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Consumer acceptance and market success: Wal-Mart in the UK and Germany

Elke Pioch
Business School, Manchester Metropolitan University, Manchester, UK

Consumer acceptance and market success 205

Received 28 July 2008 Revised 9 October 2008 Accepted 2 December 2008

Ulrike Gerhard
Department of Geography, University of Wurzburg, Wurzburg, Germany

John Fernie
School of Management and Languages, Heriot-Watt University, Edinburgh, UK, and

Stephen J. Arnold
School of Business, Queens University, Kingston, Canada
Abstract
Purpose This paper aims to explore Wal-Marts varying performance in Europe and eventual exit from the German market by singling out the role of consumer acceptance of Wal-Marts market propositions. Design/methodology/approach The paper uses the macro-constructs of institutional theory to interpret and conceptualise micro-level consumer data. Data were collected via telephone surveys in two regional German and UK markets in 2002/2003. Salient patronage norms in each market were established and Wal-Marts as well as its competitors performance on those norms were assessed. Findings In the German context, the institutional theory approach to explaining Wal-Marts problems clearly foreshadows market failure and exit. In UK market, no clear pattern between retailers adhering to salient patronage norms, patronage behaviour and market position could be established. The constructs of institutional theory were more likely to predict and explain market failure than success. Research limitations/implications Research in two regional markets limits the applicability of ndings. Nevertheless, some key issues seem to indicate overall market performance. The telephone survey approach carries inherent problems, which however have only marginally impacted on the relevance of the ndings. Originality/value The use of institutional theory constructs adds a further dimension to the discussion of international retailer success/failure and can constitute a valuable tool in the repertoire of the divestment and failure literature. Keywords Retailing, Consumer behaviour, International marketing, Germany, United Kingdom Paper type Research paper

Introduction Wal-Mart entered the European market in 1997 via Germany by acquiring 21 Wertkauf and 74 Spar Handel stores, all of which were changed into Wal-Mart superstores. In 1999, the companys reach was extended to UK through the acquisition of Asdas 219 outlets, which remained trading under their own name. Wal-Mart aspired to climb

International Journal of Retail & Distribution Management Vol. 37 No. 3, 2009 pp. 205-225 q Emerald Group Publishing Limited 0959-0552 DOI 10.1108/09590550910941490

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to number one market position through its winning formula of EDLP (every day low prices), high customer service, strong organisational culture and efcient operations. Speculation was rife amongst retail analysts, academics and practitioners about the effects the retail giant would have on domestic retail market structures (Arnold and Fernie, 2000; Bergmann, 2000; Burt and Sparks, 2001; Gotterbarm, 2004; Rohleder, 1999; Whysall, 2001). The success of the company in North America seemed to foreshadow a new era in European (grocery) retailing. In 2006, however, Wal-Mart announced its exit from the German market and had not achieved market leader position in UK. The study presented here continues the discussion about Wal-Marts performance in Europe. It aims to assess the companys performance in the two European markets by singling out the role of consumer acceptance of Wal-Marts market propositions. The constructs of institutional theory are used to interpret consumer data gathered in rzburg) and UK the period 2002-2003 in two specic regional markets in Germany (Wu (Manchester). Institutional theory suggests that particular market norms exist. In order to be successful, retailers have to at least comply or better exceed those norms. Thus, by rst determining salient norms for shopper patronage behaviour in the selected markets and then comparing incumbent retailers and Wal-Marts performance on these norms, it may be possible to explain the American companys position. Although data limited to two cities in Wal-Marts European trading areas cannot and is not meant to be representative of the respective national markets, the results have proved to be indicative of overall trends. Whilst the application of an institutional lens cannot of itself explain international retailer market position, it has emerged as a useful conceptual base especially for the interpretation of international retailer failure. The retail internationalization literature The retail internationalization literature has traditionally concentrated on who internationalizes, the motives for expansion, the direction of growth, market entry mechanisms, adaptation/standardization of retail offers, post-entry strategies, market exit/divestment strategies and corporate culture (see Wrigley, 2000; Arnold and Fernie, 2000; Burt and Sparks, 2001; Burt and Carralero-Encinas, 2000; Moore and Fernie, 2004; Dawson et al., 2006, for extensive reviews). To date, however, the role of the consumer in the internationalization process has received scant attention beyond the adaptation/standardization debate. Retailer internationalization and consumer acceptance A variety of contributions consider the role of consumers in the success (or failure) of international retailers at a conceptual level (Sampson and Tigert, 1994; Dupuis and Prime, 1996; Arnold and Luthra, 2000; Seiders and Tigert, 2000; Arnold, 2002; Colla, 2004). Consumer behaviour and preferences have also been taken account of in the context of national cultures and the convergence divergence debate (Levitt, 1983; McCracken, 1989; Appadurai, 1990; Schroder, 1999), applying Hofstedes (1991) four dimensions of national culture (Usunier, 1993; Hofstede, 2001; de Mooij, 2000; de Mooij and Hofstede, 2002). Increasingly, the store image literature addresses consumer perceptions of international retailers (Burt and Carralero-Encinas, 2000; Zarkada-Fraser and Fraser, 2002; Jin and Kim, 2003; Burt et al., 2005). These studies either compare the image of

the same company in two different markets (Burt and Carralero-Encinas, 2000; Burt et al., 2005), the perception of foreign retailers in a particular market (Zarkada-Fraser and Fraser, 2002; Jin and Kim, 2003) or the role of consumer ethnicity in the way store image attributes are perceived (Burt et al., 2005). They stay close to image perceptions of specic companies and thus the generation of general image norms that retailers have to adhere to to entice patronage and re-patronage behaviour is outside the scope of these micro-level studies. Whilst much of the literature advocates the need for new (international) market entrants to consider national consumer cultures, only few studies compare consumer behaviour and the link to retailer performance across markets combining micro- and macro-level analysis. In the North American context, Arnold et al. (1998) as well as Handelman and Arnold (1999), for example, started to pursue such an approach by investigating consumer patronage behaviour in the broader context of institutional theory. Store patronage behaviour and institutional theory Store patronage behaviour Store patronage behaviour research refers to different consumer cultures that organisations must either adhere to or inuence. These consumer cultures nd their expression in the importance attached to store attributes. One strand of argument assumes that preferences are xed and exogenous, existing outside competitors (or new market entrants) inuence (Stigler and Becker, 1977; Narver and Slater, 1990; Slater and Narver, 1994). New entrants gain competitive advantage by meeting preferences better than existing players. This means that retail store patronage behaviour based on the importance attached to a bundle of store attributes (such as convenient location, low prices, wide assortment), which are formed through individual shopper values, social class, stage in their life cycle and lifestyle, is outside retailers sphere of inuence (Darden, 1979). This view is echoed, for example, in Collas (2004) assessment of consumer factors inuencing national developments in retail sector structures. In contrast, and accepting the dialectic interaction of various players in an abstract market place, Carpenter and Nakamoto (1989) supported by later research (Carpenter et al., 1994; Kardes et al., 1993) suggest that marketing strategies can inuence consumer preferences. Organisations are then either described as market pioneers or market spoilers (Arnold et al., 1998). The former inuence patronage behaviour in new/developing markets, whereas the latter shift consumer preferences towards their own position when entering an already existing market. Wal-Mart in North America has been seen to function as a market spoiler in both the Canadian and US markets (Arnold et al., 1998). In the European context, Fernie et al. (2005) and Fernie and Pioch (2006) suggested that there were limited, short-term indications for a similar effect in UK, whereas in Germany, Wal-Mart was not able to invoke a spoiler effect (Knorr and Arndt, 2003; Gerhard and Arnold, 2006). However, this paper is not so much concerned with the companys ability to change attribute saliency and inuence patronage behaviour. Rather, it aims to assess the similarities/differences of attributes in different European markets and to draw conclusions in how far adherence to those attributes by a variety of retailers could help explain Wal-Marts performance.

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Institutional theory Compared to the micro, social psychological perspective that characterizes research on retail store patronage, institutional theory takes a more macro, sociological perspective setting retailers adherence to store choice attribute in a wider context and providing a set of theoretical constructs and relationships to the normally atheoretical area of retail patronage in a manner that is amenable to a cross-cultural, international interest. The theory originates in sociology (Meyer and Rowan, 1977; Granovetter, 1985; DiMaggio and Powell, 1983; Berger and Luckmann, 1980/2004) and has received much attention in the organizational behaviour literatures (Oliver, 1991; Scott, 1995; Dacin, 1997). The more complex debate about varying environments, norms and actors (exercised for example by Handelman and Arnold (1999)) can be condensed into a parsimonious framework that identies social actors who enact and respond to institutional norms (which can be economic or societal) in order to secure legitimacy and support from other social actors. A social actor is an individual or collectivity that both creates and responds to institutional norms. Social actors who tend to emphasize the economic norms include retailers, suppliers, consumers, shareholders, competitors, etc. Societal norms tend to be prescribed for example by citizens, charities, regulative bodies, media outlets and consumer activists. In order to minimize the complexity of interactions between various actors and in line with the main aim of the current project, only the shopper and retailer social actors will be considered (as done in previous studies by Arnold (2004), Handelman and Arnold (1999)). An institutional norm is a social construction that sets out the way in which social behaviour should or must be done. The behaviour could be of an economic nature related to a task or function or societal related to family, community, environment, play, government, nation or religion. Adherence by one social actor (here a retailer) to the institutional norms prescribed by another social actor (shopper) leads to support (store patronage) of the former by the latter. However, adherence to one particular institutional norm may also moderate the relationship between another institutional norm and patronage behaviour. For example, Handelman and Arnold (1999) found that poor adherence to a societal norm (e.g. community) could weaken the relationship to an economic norm (e.g. service) and retail patronage. In addition, any adherence can be mediated by legitimacy. The legitimacy construct consists of economic and social elements, which are interdependent. Economic legitimacy is linked to the organisations ability to satisfy needs. The social element demands that a companys actions are consistent with moral norms that have the welfare of the community at its heart. Legitimacy is achieved when various social actors support an organisation. Whilst consumer support in the form of praise, recommendation and patronage behaviour is a key indicator of attained legitimacy, the attitudes of other social actors are also important. Lack of endorsement on their part (like Home Depots problems in Chile; Bianchi and Arnold, 2004) and particularly negative actions (like pressure group protests, e.g. Wal-Mart Watch) may undermine legitimacy and threaten long-term prospects for the new entrant. Returning to the aim of the current project, i.e. to assess the reasons for the performance variation of Wal-Mart in Europe, the constructs of institutional theory are

employed to explain international retailers performance in different markets. However, the concept itself cannot provide an answer as to the antecedents, developments and reasons for the existence of particular norms that inuence patronage behaviour (Gerhard and Arnold, 2006). Although it would be desirable to explore the creation of such norms, such work is outside the scope of the current investigation. Wal-Mart in German and UK grocery markets The German market is renowned for its minimal prot margins and price-led strong domestic competition. Wal-Mart entered Germany at a time when the grocery market was saturated (Gotterbarm, 2004; Senge, 2004) and ten retail companies, covering 55.1 per cent of the market, dominated a relatively fragmented grocery retail landscape. Edeka remained the leading retailer, followed by Metro, Rewe and the two discount chains Aldi and Lidl (Lebensmittelzeitung, data for 2005). Wal-Mart was trailing on 13th place with a 1.5 per cent market share (Gotterbarm, 2004, p. 185). Wal-Marts German strategy aimed to upgrade the inherited store portfolio, to incorporate high quality customer service to the established EDLP strategy and thus to act as a market spoiler (Arnold et al., 1998), i.e. change German consumers preferences in favour of the one stop shop concept. By the time of the current research, however, the German operation was struggling. In contrast the acquisition of Asda, one of the big four UK grocers, meant initial success. Asdas marketing, operations and organisational culture mirrored that of the US giant (Burt and Sparks, 2001; Arnold and Fernie, 2000) and was regarded as good strategic t. Consequently, the Wal-Mart strategy for UK was to build on these similarities (Fernie and Arnold, 2002). The EDLP approach was successful in that Asda made impressive market share gains over its less price competitive rivals, Sainsbury and Safeway, and temporarily replaced Sainsbury as the second largest grocery retailer in UK by late 2003. Tesco, however, continued to dominate and widen the gap over the competition. Research design and analysis The aim of the current study was to assess Wal-Marts performance in Europe by singling out the role of consumer acceptance of the companys market propositions. Underpinned by the constructs of institutional theory, a questionnaire was administered which aimed to establish: . salient norms for store patronage; . retailer adherence to these norms; . the moderating effect of societal on economic norms; and . the effect of the institutional theory legitimacy construct on patronage behaviour. The survey locations The research sites were Wurzburg (Germany) and Manchester (UK). Both had Wal-Mart super centres embedded in extensive networks of grocery stores, facilitating comparisons between Wal-Mart and its national competitors. Table I shows key competitors identied through the survey data. Limiting the survey area to one city in each of the European markets signicantly reduces the generalisability of outcomes. However, the results were compared to

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national data on retailer market performance (IGD and Nielsen sources for UK; EHI, GfK and Lebensmittelzeitung for Germany; Figures 1 and 2) to set the survey in the context of national trends. Nevertheless, the specic local relationships between the retailer and shopper social actors can only ever be indicative of more general developments. The research instrument The research instrument was based on the initial work of Arnolds (2004) retail food store shopper surveys conducted in North America, which suggested that across different local and national markets, similarities between consumer preferences exist and that retailer adherence to them is positively related to a companys position in the market place. The current study assesed whether similar trends could be identied in Europe, which in turn could help to shed light on Wal-Marts performance. The original questionnaire design focused on store attribute choice summarized under a number of norms developed in the literature. These norms are closely linked to Martineaus (1958) early work on store image and Lindquists (1974) nine list of attributes that span functional qualities as well as psychological dimensions, incorporating tangible as well as intangible elements. The underlying assumption in these and other studies is that a positive store image is a key determinant of store loyalty and economic success (Jacoby and Mazursky, 1984; Mazursky and Jacoby, 1986).

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Manchester and adjoining Metropolitan boroughs Table I. Wal-Mart and key competitor stores in Manchester and Wuerzburg, 2002 Asda Aldi Tesco Sainsbury Safeway (now Morrisons) Morrison 12 18 15 12 5 4

Wuerzburg and adjacent counties Wal-Mart Kupsch Aldi Lidl Tegut 2 18 9 7 7

35 Manchester 30 25 20 15 UK

Sa fe w ay

or ris o

Sa

Figure 1. Percentage share of shoppers for major supermarkets in Manchester compared to national average market share, UK 2003

10 5 0
o y ns a Te sc bu r sd in s A A ld i

Grocery stores in Wrzburg visited most often by respondents (2002) 0 Edeka/ Kupsch Aldi Lidl Wal-Mart Tegut 8.9 15.1 n = 370 Survey Wuerzburg 2002 12.7 5 10 10.3 16.0 20.3 15 20 25 30%

Market position in Germany (among the top 20) 2002 2005

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26.3

3 4 5 13 -

1 5 4 12 20

Lebensmittelzeitung, press releases 2003, 2007

Figure 2. Percentage share of shoppers for major supermarkets in Wurzburg, German comparison 2002

Whilst store image studies concentrate on micro issues relating to particular companies and primarily measure the attributes of specic stores, the study at hand was also interested in macro level attributes. Within the framework of institutional theory, these are termed (economic and societal) norms that exist beyond individual companies. The norms initially selected are those that showed signicance in other studies and were primarily of an economic nature, i.e. convenience, value prices, selection, store environment, service, quality and sales/promotions (Koppelman and Hauser, 1978; Hackett et al., 1993). Community, hedonism and trust as societal norms were successively included, reecting the signicance assigned to them in further research (Jin and Kim, 2003). Transferring research instruments from one cultural domain into another is problematic (Salciuviene et al., 2005; Cornwell and Drennan, 2004) thus a series of pilot studies were conducted in Wurzburg and Greater Manchester to adjust the North American based items to the European domain. This resulted in a reduction of attributes and the adjustment of phrases/words to: . reect British rather than American usage of terms; and . appropriateness of the German questionnaire version. Experimentation with intercept and telephone survey approaches led to the adoption of the latter as it yielded better response rates. This meant that the research approach and the research instruments were standardized across European contexts at the norm level but with local variations at the attribute level. This resulted in 13 constructs, eight relating to economic norms, three to societal norms, one to legitimacy and one to patronage. These constructs were measured by groups of attributes, based on a series of 23 questions in the form of which store is/had . . . (Table II). On average, each construct was measured by two questions. Two questions measured legitimacy (Which store is best at meeting the standards that people expect of retailers? Which store would be a loss if it closed down?)

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Economic norms Convenience Value prices Sales and promotions Selection Advertising Quality Store environment Service Societal norms Community Hedonic Trust

Sample questions/related to attributes Which store is/has . . . . . . the easiest to get to from home? . . . the lowest everyday prices? . . . the lowest prices for special promotions and sales? . . . the largest overall selection or assortment of merchandise? . . . advertising that best catches your attention? . . . the highest quality products? . . . the most pleasant shopping environment? . . . the most knowledgeable, helpful cashiers and sales assistants? . . . best at being concerned about and actively involved in the community at large? . . . the most fun place to shop? . . . best at making it easy to return or exchange merchandise?

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Table II.

and patronage was calculated by the question: Which store do you shop at most often? For the purposes of validity, an estimate of adherence on patronage was derived by rst asking each respondent What is the single most important reason you shop at? (store shopped at most often) and What is the second most important reason? The responses to these open ended questions were categorised according to the above norms. The proportions of the sample that mentioned each attribute as most or second most important were then determined. In order to assess the relative performance of Wal-Mart on each of these norms an adherence index was calculated by dividing the proportion of the sample who identied Wal-Mart as best on each norm by the proportion who shopped most often at Wal-Mart. Data collection and analysis The surveys in Wurzburg and Manchester were conducted in 2002/2003 by randomly selecting households in a cluster sample design, interviewing by telephone in each household the person responsible for grocery shopping. For Manchester, household numbers with the regional code as listed in area telephone directories were selected as the universe of households. Random selection procedure and a minimum of three call-backs generated a total of 418 completed questionnaires, equalling a response rate of 20 per cent, and necessarily excluded those households, which had exchanged landlines for mobile phones. The same approach in Wurzburg resulted in 400 completed interviews equalling a response rate of 39 per cent. The lower response rate in Manchester was attributed to respondent fatigue due to greater exposure to marketing research studies in the larger UK conurbation. Data were analysed: . to establish norm importance in each local market; . to assess how well Wal-Mart and its local competitors performed on each norm; . to establish whether each economic norm was moderated by a societal norm; and . whether each of the norms was mediated by legitimacy.

A series of analytical steps were taken. First, the reasons for store patronage was assessed, resulting in a hierarchy of norms (Table III). Second, a dichotomous data set was created, where the new variables were 0/1 scores created from the responses to the 23 which store is/had . . . questions. Each time a Manchester respondent mentioned one of the four major stores (ASDA, Tesco, Sainsburys or Morrisons) in response to one of the 23 questions and had not mentioned it previously, a store-labelled data record was created. On average, each respondent mentioned 3.2 stores. The corresponding gures for the Wurzburg data were seven major stores (Aldi, Edeka, Kupsch, Lidl, Norma, Tegut and Wal-Mart) and 3.8 stores mentioned on average. Item and factor analyses were conducted to conrm which of the norm attributes represented each of the 11 norms. The 0/1 scores were then summed as appropriate to create 11 norm scale scores. Similarly, the two 0/1 legitimacy data points were summed to create a legitimacy score. Scale reliabilities were estimated by computing a coefcients. The effect of norm adherence on patronage was determined by estimating a Cox regression model where the endogenous, dependent variable was the 0/1 response to the patronage question. The exogenous, independent variables were the 11 institutional norm adherence 0/1 sum scores. The norm effect is the regression coefcient interpreted with the appropriate t-statistics (one-tailed tests, Table IV). Next, a test for the potential moderation of each of the economic norms by the community norm was undertaken. Ten cross-product, interaction terms were formed by multiplying each economic norm adherence score by the community norm adherence score. These ten interaction terms were added to the 11 norm variables and the Cox regression model re-estimated. As the coefcients for the norm scores were similar to the results shown in Table IV, only the coefcients for the interaction terms are shown in Table V. To establish whether the legitimacy construct mediates patronage behaviour, two additional models were estimated following the test for mediation described by Baron and Kenny (1986). In the rst model, the legitimacy variable was added to the 11 norm exogenous variables in Table IV and the Cox regression model was re-estimated.

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Norm Convenience (per cent) Value prices (per cent) Selection (per cent) Quality (per cent) Store environment (per cent) Service (per cent) Sales/promotions (per cent) Trust (per cent) Community (per cent) Hedonic (per cent) Advertising (per cent) Other (per cent) Total (per cent) Valid cases

Germany 2002 Wurzburg 66 44 37 23 6 6 4 3 3 1 0 2 195 400

UK 2003 Manchester 66 44 29 19 10 5 6 0 0 0 0 10 189 355

Table III. Percentage mentions of norm as rst or second most important reason for store patronage

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Norm Convenience Value prices Store environment Sales/promotions Selection Advertising Quality Service Community Hedonic Trust

Germany 2002 Wurzburg 1.71 * 0.73 * 0.40 * 0.25 0.14 * 20.06 0.12 0.68 * 0.60 * NA NA

UK 2003 Manchester 1.34 * 0.52 * 0.57 * 0.30 * 0.51 * 0.45 0.43 * 0.18 0.08 0.23 0.40

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Table IV. Institutional norm regression coefcients

Notes: NA, no measure available; *p , 0.05, one-tail test

Norm Convenience/community Value prices/community Sales and promotions/community Assortment/community Advertising/community Quality/community Environment/community Service/community Hedonic/community Trust/community Note: NA, no measure available

Germany 2002 Wurzburg 2 0.12 0.26 0.29 2 0.25 0.04 2 0.01 0.15 0.37 NA NA

UK 2003 Manchester 0.16 2 0.23 2 0.24 2 0.12 0.21 0.15 0.10 0.24 2 0.32 2 0.33

Table V. Moderation of institutional norm regression coefcients by the community norm

A necessary but not sufcient condition for mediation of a norm is that there will be a statistically signicant reduction in the regression coefcient from the model without the exogenous legitimacy variable to the model where it is included. The other condition for establishing mediation is by estimation of an ordinary least squares regression with legitimacy as the endogenous variable and the 11 norm scores as exogenous variables. It is a necessary condition that a norm with a signicant coefcient in Table IV also has to have a signicant coefcient in the ordinary least squares regression, i.e. norm adherence affects legitimacy. Table VI summarizes the result of the mediation estimations where no effect means the norm was non-signicant in either the original Cox regression in Table IV or non-signicant in the OLS legitimacy regression, none means the Cox regression coefcient was not reduced when the legitimacy variable was introduced into the equation and complete means a signicant Cox regression coefcient was reduced to non-signicance when the legitimacy variable was added to the equation. Finally, to assess whether Wal-Marts adherence to the hierarchy of norms in each market can explain the companys performance, adherence was determined in the

 Germany 2002 Wurzburg Convenience Value prices Sales and promotions Selection Advertising Quality Store environment Service Community Hedonic Trust Note: NA, no measure available None None No effect Complete No effect No effect Complete None None NA NA

UK 2003 Manchester None None None None No effect None None No effect No effect No effect No effect

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Table VI. Mediation by legitimacy

following way: rst, the proportion of each sample who identied Wal-Mart as best on a norm measure was divided by the proportion of the sample who shopped most often at Wal-Mart. This standardized index was averaged across all the measures of that norm previously identied in the item and reliability analyses. Comparison with other retailers in the respective markets then helped to assess Wal-Marts comparative performance (Tables VII and VIII). The t-statistic tested whether the two measure proportions comprising each component of the index were the same. Comparing results Sample characteristics Sample composition in Wurzburg and Manchester were slightly different. Among the respondents in the former, the younger age groups (16-34 years) were well represented according to the overall survey area population, whereas they were under-represented in the latter. Manchester respondents in the middle age groups (35-64 years) were

Norms Convenience Value prices Sales/promotions Selection Advertising Quality Store environment Service Community Hedonic Trust

Wal-Mart 0.76 * 1.26 * 1.01 1.08 0.97 0.68 * 0.98 1.11 1.52 * 1.10 1.17

Tesco 1.0 0.73 * 0.68 * 1.14 0.78 * 0.82 0.93 0.83 1.07 0.91 0.92

Sainsbury 0.96 0.56 * 0.76 1.10 1.0 1.55 * 1.13 0.99 0.78 1.14 1.09

Morrisons 0.61 * 1.03 1.16 0.93 0.82 0.94 0.95 0.88 0.47 * 1.06 0.67 *

Safeway (now Morrisons) 1.61 0.45 * 1.30 0.68 1.53 0.59 0.77 0.70 0.30 * 0.55 0.14 *

Aldi 1.53 5.07 * 2.05 0.08 * 3.12 * 0.87 * 0.56 1.46 0.13 * 0.19 * 0.68

Note: *p , 0.05 one-tail test

Table VII. NAIs for UK grocery multiples, Manchester, 2003

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Norms Convenience Value prices Sales/promotions Selection Advertising Quality Store environment Service Community Trust

Wal-Mart 0.49 * 0.97 1.83 * 3.78 * 3.19 * 0.90 1.01 1.38 1.08 2.64 *

Tegut 1.08 0.45 * 0.24 * 1.79 * 1.01 2.54 * 1.50 * 1.66 * 1.70 * 0.37 *

Kupsch 1.60 * 0.11 * 0.11 * 0.87 1.25 1.26 * 1.10 1.46 * 2.60 * 0.35 *

Aldi 0.43 * 2.52 * 2.18 * 0.18 * 1.17 0.50 * 1.10 0.52 * 0.10 * 1.95 *

Lidl 0.97 1.02 0.82 0.24 * 0.50 * 0.46 * 0.68 0.45 * 0.08 * 0.74

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Table VIII. NAIs for German grocery multiples, Wurzburg, 2002

Note: *p , 0.05 one-tail test

over-represented with 56 per cent as compared to a local population of 38 per cent (2001 UK census data). The same holds true for Wurzburg: 52 per cent of the respondents in Wurzburg belonged to that age group compared to 43 per cent among the total population (gures for 2002). Respondents over 65 years were under-represented in Wurzburg (13 vs 19 per cent) while for Manchester more respondents in that age group were found than in the national and local population (30 vs 15 per cent). Both samples showed a one third male and two thirds female split as compared to women making up 55 per cent of the population in Wurzburg and 51 per cent in Manchester. This ratio correlates with the higher share of women being the main active economic shoppers in a household. Whilst in principle the drawing of a random sample from a population is hoped to ensure reasonable representativeness of respondents, the telephone survey method can skew the sample characteristics, as seen above. Not only is the older age group over-represented but shoppers who have exchanged landlines for mobile phones are excluded. Nevertheless, further statistical analysis, which is outside the scope of this paper, suggests no major effect on the survey results. Popularity of stores Figure 1 shows the percentage share of shoppers for major supermarkets (plus Aldi) in Manchester in comparison to UK average market share. Market leader Tesco (31 per cent) was ahead of Asda (26 per cent), which exceeded their national average by 10 per cent. This can be linked to the historical roots and store density of the group in the north of the country. Likewise, the below and above UK average performances for Sainsbury (14 per cent) and Morissons (14 per cent) can be related to their heartlands being in the south of UK for the former and the north for the latter. Aldis popularity matches the national average with 2 per cent. Figure 2 shows Wal-Mart well behind the competition in Wurzburg, with only 9 per cent of respondents shopping at their stores most often (but above their national market share of just 2 per cent). This is most likely a reection of the uneven Wal-Mart store density across the country as a whole. Edeka-Neukaufs two Wurzburg based retail chains Kupsch and Edeka are the most important shopping destinations for just over a quarter of all respondents. Aldi is the single most important retailer in

 Wurzburg, exceeding the national average. The regional supermarket chain Tegut achieves a number three ranking, whilst nationally it is 20th. Norm importance in different markets The results of tabulating the norms mentioned as rst or second most important in shopping at the store shopped most often are found in Table III. Certain commonalities characterize shoppers in Wurzburg and Manchester in this rst approach to determining the institutional norms affecting retail patronage. Two thirds of respondents mentioned convenience as most important followed by price. Selection and quality rank third or fourth whereas store environment, service, sales and promotions are clustered together at a fth level. The remaining norms were mentioned by less than 5 per cent of each sample. In terms of reliability coefcients the norms of value prices, sales and promotions, selection, quality, store environment as well as the legitimacy measure have acceptable as in the 0.6-0.7 range. The Cox regression models again highlight the primary signicance of the convenience norm (Table IV). At a secondary level the value prices norm is important in Wurzburg, whereas in Manchester store environment occupies that rank. Particularly noticeable are the differences in the service and community norms, which move up the hierarchy in Wurzburg but remain insignicant in Manchester. The selection norm still performs strongly in UK environment but slips down the scale in the German locality. Interestingly, the quality norm gains in importance in Manchester but is insignicant in Wurzburg. Finally, the norms of hedonism and trust included in the Europen studies is not signicant in any of the contexts. Overall, according to the Cox regression approach, the importance of institutional norms in the two markets vary signicantly beyond the convenience level. Moderation and mediation of norms In response to Handelman and Arnolds (1999) research, the role of moderation of economic norms through the community norm and mediation by legitimacy were investigated. Table V displays no moderation by the community norm and Table VI shows no evidence of mediation of either the primary convenience or value prices norms. These two norms directly affect patronage, underlining their importance. Adherence of grocery retailers to economic and societal norms Finally, Tables VII and VIII present the norm adherence indices (NAIs) of Wal-Mart and its UK subsiduary Asda together with those of their most prominent competitors in Manchester and Wurzburg. A score of one means that the retailers are performing as would be expected given their share of shoppers. A score above one indicates superior and below one inferior performance on a particular norm. For the convenience norm a score of less than one means that consumers by-pass other stores to reach a particular outlet. In Wurzburg and Manchester, consumers are willing to travel further to shop at Wal-Mart. In Manchester, the company performs strongly on the community and value prices norms but underperforms in quality and advertising, with the latter being no surprise given the retailers EDLP strategy. In Wurzburg, the NAIs for selection, advertising and trust are particularly high but performance on value prices is low.

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Amongst the key competitors, market leader Tesco was slightly under performing on the majority of norms, and most notably on the price norm. Conversely, Sainsbury was out performing on most norms, however, also not on price. Aldi performed well on all price related norms and rather surprisingly outperforms the competition on the service norm. A possible if anecdotal explanation is the relationship customers build with a limited and less frequently changing number of store staff. In Wurzburg, a clearly differentiated market position for each company related to store format exists, which could be linked to strength on certain patronage norms: discounter Aldi is the leader for value prices, Kupsch as the small, local neighbourhood store outperforms all others on the community and convenience norms. Tegut on place three, is the number one regarding quality, service and store environment. Particularly noteworthy is Kupschs second position with regard to shopper patronage frequency as detailed in Figure 2, given that the retailer signicantly underperforms on the important price and selection norms. Discussion The study set out to assess Wal-Marts performance in the European market at the beginning of this decade and explain the different market positions through analysing store patronage behaviour. The following discussion considers the results at three levels: (1) The importance of norm variations across markets and its relevance for international retailer strategy is assessed. (2) The link between retailer norm adherence and market position is scrutinized. (3) The usefulness of institutional theory constructs for analyzing (international) retailer success is evaluated. Norm similarities and variations The survey data suggests that the key economic norms of convenience and value prices were not only of equal importance across the survey areas but were also not mediated by any other factors. This conrms Arnolds (2004) North American results and Fernie and Piochs (2006) data, suggesting that for grocery shopping, consumers prioritise convenience. Hence, a dense and conveniently accessible store network seemed to top the list for grocery retail success. This would at least partially explain Wal-Marts low patronage share in Wurzburg, where the company only had two outlets. In contrast, however, Aldi with nine stores attracts more consumers than Kupsch with 18, suggesting that convenience alone does not determine store patronage. The saliency of the price norm is also in line with other grocery market data for UK and Germany at the survey time (IGD, 2004, 2005; Nielsen, 2003; Competition Commission, 2000). The results concerning all other factors are more heterogeneous and suggest that it is impossible to generalise norm saliency for grocery shopping in international markets beyond the two key economic norms. For grocery retailers wishing to internationalize, this means that adopting a standardized approach is likely to lead to market success only if the retailers marketing proposition either coincides with the norm saliencies in the chosen destination or is able to invoke the market spoiler effect. Wal-Marts approach is a case in point. In the North American context, where the retailer was able

to inuence consumer preferences and act as market spoiler (Arnold et al., 1998), the standardized marketing strategy yielded unprecedented success. In UK, where in the late 1990s, norms were already shifting towards price dominance, Wal-Marts propositions tted well. In Germany, however, the company neither managed to shift consumer preferences nor adhered to differing norm saliency, resulting in market exit. Norm adherence and market position Institutional theory suggests a correlation between retailer adherence to salient norms and patronage, and seems to be able to explain at least in part Wal-Marts fate in Germany. Wal-Mart in Wurzburg outperformed on most of the norms linked to their marketing strategy, however, they were not able to inuence norm saliency through the market spoiler effect (compare also Knorr and Arndt, 2003; Gerhard and Hahn, 2005). Additionally, on the relative important quality norm, Tegut and Kupsch excelled. Wal-Marts low store density confounded their troubles. In Manchester, Asda also performed well on patronage norms related to their strategy, and either outperformed its main rivals on the majority of norms or operated at similar levels. However, the stated aim to reach number one position was not achieved in the survey area or nationally. As in Wurzburg, the high scores on the (less salient) service and societal norms seem not to substantially inuence patronage. Although the results add a patronage behaviour dimension to other analyses of Wal-Marts problems in Germany, stressing external factors as well as internal problems (Knorr and Arndt, 2003), for the Manchester data, this correlation is not evident. Asdas high scores on most norms did not result in rst place for consumer choice. Tesco occupied this position despite underperforming on most norms, whilst Aldis unrivalled leadership on the price norm is not reected in its share of shoppers. The correlation between retailer adherence to institutional norms and share of shoppers as suggested in institutional theory and demonstrated in North America is not as obvious in the European contexts and particularly weak in Manchester. However, the institutional lens, rather than identifying or explaining correlations between norm adherence and success, seems to be more perceptive in pinpointing market failure (as for Wal-Mart in Germany and Safeway in UK) and in identifying niche players strength and weaknesses (e.g. Aldi in Manchester and Kupsch in Wurzburg). Far more complex relationships related to overall market conditions than investigated here seem to inuence patronage behaviour. Relevance of institutional theory constructs The norm saliencies established for each market mapped well onto other marketing data for the survey areas, thus suggesting that the measurement tools and constructs were reliable. However, there was no evidence that societal norms (community, hedonism, trust) were signicant. These norms had been added to the more established economic norms (Koppelman and Hauser, 1978; Hackett et al., 1993) in response to previous research and particularly as Wal-Marts strategy emphasized the community norm and seemed an important factor in the companys North American success. Conceptually linked to the importance attributed to societal norms and particularly to the community construct is the proposition made by Handelman and Arnold (1999) that the latter moderates economic norms. Again, there was no evidence in the current data for this assumption.

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A number of reasons may account for this. Jin and Kims (2003) research, introducing hedonic attributes, investigated a different geographical and cultural zone and Handelman and Arnolds (1999) work related to non-food. Hence, it could be argued that the importance of the community and further societal norms may be linked to product categories and cultural specities. Grocery retailing in Europe is dominated by economic norms and thus the investigation of societal norms is marginal and could be excluded from further work. However, given the signicance sustainability as well as green and health credentials have gained (IGD, 2007) it may be premature to disregard societal norms altogether. Rather, the attributes that dene these norms should be reconsidered in future work. Legitimacy was identied as another crucial construct of institutional theory through which social actors endorse organisations. Signicantly, no (or very limited) mediation of economic norms was evident in the European grocery shopping context, endorsing again the primary importance of economic norms. As was argued with regards to moderation by the community norm, in an altered context emphasizing environmental and health concerns, the legitimacy construct may assume increased signicance. Whilst studies in North America provided evidence for the explanatory power of institutional theory in a retail context, the European survey outcomes were far more ambiguous. In the more differentiated German (Wurzburg) market, the link between norm adherence and positive patronage behaviour appears stronger (see Aldis performance in particular) than in the more homogenous UK (Manchester) market. It could thus be argued that in a less differentiated market, the explanatory power of institutional theory is weak in explaining success. As could be expected, adherence to salient institutional norms is a pre-requisite to staying on a par with competitors but even over-performance on those norms does not necessarily mean market leadership. Adherence to less important norms, especially the societal norms, does not necessarily increase patronage. The institutional lens highlights that signicant non-performance on key norms results in market failure (e.g. Safeway being taken over by Morrison; Wal-Mart exiting the German market) or is linked to niche performance (e.g. Aldi in UK). Conclusions Two localised European studies on Wal-Marts performance using the constructs of institutional theory resulted in rst, the establishment of salient patronage norms, second, a discussion of retailer adherence to these norms and third, an evaluation of the relevance of the theoretical constructs employed. With regards to the rst issue, ve key points emerged: (1) Norm saliency in grocery shopping was heterogeneous across markets beyond a couple of key norms. (2) Societal norms were not as important as assumed. (3) Linked to the previous point was the lack of moderation of economic norms through the community norm. (4) There was a near absence of mediation of norms through the legitimacy construct.

(5) The relationship between retailer norm adherence and market position in a European context was less obvious than the results from North American studies suggested. At a company level it was difcult to clearly relate Wal-Marts (or most other companies) success purely through the constructs of institutional theory. Other external and internal factors have to be considered. However, there was strong evidence to explain failure and market exit. At the theoretical level, the study highlighted the ability of institutional theory constructs to ascertain insights into patronage norms and to establish the overwhelming signicance of economic parameters in grocery shopping at a particular point in time. The complex relationship between norm adherence, patronage behaviour and market position (including success/failure), however, cannot be purely determined by investigating only two social actors (i.e. consumer and retailer). Further studies need to consider the process of norm creation together with external market pressures and internal capabilities as proposed in international retailing concepts, stressing either corporate (Alexander and Myers, 2000) or behavioural (Vida and Fairhurst, 1998) perspectives. This should include the reassesment of the relevance of norms and their attributes taking account of changing market conditions. The institutional theory approach also needs further elaboration in different contexts, for example in fast developing Indian and Chinese markets as well as product categories. Only then can the overall utility of the concept to explain international retailer success be determined. Nevertheless, the current study has highlighted a strong correlation between retailer underperformance on key economic norms and market exit. Thus, investigating norm saliency in patronage behaviour across different markets (and products) can constitute a valuable tool in the repertoire of the divestment and failure literature.
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