i

STORE ENVIRONMENT AND CUSTOMERS

PERCEPTION: A STUDY OF RETAIL STORES IN
KATHMANDU

Jamuna Manandhar
Exam Roll No: 15570019
PU Registration No: 2015-2-57-0019

A Graduate Research Proposal Submitted to

Ace Institute of Management
Pokhara University

Submitted for the degree of

Master of Business Administration (MBA)

Kathmandu
January, 2019
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ACKNOWLEDGEMENTS

This Graduate Research Project Report entitled “Store Environment and Consumer
Perception: A Study of Retail Stores in Kathmandu” has been prepared in the form as
required by the Pokhara University, in the partial fulfillment for degree of Masters of
Business Administration. I would like to express my sincere gratitude to all those who
have helped me in preparation of this Graduate Research report and have been a source of
inspiration for me to complete this work and assisted me in my study from their different
fields of life.

First, I would like to express my heartfelt gratitude to my supervisor Mr. Rabindra Silwal
for his continuous guidance, encouragement and valuable feedback without which the
completion of this research would not have been possible. This Graduate Research
Project could not have been completed without his constant encouragement, guidance and
valuable supervision at every stage of my work. I also acknowledge our Ace Research
Center for its immense support and guidance through this research.

I am thankful to all the respondents for their time. I’m thankful that they patiently and
honestly filled the questionnaire presented to them.

Thanking All.

Sincerely,

Jamuna Manandhar
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CERTIFICATE OF AUTHORSHIP

I hereby declare that this submission is my own work and that, is to the best of my
knowledge and belief, it contains no material previously published or written by another
person nor material which to a substantial extent has been accepted for the award of any
other degree of a university or other institution of higher learning, except where due to
acknowledgements.

……………..……………………

Jamuna Manandhar

Exam Roll no: 15570019

P.U. Reg. No. 2015-2-57-0019

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APPROVAL SHEET

Recommendation for Approval

This GRP report prepared and submitted by Jamuna Manandhar in partial fulfillment of
the requirements for the degree of Master of Business Administration has been
supervised by me and recommends it for acceptance.

Mr. Rabindra Silwal

Acceptance of the External Examiner

I approve the GRP submitted by Jamuna Manandhar. The grade sheet has been submitted
to the Dean, School of Business, Pokhara University through the college on a separate
evaluation sheet.

Name of External Examiner:

Viva Examination
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The candidate has successfully defended the GRP. We recommend it for acceptance. The
grade sheet has been submitted to Dean, Pokhara University through the college on a
separate evaluation sheet.

External Examiner:
GRP Advisor:
Other members:
Date:

TABLE OF CONTENTS

ACKNOWLEDGEMENTS..................................................................................................i
CERTIFICATE OF AUTHORSHIP...................................................................................ii
APPROVAL SHEET.........................................................................................................iii
TABLE OF CONTENTS...................................................................................................iv
LIST OF TABLES..............................................................................................................vi
LIST OF FIGURES...........................................................................................................vii
ABBREVIATION............................................................................................................viii
EXECUTIVE SUMMARY..................................................................................................i
CHAPTER I.........................................................................................................................1
INTRODUCTION...............................................................................................................1
Background of the Study............................................................................................................1
Statement of the Problems.........................................................................................................3
Objectives of the Study...............................................................................................................4
Significance of the Study.............................................................................................................5
Research Hypothesis...................................................................................................................5
Limitations of the Study..............................................................................................................6
Operational Definitions...............................................................................................................6
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Structure of the Study................................................................................................................7

CHAPTER II.......................................................................................................................9
LITERATURE REVIEWANDTHEORETICAL FRAMEWORK.....................................9
Literature Review.......................................................................................................................9
Store environment and Customers’ Perception......................................................................9
Typology of Store Environmental Factors.............................................................................11
Social Factor..........................................................................................................................18
Customer Perceived Value....................................................................................................20
Customer Behavioral Responses...........................................................................................22
Research Gap............................................................................................................................23
Theoretical Framework.............................................................................................................24
Independent Variables..........................................................................................................26
Dependent Variables............................................................................................................27
CHAPTER III....................................................................................................................29
RESEARCH METHODOLOGY......................................................................................29
Research Plan and Design.........................................................................................................29
Population and Sample Size......................................................................................................29
Population............................................................................................................................30
Sample Size...........................................................................................................................30
Data Collection Procedures......................................................................................................30
Primary Data Collection........................................................................................................31
Secondary Data Collection....................................................................................................31
Instrumentation of Data...........................................................................................................31
Validity and Reliability..............................................................................................................32
Data Analysis Methods.............................................................................................................33
Chapter IV.........................................................................................................................34
Data Analysis and Findings...............................................................................................34
Respondents’ Demographic Profile..........................................................................................34
Descriptive Analysis..................................................................................................................36
Analysis of Three Major Store Environmental Factors..............................................................45
Summary of Hypothesis....................................................................................................53
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H1: Design Factors have significant effect on customers’ perception of the store...........53
CHAPTER V.....................................................................................................................55
SUMMARY AND CONCLUSION..................................................................................55
Summary of Findings................................................................................................................55
Conclusion................................................................................................................................56
Recommendations for Further Study........................................................................................58
REFERENCES..................................................................................................................59

LIST OF TABLES
Table 1: Descriptive Analysis by Gender.................................................................................32
Table 2: Descriptive Analysis of Age.......................................................................................32
Table 3: Descriptive Analysis of Educational Qualification....................................................33
Table 4: Descriptive Analysis of Occupation...........................................................................33
Table 5: Descriptive Analysis of Layout..................................................................................34
Table 6:Descriptive Analysis of Display..................................................................................34
Table 7:Descriptive Analysis of Color......................................................................................35
Table 8: Descriptive Analysis of Lighting................................................................................35
Table 9: Descriptive Analysis of Music....................................................................................36
Table 10:Descriptive Analysis of Cleanliness..........................................................................37
Table 11:Descriptive Analysis of Fragrance.............................................................................37
Table 12:Descriptive Analysis of Employee Attribute.............................................................38
Table 13:Descriptive Analysis of Employee Behavior.............................................................38
Table 14:Descriptive Analysis of Consumer Perception..........................................................39
Table 15:Descriptive Analysis of Design Factor......................................................................40
Table 16: Descriptive Analysis of Ambient Factor..................................................................40
Table 17:Descriptive Analysis of Social Factor.......................................................................41
Table 18:Correlation between Dependent and Independent Variable......................................42
Table 19:Regression Analysis of Different Variables..............................................................43
Table 20:Summary of Hypothesis.............................................................................................44
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LIST OF FIGURES

Figure 1: Conceptual Framework.............................................................................................25

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ABBREVIATION

S-O-R Model : Stimulus Organism Response Model

PAD : Pleasure Arousal and Dominance
SPSS : Statistical Packages for Social Sciences
Q-Q Plot : Quantile-Quantile Plot

VIF : Variance Inflation Factor

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EXECUTIVE SUMMARY

To be successful, an organization must build a loyal customer base by satisfying its

customers at every service encounter and positively influencing their perceptions about
their organization. It is very important to know what a customer’s think or has made an
impression regarding the product and services. Creating a positive perception of an
organization quality depends on a number of factors, one of which is the physical
environment of the place where services are received. This graduate research project
entitled “Store Environment and Customers’ Perception” is survey-based research study.
This study focuses on inspecting the store environmental factors that affects the
customers’ perception about retail store in Kathmandu.

The objective of this study is to determine whether the interior environment of an

organization is responsible for building positive perception on customers or not. It
focuses on the relationship of the independent variables of store environment factors and
the identified dependent variable customer’s perception. The theoretical framework rests
on literature of store environment and its impact on consumer perception. With the theory
as a base a questionnaire was constructed that would examine customer perceptions about
the retail store. For the purpose of this research, quantitative research method is adapted.
The empirical data was gathered by sending out questionnaire to individuals in
Kathmandu and analyzed using the data analysis software program SPSS.

In the survey, a sample of 150 respondents was used. Convenient sampling was applied
for gathering the responses which were collected both from online and printed
questionnaire. Descriptive and inferential analysis was performed with the help SPSS
software. Data are presented using tables. Hypotheses were also tested in the study by
finding out the correlation and regression analysis between the dependent and
independent variables. Among three independent variables, design factor was found to
have insignificant relation with consumer perception. Whereas, ambience factors and
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social factors are found to have significant contribution on forming positive perception
about the service quality. Conclusions and recommendations were thereafter drawn from
the literature and the findings of the study.

The study has included three major dimensions namely design, ambience and social
factors. The study revealed that among the design variables, display is most important
variable that affect the perception of customers. Similarly, among the ambience factors,
cleanliness plays a vital role in forming the positive perception. And, within the social
factors, respondents considered behavior of employees important to draw the positive
perception about a store.

A favorable store environment affects the perception of a retail store in a positive way.
Customers highly consider design, ambience and social factors while evaluating the
quality of the service provided by an organization. It is important for an organization to
build the appropriate store environment in order to attract customers and form a positive
perception about them. This study will help service organization to develop an advanced
store environment that creates a positive impression about them and thereby increases the
value of the organization.
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CHAPTER I
INTRODUCTION

Background of the Study

In today’s dynamic and competitive business environment, retailers need to differentiate

themselves and must have comprehensive knowledge concerning the image of any
particular store that influences the customers’ store choice, purchase intention, and
loyalty toward their preferred stores (Pan and Zinkhan, 2006). Moreover, with the
changing behavioral phenomenon, it is very crucial for the retailers to develop a clear
image in the shoppers’ mind towards their store for having a strong impact on their
behavior.

Many retailers acknowledge the importance of store environment as a tool for market
differentiation (Levy and Weitz 1995). Store environment, the physical surroundings of a
store, is made up of many elements, including music, lighting, layout, directional signage
and human elements, and can also be divided into external environment and internal
environment (that is, exterior and interior of a store) (Lam,2001). The effects of store
environmental elements are complex.

There are various models stating the importance of store environment in the customer’s
perceptions and behavior within the store. The design of business environment could
produce unique emotional impacts in customers’ minds and could increase buying
possibilities. Baker (1986) categorized the store environmental factors into three
categories:
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1. Design Factor: layout, color and design

2. Ambient Factor: cleanliness, music, noise and lighting
3. Social Factor: number, type and behavior of employees

Customer perception describes how customers and potential customers view a company
and its products and services. Positive perception about company helps to increase the
customer loyalty and also contributes in profitability of the business. If customers have
negative perception towards the business then it hampers the revenue and the success of
the firm. For instance, the positive opinion about a specific food joint in town will result
in greater business while a negative view about a specific product or company will lead
to its losses.

Consumer perception not only influences store image but also affects the performance
and profitability of the business. This is the reasons why large business houses spend
huge amounts of money to influence the perceptions of consumers. Therefore,
understanding consumer perception is important for all kinds of business as well as
service organizations. Similarly, it is equally important for retail business.

Sirgy et al. (2000) suggest that the overall environment of a store can create a favorable
consuming context and generate positive perceptive emotions about the store among
consumers. Store environmental factors can influence the subjective feelings experienced
by consumers in the store and influence the shopping intention, consumption amount,
perceived quality, satisfaction, and shopping value (Babin and Attaway, 2000). A
pleasant store atmosphere can prolong the time consumers spend in the store, increasing
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the likelihood that the consumer will find something he or she needs, as well as
increasing impulse buying.

Store environment may also influence the number of items purchased, store liking, time
and money spent (Sherman, Mathur and Smith, 1997), perceived quality of merchandise
and patronage (Baker, Grewal and Parasuraman, 1994); sales, product evaluation
(Wheatley and Chiu, 1977), satisfaction (Bitner, 1990), and store choice (Darden, Erdem
and Darden, 1983). So, the main concern of this study is to explore factors that
influencing store environment perception in Nepalese chain retail stores especially
located in the capital. The retail store indicates supermarkets, apparel stores and
departmental stores of Kathmandu. The study will mainly focus on the three major
factors of store environment which are ambient, design and social factors and how these
are perceived by Nepalese customers.

The remainder of this study is organized in this way: First, the theoretical background
and conceptual framework was reviewed. Then some hypotheses were developed and
tested. After that data was collected from the structured questionnaire distributed to
potential respondents. The last section has presented the findings, results and conclusion.

Statement of the Problems

Retail is a fast-growing industry that is expanding each day. Customer perception has a
huge influence on a customer’s retail preference. It is important for retailers to know
what the customers’ preference is in order to acknowledge future demands and shape
their marketing strategies accordingly (Schiffman and Kanuk, 2007). Competition for
customer in retail store business is intense and considerable research has been conducted
on how to attract and maintain their customers. The customers will prefer that retail store
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if they perceive that the services they will receive will be of high quality (Dohetry, 2007).
This shows that customer perception is an important factor in retail sector.

Customers choose a store according to their perception and requirement. It is the

responsibility of the store to understand the behavior and perception of customer in order
to attract them and satisfy their needs and wants. Consumers prefer stores, which provide
them with efficient and effective services. Effective can be defined as an adequate to
accomplish a purpose; producing the intended result. Whereas, efficient can be
understood as performing or functioning in the best possible manner with the least waste
of time and effort. In short, being effective is about doing the right things, while being
efficient is about doing things right.

Store environment is one of the factors that can positively or negatively influence
customers. It refers to the effort to design buying environments that can positively
influence the shoppers’ emotions and feelings which in turn influence their purchasing
behavior. The store environment includes all ambient, design and social factors outside
and inside a store. Understanding these factors is a valuable goal for service
establishments; businesses seeking to attract customers must understand what their
customers expect from their organization and consider all the factors that influence
consumers’ perception.

In light of the above, understanding consumers’ perception is of utmost importance for

retailers, to enable them to maintain their competitive edge. Consumer characteristics,
store environment, store image, store choice and retailing strategies are some of the key
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concepts that play a role in successful retailing (Schiffman and Kanuk, 2007). The
marketing mix along with the store environment attributes contribute to the overall store
image, which consumers apply to evaluate the store on a multi-attribute utility function
(Schiffman and Kanuk, 2007). Limited research has been done on the Nepalese
customers’ perception of store environment attributes. This study hence endeavors to
gather information on the relation between store environment and consumer perception in
Nepalese market. The study focuses on the influence of store design, ambience factor and
social factor on consumers’ perception about retail stores.

In this study, few questions were generated to measure the factors that can influence the
store environment and their impact on the customer’s perception. The research study was
guided by the following research question for the investigations as follows:

 Does the design factor have any effect in the customer perception of retail store?
 What is the impact of ambient factors on the customer perception about the store?
 How does the social factor of store environment affect the customer perception of the
store?

Objectives of the Study

This study was commenced to investigate the relationship between the store
environmental factors and its impact on customer’s perception of retail stores. The major
objective of the study is to determine whether the store environment of an organization is
responsible for building positive perception among its clients/consumers. Some of the
specific objectives of the study are as follows:
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 To identify the importance of design factor on customers’ perception about store

environment.
 To discover the impact of ambient factors on customers’ perception of store environment.
 To determine the significance of personal factor on customers’ perception of store
environment.

Significance of the Study

With increasing competition, retailers strive to ensure that their stores are appealing to
their target markets. As retailers are finding it increasingly difficult to create a differential
advantage on the basis of merchandise alone, the store itself plays an important role for
market differentiation. Store environment plays an important role in a customer’s
decision whether or not to enter the store.

This study demonstrates how the store environment affects the customers’ perception. It
will help retail stores to develop an advanced store environment that creates a positive
impression about the store and thereby increases the value of the business. The study will
also benefit the future researcher by adding to literature on the effects of store
environment on customers’ perception by providing empirical evidence to support the
relationship between store environmental variables (design factors, ambience factors and
social factors) and customer perception. This study will also enrich and add more to the
literature and provide useful information on various dimensions of store environment.

Research Hypothesis

Based on the review of literature given in chapter II, some variable has been identified as
determinant of store environment. It focuses on the relationship of the independent
variables of store environment factors which are store lighting, music, color, layout,
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design and the identified dependent variable customer’s perception about the store. This
research tests the following hypothesis to determine the relationship between the various
variables:

 H1: Design Factors have significant effect on customers’ perception of the store.
 H2: Ambient Factors have an effect on customers’ perception about the store.
 H3: Personal Factors have significant effect on customers’ perception of the store.

Limitations of the Study

 This research will be mainly focused on customers who live in city area. Findings may
not be applicable for the customers from rural areas.
 This research will use non-random sampling (i.e. convenient sampling). Therefore, the
sample may not reflect population correctly.
 Due to time limitation, pilot survey will be omitted. So, the validation of the
questionnaire could not be tested.
 The survey will avoid small grocery shops and clothing stores. Hence, the findings may
not be applicable for such retailers.

Operational Definitions

Customer Perception

Customer Perception is when the customer perceives the value and benefit in the product
and service you are selling and the value, they derive from that matches the price you
have set and the experience they receive (Zeithaml, Berry, and Parasuraman 1993).
Hence, customer perception is all about “How your brand is perceived by your (potential)
customers?” Aspfors (2010) measured consumer perception by store image, store loyalty,
product quality and customer service in her study. The same measures were used in this
research.
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Store Environment

The store environment is related to the image of the facility that includes extrinsic cues
which influence the customer’s perception and satisfaction of the service (Harrell, Hutt,
and Anderson, 1980). The perceptions customers create are created through the
environment (music, color, scent and crowding), atmosphere and physical attractiveness
of the store (Baker, 2002). Hence, the store environment has been analyzed in terms of
ambient, design and personal factors inside and outside a store.

Design Factor

The aesthetic feelings that could be perceived by customers directly, including style,
layout and architectural etc. is called design factor (Chen and Hsieh, 2011). Baker (1986)
classified design factor into aesthetics and functional and defined ten measures under
these two categories. But among them, the layout, color and displays of the store were
measured under this study.

Ambience Factor

Ambience relates to non-visual elements of a store’s environment like lighting,

smell/scent, temperature, noise, and music (Tlapana, 2009). This study considered
cleanliness, lightings, music and fragrance under this factor.
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Social Factor

The factors related to people in the environment which includes store employees is called
personal/social factor. The number, type and behavior of people are proposed to influence
customers’ perceptions of stores (Mirabi and Samiey,2015). Baker (1986) measured this
factor into two ways; one is audience that is other customers and other is service
personnel. This study focused on only service personnel that was further measured by
appearance of employees and staff friendliness.

Structure of the Study

The study was divided into following 5 chapters:

Chapter I: Introduction

This chapter includes the introduction of the entire thesis work, such as overview of the
main area of the study that describes the general background of the role of store
environment in the perception of service quality. Beside these things it also includes the
objectives, statement of the problem, research objectives, research questions and
hypothesis, significance of the study and limitations of the study.

Chapter II: Literature Review and Conceptual Framework

It includes the main introductory contents of the topic on which we have focused our
work so that it can explain what the theoretical concepts has been carried out. This
chapter presents the overview of literature to each of the research question.
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Chapter III: Research Design and Methodology

This chapter will include all the topics describing how the entire data have been collected
and designed to carry out the entire tasks of the thesis report work. This chapter will be
followed by research design, population, statistical analysis, research strategies, data
collection method, sample collection, data analysis and measurement of variables of the
study.

Chapter IV: Results and Discussion

It will incorporate the entire contents related to data presentation and analysis. Statistical
tools and techniques have been used for the purpose of analyzing the reliability and
results of the data and information. Simple descriptive analysis of frequency distribution
of relevant information supplemented by percentage and compared means were used. The
test results have been used in concluding the research and interpreting results of the
research.

Chapter V: Summary and Conclusion

It involves the latest contents of the entire report. It comprises of summary, conclusions
based on the research question and the chapter ends with the recommendations. This
chapter is based on the interpretation and findings of results. The implication and purpose
of the research is included in this chapter. The chapter also include a review of the future
importance of the research.
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CHAPTER II

LITERATURE REVIEWANDTHEORETICAL
FRAMEWORK

This chapter deals with review of the prior studies conducted by different researchers and
theoretical framework upon which the current study is grounded. The current chapter
starts with the discussion of the service quality in terms of conceptualization and
measurement. It reviews prior studies that focused on the service environment of an
organization and customers’ perception and behavior. Finally, it presents and explains the
conceptual framework of the study.

Literature Review

Store environment and Customers’ Perception

Store environment refers to the physical surroundings, composed of elements like music,
lighting, layout, symbols and human beings. Physical aspects of retailer include
appearance of equipment and fixtures, physical facilities, materials associated with the
service, appearance of personnel and communication materials, convenience of physical
facilities and layouts. In addition to the appearance of the facilities, it also takes into
account the convenience offered the customer by the layout of physical facilities (Ananth,
Ramesh, and Prabaharan, 2010). The higher customers appreciate on the physical aspects,
the higher the overall evaluation of retail service quality is (Bellini, Lunardi,and
Henrique, 2005).
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Schiffman and Kanuk (2007) described perception as the stages that a customer or a
person undergoes in selecting, rearranging, and interpreting external triggers into a
cohesive picture. People generally interpret truth based on perception rather than the
actual reality. Thereby whenever a customer buys a product or visits a store it depends on
the perception they have on that particular product or store.

Hutton and Richardson (1995) found that the physical setting and sensory stimuli present
in healthcare facilities influenced patient behavior, positive encounters lead to greater
customer satisfaction and a higher assessment of service quality, and satisfied patients
were more likely to return to the facility in the future. Like wisely, Wakefield and
Blodgett (1996) tested the servicescape model in leisure settings. Bitner (1992) coined
the term “servicescapes” in reference to the physical surroundings fashioned by retailers
to facilitate the service offering to consumers. They examined the effects of layout,
aesthetics, electronic displays, seating, and cleanliness on consumers’ perceptions and
found that the servicescape has a relatively consistent and strong effect on the length of
time customers desire to stay in the leisure service setting and on their repatronage
intentions. They mentioned about importance of environment in creating positive
customer perception in service organizations such as health sector and leisure setting. But
they did not mention exactly about the retail store.

However, many researchers have conducted study regarding retail stores and impact of its
environment on their customers in different countries. Donovan and Rossiter (1982)
found in their research that creating a pleasant and stimulating store environment has an
impact on the time and money spent in the store, on top of that it also affects shopping
enjoyment, enthusiasm to speak to employees, spending additional money and on the
possibility of returning to the store (Peter and Olson, 2005).But they did not mentioned
about the threat related to poor environment in this competitive market. This issue was
talked by other researches. Davies and Ward (2002) mentioned a poor environment
compared to competitors located close by, have a larger effect on purchase decisions than
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a pleasant environment. They further clarified that a poor environment can affect
customers to that extent that they actually choose another store for their purchases.

Despite the great importance of understanding the role of store environment for positive
customer perception, very less research has been conducted in this area in Nepal.
Therefore, this study aims to provide information regarding whether there is positive or
negative relation between store environment and perception of Nepalese customers. It
will make us clear whether the result will be similar to previous studies of Donovan and
Rossiter (1982) and (Peter and Olson, 2005) or not.

Typology of Store Environmental Factors

The store environment, defined broadly as the physical and ambient elements within the
control of a service establishment may have strong influence on the customers’
perception of retail stores. With the increase in customer’s expectations, more value-
added facilities are required to enhance company’s image. There are different design
requirements for different types of stores. Prior studies have considered the variables like
color, lightings, music, crowding, and behavior of employees for analyzing the store
environment. Several prior studies are useful to classify these store environmental
components.

Kotler (1973) categorized store atmospherics into four dimensions according to

customers’ sensory channels to an environment. They were Visual, Aural, Olfactory and
Tactile. The Visual environment included Color, Brightness, Size and Shapes. Whereas
Aural included Volume and Pitch, Olfactory included Scent and Freshness and Tactile
included Softness, Smoothness and Temperature. But the classification of Kotler (1974)
does not include social factor/human factor in his study.
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On the other hand, Baker (1986) introduced social factor in his study and proved its
importance. He provided another typology for differentiating store environmental factors
according to the antecedents that stimulate customers’ response. The store environment
was classified into Ambient Factor (Non-visual elements like scent, music, temperature
and lighting, etc.), Social Factor (People present in the shopping environment including
sales staff and other customers, etc.) and Design Factor (Other visual elements, like store
layout, fitting room signage, color scheme, fixtures, and merchandise display, etc.).

Bitner (1992) separated physical environment into three categories: Ambient conditions
(background music, noise, temperature, lighting and odor etc.), spatial layout and
functionality (the layout of mechanical equipment, facilities, furniture and furnishings
etc.) and Signs, symbols and artifacts (Signboards, symbols, etc.). This classification
focused more on spatial layout and sign and symbols and ignored social factor like Kotler
(1974).

The typology completed by Turley and Milliman (2000) put emphasis in management
prospect which is a new perspective then former research. They separated the
atmospherics into five categories that allowed managers to identify their retail element
according to their location and physical functions. They were external variables, internal
variables, layout and design variables, point-of-purchase and decoration variables and
human variable. However, this typology may ignore the way atmospherics interact with
customers and it is believed that there are confusions between general interior variables,
layout and design variables and point-of-purchase and decoration variables.
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Berman and Evans (2009) made revisions and added supplementsto Turley and Milliman
‘s (2000) conclusions. They summarizedenvironmental factors into four categories:
exterior of the store, general interior, layout and design variables and point-of-purchase
and decoration variables. This study clarified the confusions created by previous study.
The general interior variables included flooring and carpeting, lighting, scents, music,
temperature, cleanliness, wall composition and color schemes. And the layout and design
variables included space design and allocation, placement of equipment, grouping of
merchandise, waiting rooms, waiting ques and furniture. Whereas the point-of-purchase
and decoration variables included products displays, point-of-purchase displays signs and
cards, artwork, and price displays.

Among these typologies, Baker’s typology (1986) and Bitner’s topology (1992) are more
practical for this research. This research will be guided by differentiating variables into
three categories which include design factor, ambient factor and social factor. Baker
(1986) gave a definition for each factor and further separated design factor into functional
and aesthetic factors, and social factor into employees and other people in store.
Therefore, most of the in-store elements can be classified easily and the effects of these
factors to customers can also be identified easily. Customers are affected by design factor
because they see it; by ambient factor because they feel it; by social factor because they
interact with it. Hence, this paper will deal with how impactful are these factors for
Nepalese consumers in terms of retail store.

Design Factors

A good environment design could convey the brand image and quality signals to target
customers. Convenient movements, relaxing space design, and delicate layout would
strengthen customers’ confidence that the store is capable of completing what they
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promise to do for customers (Lina and Chiangb, 2010). In a store featuring a comfortable
design and atmosphere, customers are more likely to trust the services provided and truly
enjoy themselves in the consumption process Baker (1986). Baker et al. (2002) have
investigated design factor as an overall perception to customers. The result showed that
design perception had a significant effect on the merchandise value perception and store
patronage intentions. A sophisticatedly-designed store environment can stimulate a
change in emotional state and in turn affect the perceptions of store value (Lina and
Chiangb, 2010).

Layout

Facility layout and functionality are generally referred to as the way in which equipment
and furnishings are arranged and ability of those items to facilitate customer’s enjoyment.
They are often perceived through (signage and symbols) décor intended to communicate
and enhance a certain image or mood or to direct customers to the desired destination
(Wakefield and Blodgett, 1996). Facilities are explicit communicators used as labels and
directions to communicate behavioral guidelines. Implicit communicators, such as quality
of the raw materials and equipment, office and desk size, tidiness, the presence of
certificate and photographs, and the personal objects are all symbolic representations of
status and professional image (Weiner, 1985). Both have been shown to affect the
customer impression of the quality of the service. Spatial layout refers to the ways in
which machinery, equipment, and furnishings are arranged, the size and shape of those
items, and the spatial relationships among them[ CITATION MJB92 \l 1033 ].

Color

Color can be used in retail to attract attention, assist evaluation, highlight certain store
features and it can be used to improve mood and to increase arousal or excitement. In
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general, warm colors (i.e. red and yellow) have produced the opposite physiological and
psychological effects to cool colors (i.e. blue and green). Not only are warm colors more
arousing than cool colors, they are also known to be less preferred than cool colors.
Wexner (1954) dealt with the associations between colors and feelings and concluded
that the color red was associated with “exciting” and “stimulating” both implying
pleasure and high arousal. Blue was associated with “secure/comfortable” and
“tender/soothing” implying pleasure and low arousal. Overall, warm colors, especially
red, have been found to be physically and emotionally arousing, exciting, and distracting.
Cool colors, especially blue, are evaluated as being relaxing, peaceful, calm and pleasant
Wexner (1954).

Color has also proven to have both physical and psychological influences on humans.
Colors are of course important especially in the home-furnishing business since it is a
business that is easily affected by trends. Consumers shopping at specialty stores and
boutiques are very trend conscious. Except for the importance of having the right colored
store due to trends, colors also affect customer perception and buying behavior. Studies
have shown that customers are easily drawn to yellow and red (warm colors) while cool
colors like blue and green often are perceived pleasant. It is therefore advisable to use
warm colors in store windows and at places where impulse buying occurs. Blue, green
and other cool colors can be used in stores were customers are spending more time
thinking over the purchase decision (Peter and Olson, 2005).

Displays

Products in the retail chain outlets should be displayed in such a way that attracts the
consumers. The display can be defined as grouping of products, shelf space, and
allocation of floor space, department allocation and wall decorations. Product display has
a strong impact on the consumers purchase intention and customer's perception about the
 xix

product. Customer's movement in the stores is immensely influenced by the display of

the products in the stores (Ward, Bitner and Barnes, 1992).

Kaur, (2013) found out that window display acts as a stimulus for the customers to enter
the store. It has various benefits like displaying best merchandize, providing information
about new arrivals and attracting price sensitive customers by displaying promotional
merchandise therefore retailers should put up an attractive and informational display

Ambience Factor

Several authors have identified ambient conditions as a factor that affects perceptions and
human responses to the environment. Ambient conditions include background
characteristics of the environment such as temperature, lighting, noise, music, and
scent[ CITATION MJB92 \l 1033 ]. Ambient cues refer to the non-visual elements of a
store’s environment (Baker et al., 2002), such as smell, lighting, music, temperature etc.
In other words, ambient factor is the element that cannot be seen directly, but can be felt
by customers. This factor tends to act on subconscious level of customers [ CITATION
Cam83 \l 1033 ] and alter customers’ behaviors in a way that they are not aware.

Morrin and Ratneshwar (2003) pointed out that ambient scents are likely to improve the
evaluation of products that are unfamiliar or not well understood. Smell can influence
respondents in regard to elaborative image, affective and evaluative responses, purchase
intention, and behaviors (Bone and Ellen, 1999). Adding a pleasant fragrance to a product
display would induce a positive attitude of customers towards the product, purchase
intention, and willingness to pay a higher price (Michon, Chebat, and Turley, 2005).
 xx

Favorable music induces feelings of pleasure and arousal in consumer’s minds and
prolongs the time they spend in stores by reducing the psychic cost and time and effort
cost (Baker, Parasuraman, and Voss, 2002).High temperatures, noisy music, broadcast in
stores, and overly bright lighting trigger anxiety and pressure in consumers (Aylott and
Mitchell, 1999). In addition, when juxtaposed with stores without olfactory triggers,
stores with a favorable smell are proven to be more likely to impress consumers.

Cleanliness

Cleanliness is the appearance of the retail chain outlet that improves the atmosphere
which affects the customers feeling towards the outlet. Cleanliness can improve store
atmosphere (Gajanayake, Gajanayake, and Surangi, 2011). Cleanliness of a store creates
positive impression among consumers and makes them spend more time in the store. it is
one of the important factors determining how customer judge the physical characteristics
and appearance of store as well as the overall store image and service quality.

Product display and cleanliness are very important for the outlet selection. The
cleanliness of a store as an important store attribute that projects an image of luxury that
attracts customers creates a pleasant atmosphere and retains them in stores (Gajanayake,
Gajanayake,and Surangi, 2011).

Temperature

Temperature at retail outlet is among those atmospheric variables that greatly impact the
consumer purchase intention. Extreme temperature-very low or very high-creates
negative feelings among customers; consequently, customers spend less time in outlet
 xxi

and produce negative word of mouth [CITATION SYL01 \l 1033 ]. In different situation and
environment, there should be a different optimum ambient temperature creating a
comfortable environment (Nicol and Humphreys, 2002).

Lightings

Lighting can be referred as the act of enhancing or illuminating, the light arrangement to
create particular effects, an effect occurred by the arrangement of lights, and the way light
falls upon a face, objects, products etc., in a various situation. Majority of customer
respond to the lighting more positively. They specially mentioned that lighting helps to
select correct products, reduce the time wasted and feel relaxation during the shopping
tours. Therefore, stores can select appropriate lighting system that creates satisfaction of
psychological needs of customers[ CITATION Kau13 \l 1033 ]. Lighting is a key design
element that contributes to the identity, comfort, and visual quality of a retail store.

Lighting is used to highlight products. It creates excitement and has a positive impact on
consumer purchasing behavior. When the lighting used in the retail chain outlets is of
good color, consumers are inclined to touch products to assess quality (Areni and Kim,
1994). Stores with proper lighting, music, color, scent and displays will motivate the
customers to visit the store again in the future (Yoo, Park, and MacInnis, 1998). The main
purpose of using brighter lighting in retail outlets is to grab the customers’ attention so
that they start purchasing from the outlets due to their comfort.
 xxii

Music

Music can be defined as a pleasant sound that impacts consumers’ conscious and
unconscious decisions. Prior studies suggest the mere presence of music in a store could
contribute to a favorable atmosphere. Atmospheric music can affect customer perceptions
of business places, elicit emotions and waiting time, decrease perceived shopping time
and waiting time, influence purchase intentions, influence buyer/seller interaction and
increase sales (Ryu and Han, 2010).

The background music influences on consumer’s moods, service/product evaluation, and

consumer decision, as a part of atmosphere and a part of ambience [CITATION RMi82 \l
1033 ].The tempo of music significantly affect the pace of in-store traffic flow and sales
volume in a supermarket [ CITATION RMi82 \l 1033 ] and dining speed, money spent, and
length of stay in a restaurant [CITATION RMi86 \t \l 1033 ]. The characteristics of music
(i.e., tempo, tonality, and texture) stimulate customer’s emotion and induce customer’s
behavioral reaction (Yalch and Spangenberg, 2000).

Fragrance

The influence of pleasant scents as a powerful tool to increase sales has gained much
attention in retail businesses. Aroma can have an impact on a consumer’s desire to make
a purchase, mood, or emotion (Ryu and Han, 2010). Presence or absence of scent in the
retail chain outlets has noticeable impact on the consumer purchase intention. Scent is a
pleasant fragrance that influences customer mood and emotions which make the
customers stay more time and feel excited. The selection of scent must consider the
targeted gender to make theme pleasing, so that customers spend more time and money at
a retail outlet to purchase goods (Spangenberg et al., 2006).
 xxiii

Customers can associate scents rather strongly with different products and feelings and it
can provoke memories and emotions from the past. No matter if, the scent is related to a
specific product, like leather or coffee, or if it is associated with the whole store, it can
affect customer’s perception (Ryu and Han, 2010). It is relatively hard for customers to
express a certain perception with a certain scent. Nevertheless, without the scent
customers might communicate a different perception. Spangenberg et al., (2006) argues
that scents of orange, ginger, lavender or spearmint in stores influenced customer
assessments of the products, the store and their buying behavior more than stores without
these scents. Scents can be one way for stores to differentiate themselves from their
competitors, but it is important to remember that it is very individual how different scents
are experienced and what memories they awake.

Social Factor

Social factors refer to the people (i.e., employees and their customers) in the service
setting. The social variables include employee appearance, number of employees, gender
of employees, and dress or physical appearance of other customers. A professional
employee uniform may effectively convey an organization's image and core values in a
very up-close-and-personal way (Ryu and Han, 2010). Social cues refer to factors about
human beings, including consumers and salespeople, two-way transaction behaviors, the
crowding density of a store, privacy, lines for in and out, and even children’s racket
(Aylott and Mitchell, 1999). Social cues entail how attendants appear to customers and
how attendants communicate with customers during the service process. The interaction
between employees and consumers is confirmed to affect how consumers assess service
quality (Baker, 1986). The verbal and non-verbal communication, courtesy, neat
dressing, vitality, helpfulness in service, attitude, tone of voice, capability to handle
complaints, and friendliness of an attendant are often used to measure how social stimuli
 xxiv

influence consumers’ perceptions on reliability, assurance, responsiveness, and empathy

(Baker et al., 2002).

Although social interactions between patrons and employees primarily involve the
intangible dimensions of service quality such as reliability, responsiveness, and empathy,
other influences such as the ambient, psychological, temporal, and physical aspects of the
service setting can influence these social interactions. These latter influences set a mood
that affects customers’ perception of the enterprise’s employees and hence the perception
of the quality of the service as a whole[CITATION Bel08 \l 1033 ]. Reviewing the prior
studies, several social factors such as crowding, kindness, friendliness and courtesy of
employees can be specified.

Crowding (Number of employees)

Crowding can be defined either from a physical (number of persons in a given space) or
from a psychological perspective (perceived crowding). Perceived Crowding is a
psychological state that occurs when a person’s demand for space exceeds the supply.
The level of in-store crowding perceived by shoppers can affect their patronage decisions
as well as satisfaction with the overall shopping activity. Clearly, if perceived crowding
does affect shopper behavior to some degree, those who are interested in shaping such
behaviors will want to understand the specifics of this relationship. Perceptions of
crowding are individual in nature; two different shoppers in the same store may perceive
different levels of crowding depending upon individual characteristics and situational
constraints (Machleit, Eroglu, and Mantel, 2000).
 xxv

Employee Friendliness

Employees' behaviors are important in a service company as they connect the

organization with its customers and they are a critical factor in developing effective
working relationships with customers (Gwinner, Gremler, and Bitner, 1998). Employees'
behaviors have influences on customer perception of service quality and on customer
satisfaction. A number of studies have indicated the importance of friendly type
behaviors (friendliness, familiarity, caring, politeness, responsiveness, trustworthiness,
helpfulness, and understanding) of service staff to improved service outcomes and long-
term relationships[ CITATION Spa94 \l 1033 ]. More attention should be given to the service
providers on the front-line (desk clerks, waiters, park rangers, door and bell men, maids,
and stewards) interacting with the customer[CITATION Lil00 \l 1033 ].

Bienstock et al. (2003) tested the relationship between employees’ organizational

behaviors and customer perceptions. The results demonstrated that higher levels of
organizational behaviors among an organization’s employees are associated with higher
levels of service quality perceptions among the organization’s customers. According to
Wakefield and Blodgett (2002), if the service personnel is competent enough and has
friendly attitude, they will make customers have pleasant feelings, thus have favorable
impressions on the retail store.

Appearance of Employees

Uniforms had a positive impact on customer perceptions of overall service quality, and
tattoos, athletic wear, unconventional hairstyles or hair color, sweat pants, facial
piercings, revealing clothing and clothing with tears, rips or holes had a negative impact
 xxvi

(Karl, Hall, and Peluchette, 2013). A professional employee uniform may effectively
convey an organization's image and core values in a very up-close-and-personal way
(Ryu and Han, 2010).

Therefore, this paper focuses on how these factors under three major dimensions of store
environment will affect perception of Nepalese customers and influence their buying
behaviors when they visit stores in the market.

Customer Perceived Value

Customer perceived value refers “value is the consumer's overall assessment of the utility
of a product based on perceptions of what is received and what is given”[CITATION Zei88 \t
\l 1033 ]. Buyers' perceptions of value represent a tradeoff between the quality and
benefits they perceive in the product relative to the sacrifice they perceive by paying the
price[ CITATION Mon02 \l 1033 ]. According to Woodruff (1997) value is the customers’
evaluation of attributes and performance of products for achieving their goals. Many
scholars have focused on “customer perception” and “customer benefit”. For the purpose
of measuring customer perceived value, Woodruff (1997) used three dimensions
including economic benefits, cognitive benefits and emotional benefits for the
measurement. Grewal, Monroeand Krishnan (1998) considered two cognitive
dimensions: acquisition value and transaction value. But Holbrook (1996) added new
perspectives and measured customer perception by three dimensions: extrinsic value and
intrinsic value, self-oriented value and other-oriented value and active value and passive
value.
 xxvii

In order to establish a long, stable and sound relationship with target customers, retail
enterprises should provide customers with more complete experience values [ CITATION
Spi00 \l 1033 ]. The shopping value under a retail context should include tangible shopping
results and intangible value perceptions as well as customer emotions. Customers’
shopping behaviors should be considered from the acquisition view of overall experience
value (Han-Shen and Tsuifang, 2011). Babin and Darden (1995) thought that experience
value provided two kinds of benefits for customers, that is, external and internal benefits.
The former was to acquire concrete benefits from shopping, for example, the commodity
purchased and the service enjoyed etc.; the latter referred to the preference of the
purchasing experience itself and the type of preference was related to no results of
experience (Holbrook, 1994).

Researches on customer perceived value mainly focus on cognitive value and emotional
perception, as complies with the opinions of store atmosphere, that is, customers will
perceive the impact of store atmosphere from cognitive and emotional dimensions and
then make decisions in adopting what kind of shopping behaviors (Han-Shen and
Tsuifang, 2011). But this research mainly deals with causal relationship between store
environment and customers’ perception in Nepalese market.

Customer Behavioral Responses

In Mehrabian and Russell (1974) S-O-R model, customer behavioral responses are
customer’s intentions of approaching or avoiding certain environment, which is called
approach-avoidance behaviors. Customer’s behavioral response to consumption
environment can be sorted into two categories: approach and avoidance. Approach
 xxviii

behavior means to approach certain environment, stay, explore, interact and identify in it,
having good impression on the environment and holding the intention to return to that
environment again. Avoidance behavior is just the opposite: To express dissatisfaction,
worry boringness and irritableness to the environment, hoping to leave from the
environment without any intention to return. Customers’ responses depend on the extent
initiated by environment and can be used to predict customer emotions and their
responses to environment.

Regarding the relationships between approach-avoidance behaviors and other variables,

early studies have shown that customer behaviors in store atmosphere are brought about
by the feelings and emotions that customers develop in the environment (Mehrabian &
Russell, 1974). Therefore, customer behavioral responses to different environment are
originated from different emotions. Mehrabian and Russell (1974) divided people’s
emotional responses to environmental signals into three dimensions: Pleasure, arousal
and dominance (PAD). Different combination of the three emotions leads to different
behavioral results, which make a person to determine whether to remain in a certain
specific environment, that is, to determine the behavior he adopts is approach or
avoidance.

Baker et al. (1994) studied the connection between store environment and customer
psychological status in leisure service settings.They considered that an individual’s
emotional response to environment revealed the ability the environment regulated
emotions, that is, the extent that customer perceives pleasure and arousal in the
environment. They examined the impacts of two kinds of environmental factors on
customers’ emotional assessments and found that surrounding environment factors
(replaced by background music) affected the extent of customer pleasure along with
social factors (replaced by store service staff); while the extent of arousal that social
 xxix

factors influenced customers complied with the opinions of S-O-R model in their
findings, that is, customer emotions on store environment had important moderate effect
on buying behaviors. But this study do not provide findings directly related to retail store.

Under a retail context, Donovan and Rossiter (1982) applied S-O-R model to study the
impact of emotion on customers’ presence behaviors. They considered in general
conditions, appropriate arousal level can promote customer to accepting behaviors, but
either excessively high or excessively low arousal level will make customers take
avoidance behaviors. They further discovered that arousal level and customers’ accepting
extent have positive correlation in pleasant environment whereas arousal level and
avoidance behavior have positive correlation in unpleasant environment.

Wakefield and Blodgett (1996) added supplements to Donovan and Rosisters’ (1982)
findings. They discovered that customer’s good emotional status had positive correlation
with the duration of their stay, the quantity of their shopping commodity and the amount
of their consumption. The dominance of environment can significantly affect customers’
buying behaviors, which will not only impact the theories of retail enterprises, but also
correlate closely with customer loyalty. Therefore, making use of store environment to
regulate customers’ positive emotions and initiate their accepting behaviors becomes the
issue concerned intensely by retail enterprises in Nepal as well. Therefore, this paper
points out its importance clearly. This research provides sufficient information regarding
which environmental attributes will influence Nepalese customers more and helps retail
stores to focus on that particular factor for successful business tenure.
 xxx

Research Gap

Tlapana (2009) investigated how store layout impacted consumer purchasing behavior at
convenience stores in Kwa Mashu, South Africa and found significant relationship
between store layout and purchasing behavior. Mariri and Chipunza (2009) also studied
how in-store environment affected impulse purchasing among South Africans and
established a strong relationship. In Ghana, Anning-Dorson (2013) also did a study on
how store-atmosphere factors influenced Ghanaian shoppers to choose the mall to shop at
and established that store display and store-personnel were the main factors that drew
shoppers to choose malls. Similarly, such has also been conducted in South Asian
countries like India and Sri Lanka. But such studies are very less conducted in Nepalese
market.

Nepal is a different market with different demographics of customers in compare to

above mentioned countries. Nepalese customers are different from various aspects that
affect their perception regarding the retail store around them. The income levels of
customers are not strong making them price sensitive customers which will definitely
reflect their perception. In addition, retail business in Nepal is an emerging market that
introduces new and innovative ideas frequently. All these factors make Nepalese market
and Nepalese customers distinct and diverse from others. Hence, the study concentrating
this market is necessary to understand the relation of store environment and customer
perception. It is important to find out whether the findings of prior research in other
countries hold in our country or not. So, this paper aims at finding out whether there is
positive relation between store environment and consumer perception in context of
Nepal.

Theoretical Framework

This research study was guided by the following theoretical framework in the context of
effect of store environment on the consumer perception in Kathmandu Valley. The model
of this study is proposed in Figure 2.1. This model tests the tangible aspects of store
environments (i.e. design, ambience and social factor) as a direct influence on an
 xxxi

customers’ perception about the store. Store environmental factors influence customers’
evaluations of service experience.

The major objective of the study is to examine the influence of store environment on
consumers’ perception. The theoretical framework is based on the question that “to what
extent do the consumers’ perception about retail store is affected by the environment of
the stores”. After reviewing the literature, the researcher can identify three major store
environment attributes, namely, design factors, ambience factors and social factors. The
figure below shows the conceptual framework of the study.

Independent Factors Dependent Factor

Design Factors
Layout
Display
Color

Ambient Factors
Lighting Consumer Perception
Music
Cleanliness
Fragrance

Employee Behavior
Employee Attribute
Social Factors
 xxxii

Figure 1: Conceptual Framework

 xxxiii

Independent Variables

The interaction of dependent variable with independent variables explains their

relationship. Each independent variable was measured in terms of dependent variable.

Design factor is the visual part of the store environment which includes layout, color,
cleanliness, and so forth. Colors are ensured to incite consumer’s emotions and impress
customers (Wexner, 1954). Prior studies show that cool colors create a more pleasant
feeling than bright ones, though bright colors may attract more attention from customers.
This study clarifies whether it is true in case of retail stores of Kathmandu or not.
Similarly, cleanliness also affects a lot in service consumption process. For example, in a
neat and tidy restaurant, customers are more likely to believe that they are being served
fresh dishes from a carefully handled cooking process. But unlike restaurant, this paper
deals specifically with retail environment and provides knowledge about how design
factors affect retail store.

Ambient factors refer to the non-visual elements of a store’s environment as fragrance,

lighting, music, temperature etc. Baker (1986). Insights from certain researchers indicate
that ambient factors are likely to influence consumers’ perception of service quality. It is
generally assumed that adding a pleasant fragrance to a product display would induce a
positive attitude of customers towards the product, purchase intention, and willingness to
pay a higher price. Volume, tempo, and types of music have been influencing the
perception process of customers in a service organization. Therefore, this study clarifies
whether these ambient factors influence perception of Nepalese customers in terms of
retail store or not.
 xxxiv

Social factors refer to factors about human beings, including consumers and salespeople,
two-way transaction behaviors, the crowding density of a store, privacy, lines for in and
out, and even children’s racket (Aylott and Mitchell, 1999). They entail how attendants
appear to customers and how attendants communicate with customers during the service
process (Lina and Chiangb, 2010). This research provides insights about how personal
factors affect consumer perception about retail stores.

Dependent Variables

In this study, dependent variable is the consumer perception, the one we are trying to
predict and measure. Customer perception describes how customers and potential
customers view a company and its products and services. Positive perception about
company helps to increase the customer loyalty and also contributes in profitability of the
business. If customers have negative perception towards the business then it hampers the
revenue and the success of the firm. It is measured in terms of influence or effect of
independent variables in perception of customers about the retail store located in
Kathmandu valley.
xxxv
 xxxvi

CHAPTER III
RESEARCH METHODOLOGY

This chapter provides an overview about how this study will be conducted. Moreover, it
puts light on the research process and methods design to meet the stated objectives of the
study. The research methodology explores the research process regarding the impact of
store environmental factors on the perception of Nepalese customers in regards to retail
stores. This chapter covers research plan and design, description of sample,
instrumentation, data collection procedure, validity and reliability of data and analysis
plan.

Research Plan and Design

A casual as well as descriptive research was carried out for the purpose of carrying out
this research. The findings of this research were based upon the primary survey. The data
was collected by formulating a questionnaire collected from the respondents. The
findings were totally based on the data and facts provided by the sample respondents.
Apart from questionnaire, the expert opinion was obtained depending upon the necessity
of the research.

The study was based on various statistical tests such as correlation, regression, mean
standard deviation and etc. The software called Statistical Package for Social Science
(SPSS) and Microsoft Excel was used to analyze and interpret the quantitative data. The
reliability of scales was analyzed by using Cronbach’s alpha since this test is best
measure for multiple scale items and it is also the most popular test for the inter-item
consistency reliability.
 xxxvii

Population and Sample Size

This study is design to understand the relationship between the store environmental
factors and customer’s perception about the service quality of the firm. Convenience
sampling was used to track the respondents for the study so that population can be
reached conveniently on the basis of proximity, ease of access and willingness of
respondents to participate. This sampling technique generally assumes a homogeneous
population which consist the members with similar characteristics. Although convenient
sampling is not very scientific, it’s perfectly valid in exploratory research where there is
need to get only an approximation of actual value.

Population

A population is basically defined as the universe of units from which the sample is to be
selected. The target population for this study is all the customer of retail stores of
Kathmandu Valley. Basically, the customers who go to departmental stores and other
types of retail stores in Kathmandu are considered as population for the study.

Sample Size

The total of 150 respondents was taken as sample for this study. The sample includes the
customers of various retail stores. Sample was taken from the visitors of common stores
like Supermarkets, Apparel Stores and Department stores. The sample also include
Students of Ace College. Convenience sampling was used to collect the data. This sample
of the study has represented the whole population of the study.

Data Collection Procedures

The methodological approach of this study is oriented towards collecting numerical data
and to analyze them statistically. Therefore, the main research approach of our thesis is a
quantitative research. The quantitative research is described as an objective, systematic
process that tests, examines cause and relationships effect with the use of a deductive
 xxxviii

process of knowledge attainment. The quantitative research converts information into

digit in order to analyze statistically. Throughout the study, researcher intent to measure,
quantify the effectiveness of store atmospheric variables over the perception of customers
about retail stores.

Quantitative data was collected with the help of questionnaire. Questionnaires were
distributed through e-mail and by providing the printed questionnaire to the potential
respondents. The data collected from the questionnaire was analyzed using mathematical
tools and the result was presented in tables for the clear understanding to the reader. The
conclusions were drawn from the findings from the analysis of research and
recommendation was made accordingly.

Primary Data Collection

Primary data is information that collected specifically for the purpose of the research
project. It is first used to test the hypothesis and then used as evidence to support a
researcher’s claim. Questionnaire method was used as it is the best suited for the
descriptive study. The questionnaires were handed out through delivery and collection
method which belongs to the category of self-administered questionnaires. This method
enables to confirm that the questionnaires were filled up completely to reduce the
occurrence of missing data, also able to explain to participants of research any queries
they may have regarding the questionnaire for the accuracy of the collected data.
Questionnaire for this study was distributed within Kathmandu valley.

Secondary Data Collection

The secondary data for this research was collected from different sources such as text
books, internet, journals, articles and related research works. The books related to
marketing were referred for secondary data. As internet is the huge source of secondary
data, many websites and data related to the topic will be searched. The online journals,
 xxxix

research reports and articles of several national and international researchers were also
used as references.

Instrumentation of Data

At the initial phase, for the purpose for developing theoretical framework secondary data
were collected. Basically, the secondary source of data was internet, books, journals,
newspaper and articles. Whereas, in the later stage, the primary source of data collection
was used for the purpose of collecting data so as to analyze data for making findings. The
primary source of data is structured questionnaires. Furthermore, the structure
questionnaire contained multiple choice questions, rating questions and these questions
were prepared in such a way that the objectives of the study will be met. Questions based
on likert scale was designed to test the significance difference between the dependent and
independent variables. Based on the likert scale, the respondents have provided answer
by taking a position in one the five scales like: strongly agree, agree, neutral, disagree and
strongly disagree.

The questions will be well formulated considering the easiness and understandability and
avoiding any vague and double meaning words so that the respondent could easily
answer the given questions without any confusion thereby minimizing the error rate. The
questionnaire of the study will have mainly two parts. The first part contains personal
information which is collected for statistical use, to prepare respondents’ profile. The
next part contains the questions which will be used to measure dependent and
independent variables.

Validity and Reliability

The validity of research design and plan is done by discussion with the experts and also
comprehensive research instrument used to develop and test before starting the real
 xl

investigation. The questionnaire was developed after discussion with the supervisor. The
items were also be carefully designated considering the research question. The main
purpose of the validity is to determine whether data are trustworthy or not.

Factors N of Items Cronbach's Alpha

Design 8 0.896

Ambient 9 0.884

Social 6 0.904

Consumer Perception 5 0.87

The reliability of each independent variable was tested. The relation of independent
variables and dependent variable was checked using Cronbach’s Alpha. Since the
calculated Cronbach’s alpha is above 0.7 for all the variables, the collected data are
reliable. Therefore, it is inferred that the questionnaire prepared was reliable for the
study.

Data Analysis Methods

Simple descriptive analysis and frequency distribution of demographic variables was

analyzed by percentage, compared mean and standard deviation. Simple frequency
distribution tables of types and number of responses translated into percentages were
 xli

constructed and analyzed. Correlation coefficient was used to show the relation between
each independent variable with the dependent variable. Similarly, Regression Analysis
was also be carried out.

For the analysis and management of data, Excel and SPSS tools were used. All the
questions of likert scale were coded as per the rule and appropriate analysis was done on
the data collected. Various tools were used to draw inferences from the collected
responses. Necessary tables were drawn using the Microsoft Excel. The tables obtained
from the SPSS were refined and then used to interpret the results. Then, the tables were
presented along with explanations in order to draw the conclusion.
 xlii

Chapter IV

Data Analysis and Findings

The primary data collected from the procedure as mentioned in chapter three were used
for analysis and presentation. The analysis of data was done with the help of SPSS and
Microsoft Excel. This chapter consists of detail of the respondents’ profile, descriptive
analysis of respondents’ answers and correlation among the dependent and independent
variable. Under descriptive analysis, mean value, maximum value, minimum value and
standard deviation of corresponding items of the research variables are analyzed in order
to understand the responses of the respondents. Finally, it also consists inferential
analysis or hypothesis testing to determine the significance relationship between
dependent and independent variables.

Respondents’ Demographic Profile

Descriptive analysis of the sample respondents taken for the study is described in this
part. In other words, it deals with the demographic analysis and interpretation of primary
data collected through survey questionnaires. The survey was based on the reaction of
150 respondents. Thus, from the responses of questionnaire we are able to get various
insights. The details of demographic profile of the respondents in this study include
gender, age and educational qualification.

Table 1: Gender

Gender Frequency Percent

 xliii

Male 80 53.3

Female 70 46.7

Total 150 100

The above table shows the gender profile of the respondents. Out of total 150 respondents
in this survey, 53.3% were male and 46.7% were female.

Table 2: Age

Age Frequency Percent

16-25 74 49.3

26-35 57 38

35 and above 19 12.7

Total 150 100

The above table shows the age profile of the respondents. The age of respondents has
been categorized into three groups: 16-25years, 26-35 years and 35 and above. Out of
total 150 respondents in this survey, 49.3% were of age group16-25, 38% were of age
group 26-35 and 12.7% were of age group 35 and above.

Table 3: Educational Qualification

 xliv

  Frequency Percent

SLC 8 5.3

Intermediate 10 6.7

Bachelors 84 56

Master and above 48 32

Total 150 100

The frequency distribution of respondents as per their educational qualification is shown

in above table. Out of total 150 respondents in this survey,5.3% of respondents have
educational qualification of SLC,6.7% have intermediate level education, 56% were
bachelor degree holders and 32% were master degree holders.
 xlv

Table 4: Occupation

  Frequency Percent

Student 19 12.7

Business 23 15.3

Employment 97 64.7

Housemaker 11 7.3

Total 150 100

The above table shows the frequency distribution of occupational difference of

respondents. Out of total 150 respondents, 12.7% were student,15.3% were business
persons, 64.7% were employment holder either in private or public sector whereas 7.3%
were housemaker.

Descriptive Analysis

The descriptive analysis consists of the frequencies, mean, standard deviation, minimum
and maximum of each question that was asked to the respondents. Likert Scale questions
were asked to find out the relationship between dependent and independent variables.
Five scale Likert was used for the analysis of the variable in which 1 denotes strongly
disagree, 2 denotes disagree, 3 denotes neutral, 4 denotes agree and 5 denotes strongly
agreed statements. The descriptive analysis is presented in table and chart for easy
understanding of the variables.
 xlvi

Table 5: Descriptive Analysis of Layout

Std.
Layout N Minimum Maximum Mean
Deviation

The Interior layout

of the store is 150 1 5 3.76 .939
appealing.

The layout is well

arranged section 150 1 5 3.99 0.938
wise.
 xlvii

The layout of the

store is convenient 150 1 5 3.75 0.955
and spacious.

Layout Average 150 1 5 3.84 0.832

The above table shows the response of respondents regarding impact of store layout on
consumer perception. It shows that the average score for all the variables of layout is
above 3 i.e. 3.84. It indicated that there is above average level of store layout. The
respondents highly agree that customers are satisfied if the layout in a store is well
arranged section wise. Similarly, it also shows that appealing store environment and
convenient and spacious store layout also play greater role for the selection of the store
customer visit.
 xlviii

Table 6: Descriptive Analysis of Display

Std.
Display N Minimum Maximum Mean
Deviation

Display is suitable
enough to locate 150 1 5 3.85 0.995
products quickly.

Display is attractive
150 1 5 3.79 0.950
and impressive.

Display is organized
150 1 5 3.93 0.906
department wise.

Display Average 150 1 5 3.85 0.835

The table above shows that the average score for all the variables of display that is above
3. It indicated that there is above average level of store display. The respondents highly
agree that customers are satisfied if the display in a store is well arranged department
wise. Similarly, it also shows that suitable display of the products with easy accessibility
and impressive and attractive display play greater role for the positive perception of a
retail store.
 xlix

Table 7: Descriptive Analysis of Color

Std.
Color N Minimum Maximum Mean
Deviation

Colors used in the

store are vibrant and 150 1 5 3.38 0.960
lively.

Colors are matched

with the ongoing
150 1 5 3.11 1.056
promotional
campaigns.

Colors Average 150 1 5 3.24 0.904

In Table 7, all variables have mean above 3 which shows that respondents agreed that the
color is important factor in forming positive perception about a retail store. The highest
mean of 3.38 shows that the vibrant and lively color used in the retail outlet plays an
important role in creating positive perception in the respondents’ mind and the lowest
mean of 3.11 shows that respondents were slightly positive about colors matching the
ongoing promotional campaigns.

Table 8: Descriptive Analysis of Lighting

 l

Std.
Lighting N Minimum Maximum Mean
Deviation

There is sufficient lighting

in the store for easy 150 1 5 3.94 0.899
accessibility.

The color and theme of

the store is compatible 150 1 5 3.47 1.008
with the lighting.

Lightings used in the

outlet helps me to
150 1 5 3.85 0.885
examine the products
clearly.

Lighting Average 150 1 5 3.75 0.790

All the variables in above Table 8 have mean above 3 which shows that respondents
agreed that the lighting is important factor in forming positive perception about the retail
store. The highest mean of 3.94 shows that respondents are attracted towards the store
with sufficient lighting that enables easy accessibility. Similarly, lighting also helps
respondents to examine the products clearly with the mean of 3.85. Whereas, the lowest
mean of 3.47 shows that respondents find lightings effective if color and theme of the
store is compatible with the lighting of the store.

Table 9: Descriptive Analysis of Music

 li

Std.
Music N Minimum Maximum Mean Deviation

Pleasant 150 1.00 5.00 3.32 1.131

environment
created by music
makes me stay
longer.

I repeatedly visit 150 1.00 5.00 3.06 1.088

the store with nice
background music.

Music Average 150 1.00 5.00 3.19 1.031

The mean of all variables is slightly above 3 in Table 9, which depicts that respondents
slightly agreed that the music is important factor in forming positive perception about the
store. The highest mean of 3.32 shows that pleasant environment created by music makes
people stay longer than expected. Whereas the lowest mean of 3.06 shows that
respondents repeatedly visit the store with nice background music.

Table 10: Descriptive Analysis of Cleanliness

Std.
 Cleanliness N Minimum Maximum Mean
Deviation
 lii

The tidiness of the stores

attracts me to visit the 150 1 5 3.96 0.911
store.

The clean and hygienic

environment of the outlet
150 1 5 4.00 0.923
motivates me to visit
again.

Cleanliness Average 150 1 5 3.98 0.881

In Table 10, all variables have mean above 3 which shows that respondents agreed that
the cleanliness is important factor in forming positive perception about the retail store.
The highest mean of 4.00 shows the clean and hygienic environment of the outlet
motivates respondents to visit that store again. Similarly, tidiness of the stores also
attracts respondents to visit the store frequently as its mean is 3.96.
Table 11: Descriptive Analysis of Fragrance

Std.
Fragrance N Minimum Maximum Mean
Deviation

Fragrance can make me

feel happier and satisfied 150 1 5 3.67 0.923
while shopping.

Pleasant fragrance
influence me stay longer 150 1 5 3.32 0.958
in the outlet.
 liii

Fragrance Average 150 1 5 3.49 0.876

All the variables have mean above 3 which shows that respondents agreed that the
fragrance is also important factor in forming positive perception about the retail store.
The highest mean of 3.67 shows that fragrance can make people feel happier and satisfied
while shopping. Whereas the lowest mean of 3.32 shows the least preferred statement
which states pleasant fragrance influences customer stay for longer time period.

Table 12: Descriptive Analysis of Employee Attribute

Maximu Std.
Employee Attribute N Minimum Mean
m Deviation

There are enough

employees in the store to 150 1 5 3.51 1.021
serve the customers.

The employees of the

store are well dressed 150 1 5 3.37 0.908
and appear neat.

The employees are well

informed about the
150 1 5 3.73 0.953
available products and
schemes.
 liv

Employee Attribute
150 1 5 3.54 0.812
Average

In Table 12, all variables have mean above 3 which shows that respondents agreed that
the employee attribute is important factor in forming positive perception about the store.
The highest mean of 3.73 shows that customer is satisfied when the employees are well
informed about the available products and schemes. Similarly, people also have positive
perception if there are enough employees in the store to serve them well. Whereas the
lowest mean of 3.37 shows that people slightly agree with the statement i.e. employees
are well dressed and appear neat.

Table 13: Descriptive Analysis of Employee Behavior

Maximu Std.
Employee Behavior N Minimum Mean
m Deviation

The employees are

150 1 5 3.93 1.024
humble and polite.

Employees are very

helpful and provide 150 1 5 3.85 1.041
efficient service.

Employees in the outlet

provide me with the 150 1 5 3.48 1.191
valuable advice.
 lv

Employee Behavior
150 1 5 3.75 0.982
Average

In the Table 13, all variables have mean above 3 which shows that respondents agreed
that the behavior of employees is important factor in forming positive perception about
the store. The highest mean of 3.93 shows that customers are satisfied more if the
employees are humble and polite. Like wisely, they also prefer a store more if employees
are very helpful and provide efficient service. Whereas the lowest mean of 3.48 shows
that customers are indifferent even if employees in the outlet provide me with the
valuable advice or not.
 lvi

Table 14: Descriptive Analysis of Consumer Perception

Std.
Consumer Perception N Minimum Maximum Mean
Deviation

Store environment
element helps me in
150 1 5 3.65 0.898
selection of the store I
visit.

Store environment
makes me comfortable
150 1 5 3.46 0.959
enough to stay longer in
the store.

Store environment
factors make me
150 1 5 3.83 0.862
recommend that store to
my friends and family.

A pleasant store
atmosphere makes me
150 1 5 3.87 0.848
visit the same store
frequently.
 lvii

A good store
environment creates a
150 1 5 4.11 0.807
positive perception
about the store.

Perception Average 150 1 5 3.78 0.711

In the Table 14, all variables have mean above 3 which shows that respondents agreed
that there is influence of store environment in perception of retail store. The highest mean
of 4.11 shows most preferred statement i.e. a good store environment creates a positive
perception about the service quality. Like wisely, store environment also influences in the
selection of the store customers visit and to visit the same store frequently. Also, store
environment factors make customers recommend that store to their friends and family.
Whereas the lowest mean of 3.46 shows the least preferred statement i.e. store
environment makes customers feel comfortable enough to stay longer in the store.

Analysis of Three Major Store Environmental Factors

The study has differentiated store environment into three major factors i.e. design factors,
ambience factors and social factors. Design factor includes layout, display and color of
the store. Ambience factor consists of temperature, music, cleanliness, fragrance and
lightings used in the store. The social factors include appearance of staffs and behavior of
the staffs in the organization. in order to find out which variable among each factor are
most influential for affecting the customers’ perception about service quality, analysis of
these three environmental factors has been done by evaluating the mean and standard
deviation. Mean above 3 shows that the factors used are influential to affect the
 lviii

dependent variable. The highest mean shows the most influential and lowest mean shows
the least influential factor.

Table 15: Descriptive Analysis of Design Factor

Std.
Design Factors N Minimum Maximum Mean Deviation

Layout Average 150 1.00 5.00 3.84 0.832

Display Average 150 1.00 5.00 3.86 0.835

Colors Average 150 1.00 5.00 3.24 0.904

Within the design factors (layout, display and color), display has the highest mean of 3.84
which states that it is the most influential factor for forming positive perception about the
retail store. Whereas, color is the least influential factor with the lowest mean of 3.24.

Table 16: Descriptive Analysis of Ambient Factor

Std.
Ambient Factor N Minimum Maximum Mean Deviation
 lix

Lighting Average 150 1.00 5.00 3.75 0.790

Music Average 150 1.00 5.00 3.19 1.031

Cleanliness Average 150 1.00 5.00 3.83 0.881

Fragrance Average 150 1.00 5.00 3.49 0.876

Within the ambience factors (lighting, music, cleanliness, and fragrance), cleanliness has
the highest mean which states that it is the most influential factor for forming positive
perception about the retail store. Cleanliness has the highest mean of 3.83 and music has
the lowest mean of 3.19 making it the least important factor.

Table 17: Descriptive Analysis of Social Factor

Std.
Social Factor N Minimum Maximum Mean Deviation

Employee Attribute 150 1.00 5.00 3.54 0.812

Average

Employee Behavior 150 1.00 5.00 3.75 0.982

Average

Among the social factors (attribute and behavior of employees), behavior of employees
has the highest mean of 3.75 which states that the respondents found employee behavior
 lx

most influential social factor for forming positive perception about the retail store in
compare to employee attribute such as dress up.
 lxi

Data Normalcy

A normal probability plot is a scatterplot of the data vs. the expected quantiles. A Q–Q
plot is drawn for different independent and dependent variables to check the normality of
the data collected form questionnaire. A normal Q–Q plot compares randomly generated,
independent standard normal data on the vertical axis to a standard normal population on
the horizontal axis. the plot is shown below. If the data is normally distributed, the points
in the QQ-normal plot lie on a straight diagonal line. The Q-Q plot for all three
independent variables and a dependent variable are shown below:

For Design Factor

Figure 2: Q-Q Plot for Design factor

 lxii

The above figure shows Q-Q plot for design factor. This Q–Q plot compares
a sample of data on the vertical axis to a statistical population on the horizontal
axis. Since the points in the QQ-normal plot lie on a straight diagonal line, we can say
that the data for design factor are normally distributed.

For Ambient Factor

Figure 3:Q-Q Plot for Ambient factor

The above figure shows Q-Q plot for ambient factor. This Q–Q plot compares
a sample of data on the vertical axis to a statistical population on the horizontal
axis. Since the points in the QQ-normal plot lie on a straight diagonal line, we can say
that the data for ambient factor are normally distributed.

For Social Factor

 lxiii

Figure 4:Q-Q Plot for Social Factor

The above figure shows Q-Q plot for social factor. This Q–Q plot compares
a sample of data on the vertical axis to a statistical population on the horizontal
axis. Since the points in the QQ-normal plot lie on a straight diagonal line, we can say
that the data for social factor are normally distributed.

For Consumer Perception

 lxiv

Figure 5:Q-Q Plot for Consumer Perception

The above figure shows Q-Q plot for consumer perception. This Q–Q plot compares
a sample of data on the vertical axis to a statistical population on the horizontal
axis. Since the points in the QQ-normal plot lie on a straight diagonal line, we can say
that the data for consumer perception are normally distributed.
 lxv

Relationship between Design, Ambient and Social Factor and Consumer Perception

Pearson correlation test was conducted to see the correlations between the independent
variable and dependent variables. A correlation analysis is a very useful way to
summarize the relationship between two variables with a single number that falls within
-1 to +1. This section shows the strength in relationship between the expected
independent variable. Likert scale question has been used to measure all the variables
such as design factor, ambient factor, social factor and consumer perception.

Table 18: Correlation between Dependent and Independent Variable

  X1 X2 X3 X4

X1 1 .517** .636** .351**

0.000 0.000 0.000

X2 1 .410** .697**

0.000 0.000

X3 1 .427**

0.000

X4       1

**. Correlation is significant at the 0.01 level (2-tailed).

The table above shows the correlation between dependent and independent variables,
Where,
 lxvi

X1= Design Factor

X2= Ambient Factor

X3= Social Factor

X4= Consumer Perception

The correlation coefficient between design factor and consumer perception is .351, which
means positive correlation between the variables. The corresponding p-value is 0.000,
which is less than level of significance (α)=0.05, there is a significant relationship
between design factor and consumer perception.

The correlation coefficient between ambient factor and consumer perception is .697,
which means positive correlation between the variables. The corresponding p-value is
0.000, which is less than level of significance (α) =0.05, there is a significant relationship
between ambient factor and consumer perception.

The correlation coefficient between social factor and consumer perception is .427, which
means positive correlation between the variables. The corresponding p-value is 0.000,
which is less than level of significance (α) =0.05, there is a significant relationship
between social factor and consumer perception.
 lxvii

Hence, it can be inferred that consumer perception is affected by all three factors that is
design factor, ambient factor and social factor.

Impact of Design, Ambient and Social Factor on Consumer Perception

The results of multiple regression analysis are using consumer perception as dependent
variable and independent variables are design, ambient and social factors.

Table 19: Regression Analysis of Different Variables

 Model Beta T-Value P-Value VIF

(Constant)   4.748 0.000  

Design factor -0.156 -1.965 0.051 1.936

Ambient factor 0.675 10.031 0.000 1.385

Social factor 0.250 3.342 0.001 1.707

R-Square 0.522

F 53.219

P-Value 0.000

On the basis of above findings, regression analysis has been developed:

ID=0.00-0.156X1+0.675X2+0.250X3

Where,
 lxviii

X1= Design Factor

X2= Ambient Factor

X3= Social Factor

ID= Consumer Perception

The coefficient analysis above the table shows the relationship between dependent and
each independent variable. The regression coefficient of design factor and consumer
perception in the regression coefficient analysis is -0.156, which indicates that if we
increase design factor by 1 unit, the average influence on consumer perception will
decrease by 0.156. The corresponding p-value is 0.051, hence there is no significant
relationship between design factor and consumer perception.

The regression coefficient of ambient factor and consumer perception in the regression
coefficient analysis is 0.675, which indicates that if we increase design factor by 1 unit,
the average influence on consumer perception will increase by 0.675. The corresponding
p-value is 0.000; hence there is significant relationship between ambient factor and
consumer perception.

The regression coefficient of social factor and consumer perception in the regression
coefficient analysis is 0.250, which indicates that if we increase design factor by 1 unit,
the average influence on consumer perception will increase by 0.250. The corresponding
p-value is 0.001, hence there is significant relationship between social factor and
consumer perception.

Multicollinearity

Multicollinearity occurs when independent variables in a regression model are

correlated. Multicollinearity can lead to skewed or misleading results when a researcher
or analyst attempts to determine how well each independent variable can be used most
 lxix

effectively to predict or understand the dependent variable in a statistical model. In

general, multicollinearity can lead to wider confidence intervals and less reliable
probability values (P values) for the independent variables. Multicollinearity is measured
by VIF.

In the Table-19, the VIF for all independent variables are less than 5 that is 1.936 for
design factor, 1.385 for ambient factor and 1.707 for social factor. Therefore, there is no
multicollinearity. It can be inferred that the results of the study are reliable and
dependable.

Summary of Hypothesis
The summary of hypothesis is shown in table below:

Table 20: Summary of Hypothesis

P-
Hypothesis Value Remarks

No
H1: Design Factors have significant effect on customers’
Significan
perception of the store.
0.051 t

H2: Ambient Factors have an effect on customers’ perception Significan

about the store. 0.000 t

H3: Social Factors have significant effect on customers’ Significan

perception of the store. 0.001 t

H1: Design Factors have significant effect on customers’ perception of the store.

As shown in above table, design factor does not have any significant impact on consumer
perception as p-value is more than 0.05. Thus, it can be concluded that design factor
 lxx

which includes layout, display and color does not affect much on the consumer
perception about the retail store.

H2: Ambient Factors have an effect on customers’ perception about the store.

Ambient factor measure has significant relationship between ambient and consumer
perception. The p-value is 0.000, which is less than 0.05, thus it shows that the ambient
factor which includes lighting, music, cleanliness and fragrance of retail store has
positive impact on consumer perception.

H3: Social Factors have significant effect on customers’ perception of the store.

Social factor measure has significant relationship between ambient and consumer
perception. The p-value is 0.001, which is less than 0.05, thus it shows that the ambient
factor which includes lighting, music, cleanliness and fragrance of retail store has
positive impact on consumer perception.
 lxxi

CHAPTER V

SUMMARY AND CONCLUSION

In the previous chapter, the data analysis and hypothesis have been carried out
accordingly to the objectives of the study. This chapter gives a brief overview of the
introduction, review of related literature, methodology and findings of the study. It also
draws inferences from the findings which will lead to certain conclusion and
generalization.

Summary of Findings

The study was conducted to find the impact of store environment on consumer perception
in Kathmandu Valley. After reviewing the literature, various relevant variables were
identified. These variables were categorized into design factors, ambience factors and
social factors.

The outcomes of this study are in agreement with the findings of other studies that
emphasized the role the physical environment in customers’ perception process (Baker,
Grewal & Parasuraman, 1994; Alsaqre, Mohamed & Jaafar ,2010; Chen & Hsieh, 2011).
Resembling the other studies in the past having examined the direct effects of the
environment in the perception of customers, the hypotheses set out in this study specify a
direct relationship between the store environment and perception of customers about the
retail store. Therefore, managers and owners of an organization should take into
consideration of store environmental factors.
 lxxii

In this study, design factors include layout, displays and color of the store. Ambience
factors include lightings, music, cleanliness, fragrance and whereas, the social factors
included attribute of employees and behavior of employees in the store. The study was
based on 150 samples and the data were collected through the questionnaire. With
reference to the demographic profile, the study focused on four components: gender, age
educational qualification and occupation. Out of total 150 respondents in this survey,
53.3% were male and 46.7% were female. Similarly, among the respondents in this
survey,49.3% were in the age of 16-25, 38% were in the age of 26-35 and 12.7% were
above35years. Out of the total sample, 5.3% of respondents have educational
qualification of SLC or below,6.7% have intermediate level education, 56% were
bachelor degree holders and 32% were master degree holders. Similarly, out of total
respondents 12.7% were student, 15.3% were involved in business, 64.7% were engaged
in employment (private/public) and 7.3% were housemaker.

From the analysis, it can be concluded that display is the dominant design factor that
influences the customers’ perception about the retail store. Within the ambience factors,
cleanliness is the most influential factor for forming positive perception about the retail
store. Furthermore, among the social factors, behavior of employees is the most
important social factor for forming positive perception about the retail store.

Conclusion

Perception is such a word which itself is difficult to understand. Perception is connected

to eye sight, audio, smell and taste. It is crucial for a business to understand what
consumers see, what they feel when they touch the product, how the product smells and
what they hear about the product. These sensory help consumers to form positive or
negative perception about anything. It is very important to know what a customers or
 lxxiii

consumers think or has made an impression regarding the retail store. Creating a positive
perception of retail store depends on a number of factors, one of which is the physical
environment of the place.

This study shows that the store environment has a strong influence on the consumer
perception of a store. The store environment includes all ambient, design and social
factors outside and inside a store. Understanding how these factors can be well-organized
and incorporated into the service environment is a valuable goal for service
establishments. Businesses seeking to attract customers must understand what their
customers expect from their organization and consider all the factors that influence that
customer’s perception of retail store. This research has been successful in identifying the
factor of store environment and their effects in the store perception.

Data for the study were collected using questionnaire which consisted of two parts:
demographic profile and research variables. Demographic profile of the respondents
consisted of gender, age, education qualification and occupation. Research variables
included three design factors (layout, color and displays), four ambience factors
(lightings, cleanliness, music and fragrance) and two social factors (employee attribute
and behavior of employees). The reliability test was done using the Cronbach alpha and
from the test it can be inferred that the questionnaire prepared was reliable for the study
as Cronbach alpha is more than 0.7.

The study found that display is the most influential design factor that influences the
customer’s perception of retail store. Similarly, cleanliness is the most effective ambient
factor among the respondents. And, employee behavior is the most significant social
 lxxiv

factor that affects the customer’s perception about the store. Moreover, it was inferred
that social factors are most important for influencing the perception of the service quality.
The way people appear and how they behave in the service environment is considered
utmost by customers while inferring the service quality.

The hypotheses of the study were tested using Pearson’s Correlation Coefficient. From
the hypotheses testing, the p-value has been found to be significant at 5% level of
significance which indicates that ambient and social factors have significant relationship
with the dependent variable. Whereas, design factor does not have significant relationship
with consumer perception.

Therefore, it can be concluded that store environment influences the customers’

perception about the retail store. In order to form positive perception, owners of retail
stores must give importance to the store environmental factors. These factors help to
attract more customers and also contribute in profitability of the business.

Recommendations for Further Study

This research examines the impact of store environment in the perception of customers.
There are limited researches conducted to understand the effect of the store environment
in the perception, particularly in Nepal. Many researchers have been done in the local
level in the international scenario. According to the literature review and results of the
study there were some primary direction for the future research. This study is conducted
to explore and understand the relationship between different store environmental factors
 lxxv

and consumer perception in Nepalese scenario. Based on the study, some of the
recommendations for further research are as follows:

 In this study the respondents were only the residence of Kathmandu Valley only. So for
the extensive research it is recommended for the inclusion of the respondents from all
over Nepal which can give better result.
 The result is based on the data collected through the questionnaire method. Further
studies can collect the response through conducting a detailed interview technique to
understand the perception of customers in a well manner.
 The study has considered only three major factors that influence the perception of store
environment. So future research studies can use the other important factors as well to do
the research.

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 lxxxiv

ANNEX

QUESTIONNAIRE

I am Jamuna Manandhar, an MBA student from Ace Institute of Management. I am

conducting research on “Store Environment and Consumer Perception: A Study of Retail
Stores in Kathmandu Valley” as to understand consumer's perception regarding existing
retail stores. This research will provide general idea regarding how important is store
environment for positive consumer perception.

Section 1: Personal Information

1. Gender

o Male

o Female

2. Age
 lxxxv

o 16-25

o 26- 35

o 35 and Above

3. Educational Qualification

o SLC or below

o Intermediate

o Bachelors

o Masters and above

4. Occupation

o Student

o Business

o Employment (Private/Public)

o Housemaker
 lxxxvi

Section 2:

Please take a position in the following statements considering the retail store you have
recently visited. Mark on the scale below to indicate to what extent do these measurement
effects on consumer perception about a retail store.

1. Design Factor

Strongly
Disagree Neutral Strongly
Statement Disagree Agree (4)
(2) (3) Agree (5)
(1)

Layout

The interior layout of the store is

appealing.          

The layout of the store is convenient

and spacious.

The layout is well arranged section

wise (eg: Foods and Clothing).

Display

Display is suitable enough to locate

products quickly.

Display is attractive and impressive.

Display is organized department          

 lxxxvii

wise.

Color

Colors used in the store is vibrant

and lively.

Colors are matched with the ongoing

promotional campaign.          

2. Ambient Factor

Strongly
Disagree Neutral Strongly
Statement Disagree Agree (4)
(2) (3) Agree (5)
(1)

Lighting

There is sufficient lighting in the

store for easy accessibility.          

The color and theme of the store is

compatible with the lighting.

Lightings used in the outlet helps me

to examine the products clearly.
 lxxxviii

Music

Pleasant environment created by

music makes me stay longer.

I repeatedly visit the store with nice

background music.          

Cleanliness

The tidiness of the stores attracts me

to visit the store.

The clean and hygienic environment

of the outlet motivates me to visit
again.          

Fragrance

Fragrance can make me feel happier

and satisfied while shopping.

Pleasant fragrance influences me to

stay longer in the outlet.

3. Social Factor

Statement Strongly Disagree Neutral Agree Strongly

Disagree (2) (3) (4) Agree (5)
 lxxxix

(1)

Employee Attribute

There are enough employees in the

store to serve the customers.          

The employees of the store are well

dressed and appear neat.

The employees are well informed

about the available products and
schemes.

Employees’ Behavior

The employees are humble and

polite.

Employees are very helpful and

provide efficient service.

Employees in the outlet provide me

with the valuable advice.          

4. Consumer Perception about Store Environment

 xc

Strongly
Disagree Neutral Strongly
Statement Disagree Agree (4)
(2) (3) Agree (5)
(1)
Store environment element helps me
in selection of the store I visit.          
Store environment makes me
comfortable enough to stay longer in
the store.
Store environment factors make me
recommend that store to my friends
and family.

A pleasant store atmosphere makes

me visit the same store frequently.

A good store environment creates a

positive perception about the store.