a theoretically novel grocerant study that sheds light on the previous experience research by adding new findings. The most noticeable findings are that experiences are significant in forming the

Fig. 2. Results of structural model and fit coefficients. Note 1. Solid lines indicate significant paths, while dotted lines indicate non-significant paths. *p < 0.05, 7

**

p < 0.01,

***

p < 0.001

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formed by their experiences. Because customers expect a good quality of various food ingredients and dishes, grocerants should prepare various categories of food that reflect customer needs. Additionally, emotional value can be affected by many factors, such as service, interior, and so forth; superior service and upscale interiors are suggested in building a comfortable and cozy environment for shopping. Further, because customers are more sensitive to the transparency of food, providing clean and transparent food can improve value for the money. This study still has limitations. First, the data for the study were collected in Korea. Therefore, the findings of the study may not be generalized to all grocerants in other countries. The themes or trends of grocerants may differ country by country. Grocerants in the US or European countries have been implemented for a longer period, so the development stage may be different. Future study is suggested in other countries, and comparisons between countries may offer useful implications for the respective countries. While the grocerant concept is more popular in the US and Europe, comparisons between countries may also reveal, whether customers form different perception according to the length of their experience with grocerants. Second, grocerants in the US were first developed as a low-end concept and then moved upscale, while in Korea grocerants started as upscale and the trend is continuing. Reflecting this difference, comparisons between the segments of grocerants is suggested, which may reveal the experiences customers seek from different segments of grocerants. Third, while the number of samples in this research exceeded the minimum sample size suggested by Hair et al. (2010), the size is still not sufficient. Increasing sample size is recommended for future research. Fourth, future research may consider other social-psychological factors (e.g., lifestyle, individual preferences) and demographic factors (e.g., age, gender, education level, income level). In that regard, research on grocerants and customer experience can flourish.

study (Hwang and Han, 2016a; Hwang and Hyun, 2012). Currently, in Korea, few things have been developed to provide educational experiences. Although Eataly Korea offers a card explaining food ingredients, many people do not read it, because it does not attract customer attention. While grocerants in Korea have staffs to answer customer inquiries, such experiences should be strengthened. Regarding the insignificance of esthetics on brand prestige, one possible explanation is that many grocerants in Korea do not provide impressive interiors to the degree customers expect in upscale grocerants. The current interiors of grocerants are quite similar to normal grocery stores with food courts. Although grocerants try to convey upscale feeling by using dark lights or wooden interiors, they are still not far from other normal groceries. This study also found a positive impact of brand prestige on customer perceived value in grocerants, which corroborates previous studies (Baek et al., 2010; Richardson et al., 1994; Chiang and Jang, 2007). As previous studies indicated, a prestigious brand forms customers’ positive functional value, hedonic value (Baek et al., 2010), social value (Hwang and Han, 2016a; Qiu et al., 2014; Vigneron and Johnson, 1999), and financial value (Hanzee and Taghipourian, 2012). It is interesting to note that the study showed that social value did not influence loyalty, while other values did. Social value refers to “perceived utility of an alternative resulting from its image and symbolism” (Smith and Colgate, 2007, p. 8). While many previous studies showed that social value significantly affects loyalty (Kim et al., 2010; Hwang and Han, 2016a), Yang and Mattila (2016) revealed insignificant relationships of symbolic value and purchase intention, while other luxury value (functional, hedonic, and financial value) led to purchase intention. Thus, the finding of this study regarding social value is in line with Yang and Mattila (2016). Yang and Mattila (2016) suggested that the symbolic value that customers perceive in groceries does not always result in purchase intention. Their explanation was that symbolic value, in many cases, was found to be a strong predictor of luxury brand items. Upscale grocerants, however, are more premium than the luxury segment. Grocerants in Korea still lack a strong brand power, which results in a lack of symbolism. This study also offers practical implications for grocerant managers and operators. This study revealed that entertainment and escapist experiences are important for grocerant customers in forming brand prestige. It is suggested that grocerants put efforts into developing attractive entertainment programs. Some grocerant brands have their own entertainment programs. For example, FICO Eataly World provides various entertaining elements through the entire shopping process. It turned the shopping cart into a bicycle with a shopping basket and established a food ingredient exhibit hall and farms next to the grocery store. Wholefoods also offers various events for customers, like “random acts of chocolate,” which distributed 100 bars of 365 chocolates throughout the store, or decorating Valentine’s Day cards (Wholefoods, n.d.). To let customers feel escapist experiences at grocerants, thematic or exotic experiences should be developed, such as throwing an event of a strawberry buffet, which is popular among hotel dining in Korea, or opening a cooking class by a famous chef with exotic ethnic recipes, like African food. In addition, collaborating with other industries can augment escapist experiences, such as collaborating with a flower shop, furniture showroom, and restaurants. By combining bakeries, restaurants, and cafes and offering exotic themes, grocerants can make customers feel an escape from their routine and dull lives. Further, this study revealed that most grocerant customers are millennials. While developing experience programs appealing to grocerant customers, the experiences that millennials seek for grocerants should be considered. Thus, the expectations and consumption patterns of millennials can be examined by managers and applied in developing experience programs. This study found that functional, hedonic, and financial values are significant predictors leading to loyalty. Management invest effort in improving these values for grocerants. Customer perceived value is

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