well-established luxury fashion groups originate from developed economies, or are owned by the families who originate from France, Italy and the US (Doyle and Moore, 2018). However, similar to other economic sectors, these established luxury fashion conglomerates have recently been challenged by emerging market multinationals (EMNCs) due to their aggressive international expansion and increasingly competitive international luxury fashion brand portfolios (Chevalier and Gutsatz, 2020). This had been evidenced by Bloomberg’s top 20 global luxury groups in terms of revenue (2018), where the four EMNCs (three in jewellery and one in fashion, from China and India) were ranked. Most recently, four EMNCs (in jewellery, from China and India) were ranked in the top 30 within the Global Powers of Luxury Goods Top 100 published by Deloitte (2020). In parallel to the globalisation of the economy and consumption, EMNCs have been playing an increasingly important role in the global market for the last three decades (Hernandez and Guillen, 2018). McKinsey (2018) acknowledged the rapid increasing numbers and importance of EMNCs, and predicted that by 2025 about half of the Fortune Global 500 companies will be EMNCs. Meanwhile, due to considerable differences from traditional MNCs, EMNCs have attracted the attention from academic researchers, especially in terms of internationalisation strategies. Classic international business studies have concentrated on the internationalisation strategies of EMNCs for example, the Springboard perspective (Luo and Tung, 2018), merges and acquisitions (Xie and Li, 2017), and outwards foreign direct investment (Liet al., 2016). In terms of economic sectors, a wide range of businesses have been researched, including manufactures (Gandhi et al., 2017), the oil industry (Andonova and Garcıa, 2018), services providers such as banks (He et al., 2019), high technology, particularly software service providers (Behrens, 2020) and e-commerce giants (Anwar, 2017), as well as generic and fashion retailers (Eren-Erdogmus et al., 2010; Ye et al., 2018). None, however, have focused on luxury fashion retailing, probably because EMNCs are still very new in this sector (Bai et al., 2021a). Moreover, the majority of EMNCs have focused on intermediate markets rather than consumer markets, which indicates that they still lack the expertise to create and maintain intangible value for consumers, particularly the higher income customer segment (Grosse, 2016). Furthermore, the majority of the literature on international luxury fashion retailing focuses on brands and groups who originate from developed markets which have long dominated the sector (Alexander et al., 2018). These studies are potentially limited in value in explaining issues related to companies that originate from emerging markets, due to significant differences between the two kinds of multinational (Bai et al., 2017, 2021b). In particular, the understanding of how these EMNCs as parenting groups support their subsidiary luxury fashion brands which originate from developed markets, remains underdeveloped. Therefore, in terms of the gap in the current literature, this empirical study, viewed from an international retailing perspective, aims to examine the parenting advantages offered by EMNCs in the luxury fashion retail sector. The current literature regarding the EMNCs and parenting advantages in the luxury fashion retail sector will be reviewed and evaluated. 2. Literature review 2.1 Emerging market multinationals (EMNCs) The international market has witnessed rapidly developing and increasingly competitive EMNCs within a wide range of economic sectors during the past few decades (Yoo and Reimann, 2017). Luo and Tung (2007) defined EMNCs as “international companies that originated from emerging markets and are engaged in outward FDI, where they exercise effective control and undertake value-adding activities in one or more foreign countries” (p. 482). More recently the accelerated internationalisation and considerable worldwide IJRDM 50,1 2
success of EMNCs has challenged the conventional international business literature, which primarily concentrates on traditional MNCs, utilising theories such as the Eclectic Paradigm and the Uppsala Model (Mohr and Batsakis, 2018). Table 1 below demonstrates a series of significant differences between traditional MNCs and EMNCs. Home countries of many EMNCs have experienced discretionary and unstable economic and political policies, which have forced EMNCs to develop the ability to deal with restrictions in terms of administration, infrastructure and policies, within heavily regulated and rapidly changing institutional environments (Kotabe and Kothari, 2016). Some EMNCs have developed such abilities to their competitive advantage within a global context (Marchand, 2017). Moreover, because many EMNCs are previously or currently owned by states, they have long felt the impact of political influence, particularly policies promoting or prohibiting internationalisation (Edwards et al., 2019). In some circumstances, business activities of some EMNCs in the international market are not directly driven by profits but for political reasons and to support domestic growth (Yilmaz et al., 2015). Further differences between traditional MNCs and EMNCs may be identified by examining their internationalisation strategies. First, in order to compensate for their competitive weaknesses, EMNCs are driven by critical asset-seeking motives, rather than the asset-exploitation strategies of traditional MNCs, such as market-seeking and/or efficiencyseeking (Yoo and Reimann, 2017). Indeed, suffering from a lack of resources, EMNCs are keen to utilise international expansion as a springboard to acquiring critical assets, such as resources, capacity and advanced management know-how, from traditional MNCs who possess the necessary resources for competitive advantage in-house (Gandhi et al., 2017). More interestingly, the ultimate aim of EMNCs’ internationalisation is, at times, to strengthen their performance within their domestic market by acquiring advanced and/or critical assets from abroad (Tan and Matthews, 2015). Second, similar to traditional MNCs, EMNCs are keen to choose developed markets to build strategic assets and potential markets, and less developed markets for efficiencies such as lower cost production and/or economies of scale (Dunning, 2000; Yilmaz et al., 2015). Third, in contrast to the gradual and stepwise Traditional MNCs EMNCs Country of origin (1) Developed economies (1) Emerging markets Flexibility to react institutional restrictions (1) Weak (1) Strong Political influence (1) Weak (1) Strong (e.g. former or current state ownership) Internationalisation motive (1) Asset-exploitation (1) Asset-seeking (2) Strengthen the performance in home markets Foreign market selection (1) Developed markets (Marketseeking) (2) Emerging markets and less developed markets (Efficiencyseeking) (1) Developed markets (Asset- and market-seeking) (2) Emerging markets and less developed markets (Efficiencyseeking) Internationalisation speed (1) Relatively slow (1) Relatively fast Internationalisation strategies (1) Gradual and stepwise (2) Strongly influenced by psychic distance (1) Aggressive and risk-taking (2) Overcome “Latecomers” disadvantages Foreign market entry modes (1) Low cost and low risk (1) Expensive and risky merges and acquisitions Source(s): Adapted from: Tan and Matthews (2015), Marchand (2017), Luo and Tung (2018), Baiet al. (2021a) Table 1. The key differences between traditional MNCs and EMNCs Emerging market multinationals 3
internationalisation approaches of traditional MNCs as demonstrated by the Uppsala Model (Johanson and Vahlne, 2009), the comparative speed of EMNCs’ internationalisation is faster due to their accumulated experience, previous/current state ownership and more recent relaxed foreign direct investment policies (Mohr and Batsakis, 2018). Fourth, compared with traditional MNCs who usually adopt low-cost and low-risk strategies to enter target host markets in order to minimise psychic distance, EMNCs attempt to overcome the disadvantages of being “Latercomers” by adopting a series of aggressive, expensive and risk-taking external expansion strategies, particularly mergers and acquisitions (Madanoglu et al., 2017; Bai et al., 2021a). These prior studies have contributed to the understanding of the characteristics of EMNCs by examining their institutional environments and internationalisation strategies. However, they are potentially limited their value to explain EMNCs in luxury fashion retailing because of the radical differences between sectors in terms of value chain activities, management expertise, anti-marketing branding strategies and even target consumers (Guercini and Milanesi, 2017; Ko et al., 2019). Understanding of the business development of EMNCs in luxury fashion retailing, especially as a parent company of developed market luxury fashion brands, still remains under developed. 2.2 Parenting advantage in luxury fashion retailing The term parenting advantage was initially used in the business strategy literature to explain how a subsidiary can benefit from the interventions and directions of its parent company, and how value can be created and enhanced by that relationship (Ciabuschiet al., 2017). Parenting advantage is defined by Goold et al. (1994) as “to influence the decisions and strategies of its business units, while standing between these businesses and those who provide capital for their use” (p. 12). Therefore, the capacity of parent companies to create more value than any other competitors for their subsidiaries is the key to creating competitive advantage. The delivery of efficient and effective parenting advantage includes strategies such as offering a wide range of resources, knowledge transfer, economies of scale and greater efficiencies (Kruehler et al., 2012). Goold and Campbell (2002) identified four approaches for parent companies to create value for their subsidiaries: (1) Stand-alone influence, where value is created by making strategic decisions such as appointing a new senior management. Each subsidiary is regarded as a stand-alone profit unit in its own right, but is managed and monitored by its parent company through key performance indicators; (2) Linkage influence, where value can be created through improved cooperation and synergy between subsidiaries; (3) Functional and services influence, where corporate value can be created through offering centralised administrative and managerial services, such as standardised communication, image, finance and infrastructure facilities; and (4) Corporate development activities, where value is created by portfolio management, for example changing the number of businesses in a parent company’s portfolio by buying and/or selling its subsidiaries. Moore and Birtwistle (2005) examined parenting advantage in luxury fashion retailing through a case study of the PPR Gucci Group (current Kering Group) and demonstrated how subsidiary luxury fashion brands can benefit from four kinds of parenting advantage. First, in order to maximise the group’s profits, the PPR Gucci regards all subsidiary brands as stand-alone profit units. They are thus able to control their brands and business activities, such as product design, merchandise and distribution, through a high degree of autonomy. IJRDM 50,1 4
Second, because of ownership advantage, the subsidiary brands benefit from intra-group supply and resource utilisation. Indeed, Gucci and Sergio Rossi supplied leather accessories and footwear to (Yves) Saint Laurent. Third, the subsidiary brands are able to achieve economies of scale and economies of scope by reducing costs and perceived risks through their parent group’s centralised administration, finance, information, management talent, standardised management and supply chain. These functions and services provided by the parent company may have significant economic impact in international markets, especially compared with private luxury fashion brands such as Burberry (Bai et al., 2018). Finally, luxury parent groups can create value via developing and optimising their portfolios of products and brands through multi-brands strategies, which help to avoid diluting exclusive brand image of a single brand due to over-extension (Ahn et al., 2018). Despite their valuable contribution, almost all prior studies in international luxury fashion retailing have focused on Western luxury fashion brands and groups rather than EMNCs, which will increasingly become their competitors (Ye et al., 2018). As EMNCs have become luxury fashion groups through their international expansion, researchers now need to consider their international context and internationalisation strategies when examining the parenting advantages offered by the EMNCs in luxury fashion retailing (Bai et al., 2021a). Therefore, the first two research questions of this study will be: RQ1. How can EMNCs in luxury fashion retailing benefit from being a parent group? RQ2. How can subsidiary luxury fashion brands benefit from the parenting advantage offered by the EMNCs? 2.3 Perceived risks of being subsidiaries of EMNCs in luxury fashion retailing Although subsidiary luxury fashion brands benefit a series of parenting advantages (discussed in the previous section) from their parent groups, they still encounter inevitable challenges. Compared with private counterparts, the autonomy of subsidiaries is relatively restricted, as their branding strategies need to be fit for the strategies of their parent groups. For instance, Helmet Lang and Jil Sander were sold by the Prada Group in order to optimise its brand portfolio (Moore and Doyle, 2010). In order to generate profit for their parent groups, the value and even brand image of subsidiaries is likely to be damaged by divergence from their core products and services (Magnoni and Roux, 2012). Moreover, luxury fashion conglomerates cannot always achieve intrinsic synergies (Kapferer and Valette-Florence, 2016). Internal conflict between subsidiaries is highly likely because of internal competition for resources, for instance Donna Karen’s separation from LVMH (Rigaud-Lacresse and Pini, 2017). As discussed earlier, because of the significant differences between traditional MNCs (e.g. well-established luxury fashion conglomerates) and EMNCs (in luxury fashion retailing), the third research question of this study will be: RQ3. What are the perceived risks of being subsidiaries of EMNCs in luxury fashion retailing? The next section justifies the qualitative case study methodology and research design based upon these research questions. 3. Research methodology An interpretivist qualitative case study was regarded as the most appropriate methodology for this study, which seeks to understand the “why”, “how” and “what” research questions for this new phenomenon within fast-moving markets (Yin, 2018). Indeed, case study has been widely regarded as an appropriate research approach for fashion and luxury fashion retailers (Moore and Birtwistle, 2005; Wigley and Chiang, 2009; Bonetti, 2014; Bai et al., 2021c). Emerging market multinationals 5
The Shandong Ruyi Group was selected as the most suitable case company for this study because its corporate business strategies have concentrated on premium and luxury fashion as their core business. This is the key difference from other EMNCs, especially those who run luxury fashion retailing as sideline rather than as their core business such as jewellery from the Chow Sang Sang Group (Deloitte, 2020). Moreover, in order to develop into an international luxury fashion group and to establish their own luxury fashion brand, the group is developing an international luxury fashion brand portfolio, including Aquascutum, Bally, Cerruti 1881, Gieves and Hawkes, as well as Royal Ruyi. Such development has created challenges for those who currently dominate the market. This can be evidenced by the fact that the group was ranked 16th within the Bloomberg top 20 global luxury groups in terms of revenue (2018). Amongst the four EMNCs in Bloomberg’s list, the group was the only one focussing on luxury fashion retailing in a global context. Therefore, the sampling frame for this study is extremely small and consists of a case study of one large company. The researchers initially accessed the Shandong Ruyi Group through one author’s personal network in Shandong Province, China. The cover letter that explained the purpose of the study and provided privacy for the participants was mailed to the head office in August 2018. Thereafter, the primary qualitative data were collected through ten semi-structured executive interviews with ten directors (six from head office, four from two subsidiary luxury fashion retailers) in two phases, from October to December 2018, and from July to October 2019, at which point the researchers recognised that the sample had reached saturation. All interviews lasted between 75 and 90 min. In order to strengthen the depth of insight into the parenting advantages offered by EMNCs in luxury fashion retailing, the ten interviewees (Table 2) were selected on the basis of the following criteria: they must be directors in their departments/subsidiaries; they must have been employed with the company for at least five years; and they must have been involved with decision-making for internationalisation strategies. Therefore, they were capable of providing sufficient strategic and operational experience, and the necessary information on policymaking, strategic implementation, internationalisation strategies, and the relationship between the group and the subsidiary retailers. The interview questions (Appendix) were sent to them prior to the interviews so that they could prepare in advance. Since this study seeks to examine the parenting advantage of EMNCs towards subsidiary luxury fashion brands, the two participant subsidiaries (Table 3) were selected from the group’s brand portfolio downstream rather than the whole value chain. They were perceived to be strong enough to represent all subsidiaries in downstream due to their strong brand awareness and heritage, global distribution, as well as solid international experience, particularly because they had established their operations in China in the 1990s. Interviewee Head office/Subsidiary Interviewee’s position Location A Head office Director of Marketing Shandong B Head office Director of International Expansion Shandong C Head office Director of finance Shandong D Head office Director of business Management Shandong E Head office Director of Research and Development Shandong F Head office Director of Strategic Development Shandong G Subsidiary A Managing Director Beijing H Subsidiary A Retail Director Beijing I Subsidiary B Managing Director Hong Kong J Subsidiary B Vice President Hong Kong Table 2. Profile of the executive interviews IJRDM 50,1 6
In order to fulfil the confidential agreements, all interviewees were anonymous and described via their job titles during data analysis and reporting. The primary qualitative data were analysed using thematic analysis on NVivo 10. The common themes were generated and retained in an index system so that the data could be carefully identified and explored. Subsequently, secondary data were employed and analysed using internal documents, marketing reports, and news articles published by reputable organisations. These multiple sources of information therefore allowed triangulation of data to strengthen the validity and reliability of the analysis, as well as helping to minimise researcher and interviewee subjective bias. The findings of this study will be presented and discussed below. 4. Research findings 4.1 Advantages of EMNCs of being parent companies Examining the expansion process of the Shandong Ruyi Group helps to understand how EMNCs can mature to become into luxury fashion conglomerates. Indeed, the group has transformed from a (previously state-owned) wool textile mill to become one of the largest luxury fashion groups globally through a series of complicated international expansions (Bloomberg, 2018). Figure 1 illustrates how the group has increased its market power and created and strengthened the value for its subsidiary luxury fashion brands in three areas, including upstream (rare material sourcing), production and downstream (retailing). In terms of the upstream development, the group has obtained full control over the quality and quantity of rare materials, cotton and wool, via the acquisitions of the Cubbie Station, Lempriere Wool and Larundel in Australia. Because of its solid reputation in terms of superior wool and cotton, the choice of Australia was heavily influenced by its locational advantages and the availability of rare resources (Dunning, 2000). Moreover, it is ambitious to establish the largest value chain in wool and cotton products in fashion and luxury fashion, not only for intermediate markets but also for consumer markets. The ownership of top quality wool and cotton helped them to achieve competitive advantage in terms of cost focus and differentiation focus for both the parent group and its subsidiary luxury fashion brands. Five interviewees from head office confirmed such importance, for example the interviewee D explained: It is impossible to produce top quality products if we cannot gain top quality wool and cotton at steady prices, so wholly owned raw materials are the foundation of sustainable success for us and our brands. Subsidiary Country of origin Retail format Position at value chain Number of countries of operation Year and city and entry mode of China’s entry Number of stores in China Ecommerce in China A Switzerland Design house Downstream More than 40 1991 and Beijing and Organic growth Over 45 Yes (official online store and ecommerce platform) B UK Design house Downstream Less than 10 1997 and Beijing and Licensing Over 100 Yes (Ecommerce platform) Table 3. Profile of the participant subsidiary luxury fashion retailers Emerging market multinationals 7
Upstream Obtain & control raw materials Production Downstream Access retailing & brand management - Cubbie Station (Australia, 2012, Strategic alliance with majority stake) - Lempriere Wool (Australia, 2012, acquisition) - Larundel (Australia, 2012, acquisition) - A series of industrial parks (Africa, India, Pakistan etc., between 2012 – 2016, organic growth) - Carloway Mill (Scotland, 2013, acquisition) - Invista’s Apparel & Advanced Textiles (US, 2019, acquisition) - Renown Inc. (Japan, multiple brands, strategic alliance with majority stake in 2010 to acquisition in 2016) - Trinity (Hong Kong, brands include Gieves & Hawkes, Kent & Curwen, and Cerruti 1881, acquisition, 2016) - Aquascutum (UK, acquisition, 2016) - SMCP (France, brands include Sandro, Maje, and Claudie Pierlot, strategic alliance with majority stake, 2016) - Bagir (Israel, merge, 2017) - Bally (Switzerland, strategic alliance with majority stake, 2018) Figure 1. The development of the Shandong Ruyi Group and the value chain IJRDM 50,1 8
Regarding production, as a reputable original equipment manufacturer (OEM) for a great number of well-established luxury fashion brands, the group has extended its expertise into a wider range of fabric know-how through the acquisition of the Carloway Mill (for Harris Tweed) and American Invista’s Apparel and Advanced Textiles (for Lycra). Such expansion in developed markets has been motivated by the need to obtain critical assets especially intellectual property. Meanwhile, it has also optimised its value chain by relocating production facilitates to less developed markets (such as India, Pakistan and Africa), and retaining research and development functions in China. This expansion has been motivated by efficiency-seeking, such as having access to a skilled labour force at lower costs and economies of scale. Eight interviewees confirmed that subsidiary luxury fashion retailers could benefit from this greater production capability, for instance the interviewee F stressed: Our value chain has been optimised through production abroad, because we are able to plan various production functions in different countries where better efficiency exists. Within downstream development, in order to grow into an international luxury fashion conglomerate, the group has extended its operations into a wider range of business and marketing activities through the acquisitions of well-established luxury fashion brands. This expansion into developed markets was proactively motivated for the purpose of seeking strategic assets, especially the know-how in retailing, luxury consumer relationship management and brand management, necessary for the development of its own high-end brands. Indeed, the establishment of its own luxury fashion brand such as Royal Ruyi is one of the most important targets for the group in terms of competitive advantage and long-term corporate strategy. Therefore, EMNCs benefit from being the parent company for luxury fashion brands through both production and downstream development. 4.2 Parenting advantages offered by EMNCs Based upon the four kinds of influences offered by parent companies (Goold and Campbell, 2002), the parenting advantage provided by EMNCs is different to some extent from their developed market counterparts. First, the Shandong Ruyi Group values the development of each subsidiary brands and supports their actual needs and growth strategies respectively through stand-alone influences. For instance, SMCP went to IPO (initial public offering) in 2017 (one year after the merge by the group in 2016). Meanwhile, the Ruyi Group have managed and monitored the business performance of subsidiary brands through key performance indicators, especially market growth rate and profits. The director of finance confirmed that senior managers from the group audit subsidiaries regularly via return of investment in finance. However, different from Kering Group, such a high degree of autonomy in EMNCs is also motivated by the lack of know-how in branding strategy and retailing. This was confirmed by eight interviewees with interviewee A explaining: It is a win-win situation for us (as a parent group) to regard our brands as stand-alone units rather than to interfere with their business management and practices, because we are still very new in downstream markets, and still need to learn from them in terms of brand management, retailing, and luxury fashion consumer services. Second, through linkage influences, all subsidiary luxury and premium fashion brands have benefited from intra-group resource utilisation. They are thus able to extend their product portfolio through support products each other. Meanwhile, they also benefit from stable supply of rare materials and production. For instance, Gieves and Hawkes extended its product portfolio into leather accessories through support from Bally. Moreover, all subsidiaries have enhanced their competitiveness in obtaining store locations by forming up a brand portfolio and achieving economies of scales, especially in China. Therefore, the linkage influences between subsidiaries of EMNCs can be achieved across the whole value Emerging market multinationals 9
chain rather than from their traditional counterparts whose subsidiaries collaborate in the same or similar position within the value chain (Moore and Birtwistle, 2005). This was evidenced by all four interviewees from subsidiaries. The interviewee J explained: As well as steady supply of top quality materials and production (upstream), we can also work together with our colleagues (other subsidiary retailers, downstream) to form a competitive and attractive brand portfolio and can negotiate with landlords in order to gain good locations for our retail stores. Third, similar as their counterparts owned by Kering Group, all subsidiary brands in the Ruyi Group have benefited from centralised administration functions, such as finance and human resources, which are important to achieve economies of scale. However, local knowledge in EMNCs’ home markets and production capabilities and diversity have been revealed as advantages offered by EMNCs. Indeed, all four interviewees from subsidiaries confirmed that the group’s local knowledge in China helped to accelerate expansion of both online and offline operations. Moreover, having acquired subsidiary brands and other subsidiaries to achieve upstream development and production, the group’s production capabilities and diversity have been extended. In particular, they have been able to diversify into high-tech fabrics. This increased know-how in fabrics allows them to provide expertise in luxury fabrics to subsidiary brands. Five interviewees from head office argued that the ultimate goal in production is to optimise the value chains of subsidiary brands and replace their old suppliers. This is because standardised value chains offer a steadier supply of rare material production, offering economies of scale. The benefit of creating such dynamic processes within value chains was also confirmed by three interviewees from subsidiaries. For instance, more recently Bally has extended their product portfolio into a wider range of wool and cashmere products, such as ready-to-wear products and accessories, rather than focussing on core leather products only. Finally, the parenting advantage created by corporate development activities is the key differences between Kering Group and Ruyi Group. None of the interviewees from subsidiary retailers was able to confirm such benefits. Four interviewees from head office argued that they wished to strengthen their brand portfolio in luxury and premium fashion segments by acquiring more luxury fashion brands. This is because one of the core aims of the group’s business strategy is to develop into an international luxury fashion conglomerate, and become “China’s LVMH”. However, it remains very new in luxury fashion sector and at the learning stage. Therefore, its corporate development activities have not yet created sufficient parenting advantage for its subsidiary luxury fashion brands. The interviewee G mentioned: The group still remains at an early stage of development and is learning from European groups, so I do not think we have been benefited from this. The following section is discussing the perceived risks of being subsidiaries of EMNCs. 4.3 Disadvantages of being subsidiaries of EMNCs Despite a number of parenting advantages, three perceived disadvantages of being a subsidiary of the Ruyi Group have been identified. Two interviewees from two subsidiary retailers were concerned about the influence of and intervention from the parent group in terms of business development and retail operations. Especially at the point when the parent group has developed into a considerable size. Because of different aims, internal conflicts are inevitable and senior management from parent group do not always have enough knowledge and expertise in brand management and consumer services to manage the subsidiary retailers. For instance, the interviewee I stressed: Long-term stable harmony between a parent company and luxury fashion brands are difficult to achieve, because they (parent company) invest for (short-term) profits rather than long-term constant brand image. IJRDM 50,1 10
Interviewee H was concerned about uncertainty caused by corporate development activities, whereby the parent company develops portfolios of brands and products by buying and selling subsidiaries. In some circumstance, luxury fashion retailers are sold by their owners because they cannot generate enough profits (Moore and Doyle, 2010). Frequent changes of ownership are perceived to be harmful to their brands. Finally, three interviewees from subsidiaries were worried that a constant and exclusive brand image is at risk of being diluted and even damaged by EMNC ownership because of the difference between country of origin and country of ownership (Johansson et al., 2018). In summary, it is a win–win situation for the EMNCs as parent groups of Western luxury fashion brands. On the one hand, the EMNCs can access critical assets, such as advanced brand management expertise, retailing know-how and the services skills needed for higher income consumers. On the other hand, the subsidiary brands benefit from a high degree of autonomy, intra-group resource utilisation, a competitive brand portfolio, local knowledge of EMNCs’ home markets, and most importantly economies of scales in the value chain, particularly in production. Nevertheless, the perceived disadvantages of EMNCs ownership include potentially restricted autonomy and the uncertainty over corporate development activities in the future, as well as the risks of diluting brand image caused by the inconsistency between country of origin and country of ownership. 5. Discussion A series of differences between EMNCs in luxury fashion retailing and well-established counterparts are identified (Table 4). The most obvious differences are in relation to country of origin and target foreign markets. Compared with France, Italy and the US where the majority of well-established groups originate from, the most popular countries of origin for EMNCs in luxury fashion retailing are China and India (Bloomberg, 2018; Deloitte, 2020). Well-established groups usually merge and acquire luxury fashion retailers who originate from same country or cultural zone (Moore et al., 2010), while EMNCs typically target brands that originate from different countries or cultural zones where larger psychic distance exists. These differences indicate different levels of market knowledge and luxury brand management experience between the two kinds of groups (Rigaud-Lacresse and Pini, 2017). The scope of internationalisation is different. Well-established groups usually merge and acquire luxury fashion retailers in order to optimise their portfolio of products and brands, developing a multi-brand extension strategy in order to avoid the diluting of an exclusive brand image, caused by over extension into inappropriate product or sub-brands (Kapferer and Valette-Florence, 2016). Therefore, most expansion activities occur within the same or Traditional luxury fashion conglomerates EMNCs Country of origin Developed markets (e.g. France, Italy, US) Emerging markets (e.g. China, India) Country of origin of target subsidiaries Same country or cultural zone Different country or cultural zone Psychic distance between parent company and subsidiary Small Large Expertise in marketing and luxury brand management high Low Internationalisation scope Downstream in the value chain whole value chain Production capabilities Relatively low high Internationalisation motives Seeking market and efficiency Seeking critical assets Table 4. The differences between traditional luxury fashion conglomerates and EMNCs in terms of parenting advantages Emerging market multinationals 11
similar areas within the value chain, especially downstream market retailing (Guercici and Milanesi, 2017). However, EMNCs’ international expansion happens in the whole value chain, from upstream raw materials sourcing, to manufacturing and to downstream retailing. Because of previous or current OEM experiences, being parent companies of luxury fashion retailers, the EMNCs are able to enhance their production capability and diversity by securing steady manufacturing and even replacing own subsidiaries’ old suppliers, unlike traditional conglomerates (Doyle and Moore, 2018). The motives and importance of internationalisation are different from the perspective of seeking markets and the efficiency of internationalisation of well-established groups (Hutchinson and Quinn, 2011). EMNCs aim to develop into international luxury fashion groups and even to establish their own luxury fashion brands by using internationalisation as a springboard to access strategically critical assets (Luo and Tung, 2007, 2018), such as brand management expertise, competitive brand portfolios and distribution networks. Therefore, EMNCs can benefit by being parent companies for luxury fashion retailers through achieving economies of scales in production, and acquiring advanced brand management expertise from subsidiaries to develop their own luxury fashion brands. Furthermore, Table 5 illustrates the parenting advantage offered by EMNCs in luxury fashion retailing. In terms of stand-alone influence, similar to Western luxury fashion groups, EMNCs offer their subsidiaries a high degree of autonomy, supporting them according to their actual business strategies and monitoring their performance according to key performance indicators, particularly profits. However, a lack of expertise in brand management and highincome consumer services also motivates the EMNCs to regard subsidiary luxury fashion brands as stand-alone profit units. Regarding linkage influences, subsidiary luxury fashion brands of the EMNCs not only utilise intra-group resources (especially know-how in fabric design and development) and support design and products for one another, but they also form as a brand portfolio to obtain suitable store locations. In relation to functional and services influences, the similarities between the two kinds of parent groups are economies of scales achieved through centralised administration, such as finance and human resources. However, the key difference between those two kinds of group is production capability. As discussed earlier, because of the OEM experiences, the EMNCs have developed their own fully controlled value chain, which offers their subsidiaries’ economies of scales in terms of diversifying raw material sourcing, core competence of fabric research and development and production capacity. The depth local knowledge and local connections in the EMNCs’ home markets are other key differences from the Western counterparts, because such parenting advantage encourages subsidiary luxury fashion brands’ international expansion (Baiet al., 2021a). Furthermore, the EMNCs are not as strong as well-established groups in supporting subsidiaries through corporate development activities, because they are still developing their brand portfolio and have not reached the stage optimising the brand portfolios of the luxury fashion brands. Therefore, the important Parenting advantage Description Stand-alone influence (1) high degree of autonomy Linkage influence (1) brand portfolio (2) fabric know-how Functional and services influence (1) production capability (2) production platform (3) wholly owned value chain (4) Local knowledge in EMNC’s home markets Table 5. Parenting advantage offered by the EMNCs in luxury fashion retailing IJRDM 50,1 12
factors to evaluate and compare in terms of the parenting advantage offered by the EMNCs in luxury fashion retailing and well-established Western groups includes the lifecycle stage, functions and the experience of parent companies, as well as anti-internationalisation performance (expansion in parent company’s home country). Since the EMNCs are still in the introduction or growth stages of their lifecycle, their subsidiary luxury fashion brands do not have to deal with the challenge of restricted autonomy (stability of stand-alone influence) and the risk of being sold (uncertainty over corporate development activities). However, when the EMNCs reached the stage of maturity and even decline, these subsidiaries are highly likely to be required to follow their strategies and to generate satisfactory profits for the parent company. These two perceived risks are similar to the subsidiary brands owned by well-established Western luxury fashion conglomerates (Moore and Doyle, 2010). Most importantly, according to the findings of this study, subsidiary luxury fashion brands owned by the EMNCs need to consider the potential risk of diluting and even damaging their brand image which may be caused by inconsistency between country of origin and country of ownership, especially in emerging markets where solid heritage and craftsmanship for luxury fashion brands is insufficient (Ko et al., 2019). 6. Conclusion International luxury fashion market has long been dominated by the luxury fashion brands and groups originated from developed markets (Moore et al., 2010). However, fast growing EMNCs have recently created challenges for these well-established multi-brands luxury fashion conglomerates. Understanding of EMNCs in luxury fashion retailing remains insufficient. This study offers a depth of understanding about the parenting advantage offered by EMNCs as parent companies in luxury fashion retailing in terms of stand-alone influence, linkage influence, functional and services influence, and corporate development activities. Meanwhile, this paper has enriched the EMNC literature which has mainly adopted an international business perspective by extending this understanding into luxury fashion retailing, highlighting the differences between EMNCs in luxury fashion retailing and in other sectors. It recognises the mutual benefit created between EMNCs as parenting companies and their developed market subsidiary luxury fashion brands, as well as different internationalisation activities (Hutchinson and Quinn, 2011; Assaf et al., 2012). The present research suggests practitioners in EMNCs, who are keen to develop into an international luxury fashion group and to create their own luxury fashion brands, to establish a wholly owned value chain through internationalisation because it creates competitive advantages over well-established counterparts, especially in terms of production capability. The internal harmony can be facilitated through regarding subsidiary luxury fashion brands as stand-alone profit units, and balancing corporate development strategies with subsidiaries’ business strategies. Furthermore, the subsidiary luxury fashion brands are suggested to highlight their heritage, craftsmanship and country-of-origin image within their communication strategies. Although the validity and reliability of the findings have been strengthened through triangulation of data collection and analysis, the major limitation of this study is related to the purposive sampling technique and the small sample size. As previously discussed, the sampling frame for this study is very limited, evidenced by the fact that very few EMNCs to date have dedicated into luxury fashion retailing and have achieved worldwide success (Bai et al., 2021a; Deloitte, 2020). The Shandong Ruyi Group is regarded as the most appropriate case company for this study because it has been widely recognised as the pioneer EMNC in luxury fashion retailing (Bloomberg, 2018). Another limitation is considered to be the institutional context within the home country China, which is perceived to be of considerable psychic distance in terms of culture compared to other typical emerging markets, which have been heavily influenced by colonialism, such as India and Brazil (Behrens, 2020). Emerging market multinationals 13
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Appendix Executive interview questions Interview questions for the directors (head office) Q1. We know that the Shandong Ruyi Group had achieved considerable success through internationalisation in the recent years. Could you please share your opinion regarding what is internationalisation of the EMNCs in luxury fashion retailing? Q2. Regarding to the downstream of the value chain, what are the most important motives behind international merger and acquisition of Western luxury fashion brands? Q3. What benefits can your group obtain of being the parent group of these subsidiaries? Q4. As a parent group, can you please share your opinion regarding how can your group support these Western subsidiaries (through stand-alone influences, linkage influences, functional and services influences, and corporate development activities)? Q5. Could you please share your opinion regarding what are the challenges to manage and operate these subsidiaries in the consumer markets? Interview questions for the senior management (subsidiary luxury fashion retailers) Q1. We know that your company is a European heritage luxury brand and solid international experiences. Could you please share your opinion regarding why did your company become a subsidiary of the Shandong Ruyi Group? Q2. In your opinion, what kinds of expertise or advanced know-how your company can offer to the Shandong Ruyi Group as an EMNC? Q3. In your opinion, what are the key differences between the Shandong Ruyi Group (and EMNCs in luxury fashion retailing) and the established developed market luxury fashion conglomerates, such as the Kering Group? Q4. In your opinion, how can your company can be benefit from the parent group (through standalone influences, linkage influences, functional and services influences, and corporate development activities)? Q5. Could you please share your opinion regarding the perceived risks of being a subsidiary of the Shandong Ruyi Group? Corresponding author Huifeng Bai can be contacted at: [email protected] For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: [email protected] Emerging market multinationals 17
Why buy used? Motivators and barriers for re-commerce luxury fashion Karun Tangri Toronto Metropolitan University, Toronto, Canada, and Hong Yu Ryerson University, Toronto, Canada Abstract Purpose – The sale of second-hand goods in the luxury fashion space continues to soar. However, existing literature on this segment is limited and the factors that draw consumers to this space are not well understood. This study aims to fill this gap and proposes a conceptual model demonstrating the linkage between the motivators and barriers toward re-commerce in the luxury fashion space and actual shopping behaviors. Design/methodology/approach – A survey sample of USA second-hand luxury fashion shoppers was collected. Participants were asked questions about various motivators and barriers toward re-commerce, as well as the participants’ attitudes and shopping behavior. The results were analyzed using SmartPLS structural equation modeling (SEM). Findings – Economic reasons, originality and self-extension were found to be statistically significant motivators of attitudes toward re-commerce, while status consumption, nostalgia and ecological motivators were not. Superstitious beliefs were also found to be statistically significant motivators toward attitudes of re-commerce. Attitudes were also found to be a significant predictor of shopping behavior as measured by dollars spent and shopping frequency. Originality/value – This study is among the first to propose a conceptual model depicting the relationship between motivators and barriers to actual shopping behavior in the second-hand luxury fashion space. Many of the motivators and barriers examined in this study are novel and have not been considered in prior research. Superstitious beliefs in particular have not been studied in the context of recommerce. Keywords Luxury fashion, Re-commerce, Sustainable retailing Paper type Research paper 1. Introduction Re-commerce, which is broadly defined as the renting, re-selling and thrifting of previously owned goods, is undergoing a boom (“The Rise of Re-commerce”, 2020). Driven by various trends, especially an increased focus on sustainability in the retail industry, re-commerce has emerged and expanded, with the total market expected to grow from US$24bn in 2018 to US$51bn by 2023 (MacDonell, 2020; Sularia, 2020). The resale luxury fashion industry, which had been valued at US$25bn in 2020, is expected to grow 10–15% over the next decade, driven by consumer attitudes toward sustainability (Berg et al., 2021). Recent literature has demonstrated that consumers have become more conscious of the environmental impact of their purchases and sustainability has become a relevant factor when making purchasing decisions (Balconi et al., 2019; Faccioli and Sheehan, 2021; Loranger and Roeraas, 2022). This has led to the development of alternative consumption models, including purchasing pre-owned (or second-hand) luxury fashion (Berg et al., 2021; Faccioli and Sheehan, 2021; Loranger and Roeraas, 2022; Veloutsou et al., 2021). For the purpose of this study, we define second-hand luxury fashion as previously owned and gently used apparel and accessory products with luxury brand names (Turunen et al., 2020; Turunen and Leip€amaa-Leskinen, 2015) and we use the terms of “resale,” “re-commerce,” and “second-hand” luxury fashion interchangeably. Re-commerce luxury fashion 1095 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0959-0552.htm Received 30 October 2022 Revised 13 February 2023 Accepted 11 April 2023 International Journal of Retail & Distribution Management Vol. 51 No. 9/10, 2023 pp. 1095-1114 © Emerald Publishing Limited 0959-0552 DOI 10.1108/IJRDM-10-2022-0417
Many different business models have been established in the re-commerce luxury fashion space, with brands and retailers adopting unique strategies to capitalize on the segment’s growth. In addition to traditional brick and mortar distribution channels, the sale of used goods has surged among new and existing online retailers (Goddevrind et al., 2021). One example is The RealReal, an American luxury consignment retailer that sells consigned luxury goods through e-commerce channels. In addition, clothing rental has also become increasingly popular in recent years, with revenues forecasted to grow from US$3.9bn in 2019 to more than US$7bn by 2025 (Inside Fashion’s Rental Market, 2021). These new business models and practices are a global phenomenon prevalent in many international markets, such as China (Berg et al., 2021; Wang et al., 2022). Although the re-commerce luxury fashion sector adopts many business models, this study focuses on re-commerce luxury apparel and accessories in the context of re-selling; thus, we exclude renting and thrifting. Despite the rapid growth of the market share, research on re-commerce of pre-owned goods is quite limited. This study seeks to fill this research gap by developing and empirically testing a model that identifies factors that influence consumers’ attitudes toward the re-commerce luxury fashion, which in turn contribute to their actual shopping behaviors. When comparing the motivators of first-hand and second-hand luxury purchases, Kessous and Valette-Florence (2019) reported that second-hand purchases typically are linked to social climbing, sustainability concerns, brand heritage and windfall, whereas first-hand purchases often are driven by power, brand and social standing. In addition, factors such as emotional attachment and nostalgia (Turunen and Leip€amaa-Leskinen, 2015) are also identified as motivators of re-commerce activities. Previous research also identifies sustainability as a key driver of re-commerce, with 73% of millennials stating in a survey that they prefer to shop from sustainable brands (Sularia, 2020). Furthermore, prior studies have explored economic motivators along with factors such as fashion motivations, which tie closely to originality and a desire to develop a specific style and observe trends (Ferraro et al., 2016; Guiot and Roux, 2010). With regards to barriers and deterrents to second-hand shopping, existing literature points to social stigma, which refers to a sense of embarrassment from buying second-hand (Silva et al., 2021). Additionally, perceived poor presentation and disorganization often found in second-hand retail locations have been noted to negatively impact consumers’ second-hand shopping experience (Connell, 2010; McColl et al., 2013). In this study, we propose a model of consumers’ motivations/barriers for re-commerce luxury fashion attitude and behavior using expectancy theory (ET) as an overarching theoretical framework and we empirically test the hypotheses using a USA sample. This paper begins with an overview of existing literature regarding the relationship between attitudes and behavior and ET. Following this, current research pertaining to the motivators and barriers of re-commerce will be examined. From this literature, we propose four hypotheses and a conceptual model that we then tested using survey methods. We then present the results, followed by a discussion outlining the relevance of our findings, along with potential managerial implications and limitations. Given that existing research on the topic is highly limited, this study provides critical insights for practitioners and researchers on consumer attitudes toward re-commerce luxury fashion. The findings are particularly important due to the rapid growth of the industry and the shift toward more sustainable consumption habits. Furthermore, avenues of future research for academics are also established. 2. Literature review 2.1 Relationship between attitudes and behavior The connection between attitudes and behavior is well established in the literature through seminal theories such as the theory of planned behavior (TPB) (Ajzen, 1988, 1991; IJRDM 51,9/10 1096
Trafimow, 2009). Numerous studies of the luxury fashion space apply TPB to establish a connection between attitudes and behaviors (Jain et al., 2017; Jain and Khan, 2017). Different studies have employed unique approaches to measure shopping behavior. Research by Guiot and Roux (2010) on re-commerce assessed shopping behavior by the frequency of purchases and the number of channels frequented. Other measures include asking whether a participant had ever bought a second-hand luxury good and whether they had made a purchase within the last three years (Kessous and Valette-Florence, 2019). This study builds on the previous research and examines re-commerce luxury fashion behaviors by assessing shopping frequency as well as the dollars spent. Based on the well-established attitudebehavior relationship, we propose the following hypotheses: H1. Attitudes toward re-commerce luxury fashion will influence shopping frequency. H2. Attitudes toward re-commerce luxury fashion will influence dollars spent. 2.2 Expectancy theory The study’s overarching theoretical framework is ET, which explores how individuals assess available options and make decisions that produce the most favorable outcome (Vroom, 1964). Focusing on motivations for behaviors, ET postulates three elements that drive human behavior: instrumentality, expectancy and valence. Expectancy refers to the belief that effort expended will drive performance proportionately with that effort, while instrumentality is defined as the belief that performance and an outcome are linked and that high performance will trigger a positive outcome (Vroom, 1964). Valence refers to the degree of satisfaction derived from the desired outcome and its value given the costs to achieve it. These three facets of motivation are ultimately what drive human behavior. ET has been applied in a variety of fields and contexts including entrepreneurship, management and technology (Barba-Sanchez and Atienza-Sahuquillo, 2017; Hau et al., 2019; Kiatkawsin and Han, 2017). In this study, instead of operationalizing the theory’s variables and applying it directly, we used ET to guide the categorization of motivators and barriers and to establish the connections between motivators and barriers of luxury fashion re-commerce and consumers’ attitudes toward re-commerce luxury fashion. 2.3 The development of re-commerce The remarkable growth of re-commerce is driven by a significant shift in consumer attitudes and perceptions toward the segment. Initial research on second-hand goods suggested that the rise of this segment was due to economic reasons and was largely driven by a decrease in spending power (Williams and Paddock, 2003). Research published in the early 2000s often focused on how these alternative channels were chosen out of necessity by those who were financially disadvantaged (Williams and Windebank, 2000). Hence, buying second-hand were generally seen as a pragmatic choice when compared to shopping for new goods. Over time, new research emerged suggesting that there were hedonic reasons for second-hand shopping and that some consumers chose to buy second-hand (Bardhi and Arnould, 2005). As re-commerce channels become more fully established and the popularity of second-hand goods rises, research has begun to explore additional motivations other than economic consideration. At present, re-commerce is viewed as a legitimate retail segment and consumers engaged in re-commerce activities with a variety of drivers and barriers (Ferraro et al., 2016; Turunen and Leip€amaa-Leskinen, 2015). 2.4 Motivators of re-commerce luxury fashion Prior studies have explored a variety of motivators toward re-commerce. An early study by Guiot and Roux (2010) utilized survey methods and semi-directed interviews to develop a Re-commerce luxury fashion 1097
scale exploring these different motivations. The resulting model uncovered three primary categories of motivators: critical, economic and recreational. Critical motivations refer to ethical reasons for shopping second-hand and encompass both ethical and ecological motivations. Additional studies have investigated ecological consciousness as a motivator and the results have been mixed, with some finding it not a statistically significant factor in driving re-commerce adoption (Silva et al., 2021). Similar results were reported through a survey-based study of factors influencing the purchase of second-hand clothes, despite general data showing that consumers are becoming more environmentally conscious with their purchases (Silva et al., 2021; Widlitz, 2020). Some studies have segmented consumers into categories based on their reasons for buying second-hand and found that ecological motivators are intertwined with other reasons for shopping second-hand, such as economic and recreational drivers (Ferraro et al., 2016; Guiot and Roux, 2010). This study further analyzes ecological consciousness in the context of resale luxury fashion and provides clarity on its role in driving second-hand purchases. Extensive research has explored the role of personal possessions in shaping and reflecting people’s identities. Beginning with early research by Belk (1988), consumer behavior literature has examined individuals’ tendency to invest themselves in objects and extend their individual identities through their possessions. Recent literature has demonstrated a connection between self-extension and luxury fashion in particular, with a quantitative study of Malaysian consumers finding that self-identity has a positive impact on attitudes toward luxury fashion (Salem and Salem, 2018). The role of self-extension as a factor influencing purchases has been shown across many consumer groups and industries, with studies on teenage consumers showing that personal identity affects the perceived importance of a clothing product and brand (Badaoui et al., 2018). Qualitative research on Finnish consumers also has explored how consumption driven by wellness and health was used as a tool for self-branding and contributed to self-identity (Grenman et al., 2019). This study includes self-extension as a motivator that influences consumers’ attitude toward re-commerce luxury fashion. The dimension of status-seeking as a motivator when shopping for luxury goods is well established in the literature (Eastman et al., 1999, 2018; Han et al., 2010). Brand prominence, defined as “a construct reflecting the conspicuousness of a brand’s mark or logo in a product” has been noted to drive the purchasing of luxury products (Han et al., 2010). Experimental research by Han et al. (2010) categorized luxury shoppers into four groups based on their wealth and need for status, with consumers being categorized as either high or low in each attribute. The study showed that wealthy consumers with high need for status will purchase “loud luxury products” to signal their status and differentiate themselves from those who are less affluent, while wealthy indviduals with low need for status tend to opt for “quiet luxury” goods that are less conspicious. Similar results were found in a qualitative study on female Taiwanese consumers, in which a number of participants stated their luxury purchases were motivated in part by the social status conferred from these goods (Wu et al., 2015). Related to this, a prior study also found a negative stigma attached to second-hand clothing due to social embarrassment, with survey evidence revealing that this dimension is significant for those with and without experience of shopping for second-hand clothes (Silva et al., 2021). Research by Klepp and Laitala (2018) had similar results, with participants consistently raising concerns regarding the social perceptions of shopping second-hand. This study explores the potential clash between the status-seeking element of luxury goods with the social stigma of buying second-hand. Economic motivations toward re-commerce have been studied extensively, with many studies identifying it as a critical factor driving the adoption of re-commerce (Guiot and Roux, 2010; Kessous and Valette-Florence, 2019; Klepp and Laitala, 2018). Economic drivers correspond to the search for a lower price and have been a focus on second-hand shopping since literature on the topic first emerged (Williams and Paddock, 2003). Guiot and Roux IJRDM 51,9/10 1098
(2010) found four elements that make up economic motivations: a desire to pay less, a search for a fair price, bargain hunting and gratification derived from the reduced price. Turunen and Leip€amaa-Leskinen (2015) examined the meaning assigned by consumers to their pre-owned luxury goods and found “bargain hunting” and achieving the best deal to be a major driver for purchasing pre-owned luxury goods. There has been a shift in the second-hand apparel segment, with recent studies noting that used clothing is seen as fashionable and trendy, and the stigma and shame attached to the segment is fading (Ferraro et al., 2016; Guiot and Roux, 2010; Steffen, 2016). Ferraro et al. (2016) found that 83% of second-hand shoppers are motivated by fashionability when shopping at second-hand stores. Fashionability encompasses many elements, including originality and a desire for uniqueness, as well as authenticity and self-expression (Ferraro et al., 2016; Guiot and Roux, 2010). This study further expands on originality and its role in motivating second-hand luxury fashion adoption. Nostalgic motivations toward re-commerce are recreational in nature and have been found to be a source of pleasure for second-hand shoppers (Guiot and Roux, 2010; Steffen, 2016). When interviewing study participants, Guiot and Roux (2010) identified a variety of responses that pertain to nostalgia, including “I’m more attracted to old things than new ones. They recall memories, linked to my family and where they lived.” Overall, it was found that the connection of used goods to one’s past triggered positive emotions (Guiot and Roux, 2010). When segmenting shoppers into categories based on their motivators, one group was noted to be highly motivated by nostalgic pleasure. This group, referred to as “nostalgic hedonists,” was drawn to second-hand goods primarily due to pleasure (Guiot and Roux, 2010). Each of the motivators in this study are classified through the ET framework. Ecological motivators are considered part of the expectancy category, as making sustainable purchases is considered an effort to protect the environment. Self-extension and status consumption are categorized as instrumentality as they are perceived positive outcomes that will result from shopping for re-commerce luxury fashion. Economic, nostalgic and originality motivations have been categorized as valence as they are seen as unique benefits to shopping for re-commerce luxury fashion. Tables 1 and 2 provide an overview of motivators and barriers that have been examined in prior literature. 2.5 Barriers This study investigates superstitious beliefs as a barrier, which in the context of ET is considered to contain negative valence. Superstitious beliefs, defined as “irrational beliefs that an object, action, or circumstance that is not logically related to a course of events influences its outcome” (Damisch et al., 2010), have been found to influence both purchasing behavior and economic activity (Jian Wang et al., 2009; Wang et al., 2017). Research by Bozaci Existing motivators Associated literature Critical Motivations: Ethical reasons such as sustainability Guiot and Roux (2010) Recreational Motivators: Focused on experiential drivers such as social contact or” treasure hunting Guiot and Roux (2010) Economic Motivations: Searching for a lower price Guiot and Roux (2010) and Ferraro et al. (2016) Fashion Motivations: Emphasis on originality and developing a unique style Ferraro et al. (2016) Status Consumption: Purchasing for the purpose of elevating one’s status Eastman et al. (1999) Source(s): Table by Karun Tangri Table 1. Overview of current motivators Re-commerce luxury fashion 1099
and Durakan (2020) found superstitious beliefs to be a significant factor that affects shopping behavior. The effects of superstitious beliefs are widespread and have even been found to influence perceptions of company logos (Jian Wang et al., 2009). Interestingly, social presence has been found to weaken the role of superstitious beliefs when shopping, with embarrassment acting as a mediator that suppresses the impact of these views (Wang et al., 2017). Limited research has been conducted on the impact of superstitious beliefs on the adoption of second-hand apparel. A qualitative study by Roux and Korchia (2006) found that some consumers were concerned about hygiene when buying second-hand apparel and felt there was a symbolic transfer of contamination between the former and new wearer of the garment. Concerns of contamination are found elsewhere in the literature, with an analysis of young Chinese consumers revealing that an association with poverty is a statistically significant barrier (Wang et al., 2022). Cultural factors appear to impact the role and degree to which concerns regarding superstitious beliefs affect the adoption of second-hand apparel; for instance, Chinese consumers held deeper concerns regarding wearing clothes previously worn by others, when compared to American shoppers (Xu et al., 2014). Although no literature was found on the effects of superstitious beliefs and second-hand luxury fashion, such beliefs were found to impact consumer behavior regarding other luxury goods, such as vehicles (Forghani et al., 2019). Overall, research on this construct is sparse and this study expands on initial research on this topic and establishes the impact of culture and superstition on attitudes and behavior toward second-hand luxury apparel. 2.6 Proposed conceptual model Given the connection between motivators and barriers to re-commerce, attitudes and ultimately shopping behaviors, we propose two additional hypotheses. Hypothesis 3 posits that each of the following motivators influence attitudes toward re-commerce: ecological (3a), self-extension (3b), status consumption (3c), economic (3d), originality (3e) and nostalgic (3f). Hypothesis 4 proposes that superstitious beliefs are a barrier to re-commerce and negatively affect attitudes. The conceptual model that ties together the relationship between motivators and barriers, attitudes and ultimately actual shopping behavior is included in Figure 1. H3. Each of the following motivators influence attitudes toward re-commerce: ecological (3a), self-extension (3b), status consumption (3c), economic (3d), originality (3e) and nostalgic (3f). H4. Superstitious beliefs are a barrier to re-commerce and negatively affect attitudes. 3. Methodology 3.1 Survey instrument and data collection Data from 419 American respondents were collected through Amazon Mechanical Turk using a questionnaire. The objective of the study was to develop a model guided by the Existing barriers Associated literature Social stigma and embarrassment Silva et al. (2021) Lack of Visual Appeal of Stores Connell (2010) and McColl et al. (2013) Poor Cleanliness and Hygiene Issues Klepp and Laitala (2018) Superstitious Beliefs Bozacı and Durukan (2020) Source(s): Table by Karun Tangri Table 2. Overview of current barriers IJRDM 51,9/10 1100
Expectancy Theory and extant literature and empirically test the proposed hypothesis. Therefore, a quantitative method using a survey questionnaire is considered appropriate. While Amazon Mechanical Turk is an efficient and convenient way to conduct data collection, there are certain limitations and disadvantages. Participants sourced through Amazon Mechanical Turk may not be representative of the general population and evidence shows that they are more educated, less religious and more likely to be unemployed (McDuffie, 2019), Given that Amazon Mechanical Turk is a web-based platform, our sample may have excluded those who do not have access or the knowledge to operate a web-based platform. Respondents who were 18 years and older and had bought a re-commerce luxury fashion item in the last 3 months were qualified to participate. The survey questionnaire was divided into three sections: demographic information, motivations for buying second-hand luxury fashion goods and barriers for buying second-hand luxury fashion. Respondents were asked to indicate their responses using a 5-point Likert scale, ranging from (1) “Strongly disagree” to (5) “Strongly agree.” Questions regarding motivators and barriers to re-commerce luxury fashion include ecological motivations, self-extension, status consumption, economic motivations, originality, nostalgic motivations and superstitious beliefs. The scale items were adapted from previous studies. Table 3 outlines the scale items used and the associated literature. Shopping dollars spent was measured by asking respondents how much they have spent on resale luxury fashion over the last 3 months, while Motivators Associated literature Total measurement items Ecological Roberts and Straughan (1999) 8 Self-Extension Rabbanee et al. (2020) 7 Status Consumption Eastman et al. (1999) 5 Economic Guiot and Roux (2010), Klepp and Laitala (2018) and Guiot and Roux (2008) 26 Originality Guiot and Roux (2010) and Guiot and Roux (2008) 9 Nostalgic Steffen (2016) 2 Superstitious Beliefs Bozacı and Durukan (2020) 4 Source(s): Table by Karun Tangri Figure 1. Proposed conceptual model Table 3. Scale items measuring motivators and barriers Re-commerce luxury fashion 1101
shopping frequency examined how many items have been bought over the same period. Attitudes were measured by asking respondents to indicate their agreement with the following dimensions: enjoyable, pleasant, worth the effort, good for me, exciting, a waste of time and important. These measurement items were adapted from a study examining purchasing behavior of thrift shoppers (Kim and Seo, 2019). 4. Results and analysis 4.1 Findings 4.1.1 Descriptive statistics. A total of 419 questionnaires were considered useable; Table 4 provides a summary of respondents’ demographic information. Respondents (n 5 419) were between the ages of 21 and 70, with the majority being between either 25–34 or 35–49 (n 5 173 (41%) or n 5 181 (43%), respectively). The sample is 66.8% male (n 5 280) and 33.2% (n 5 139) female. Nearly all the participants hold full-time employment (n 5 391, 93%) and income levels are widely distributed with 198 participants (47%) earning between US$30,000 and $60,000 annually. Most of the participants hold a bachelor’s degree (n 5 277, 67%) and a significant portion (n 5 96, 23%) also have a master’s degree. Compared with the USA population, this sample appears to be younger, with the U.S. Census Bureau reporting a median age of 38.2 as of 2018 (Rogers, 2019). The sample also appears to be skewed heavily toward males, with The World Bank (n.d.) reporting that 50.5% of the USA population are Frequency Percentage (%) Gender Male 280 67 Female 139 33 Age 21–34 15 4 25–34 173 41 35–49 181 43 50–64 39 9 65–70 11 12 Qualifications Less than High School Diploma 0 0 High School Diploma or Equivalent 20 5 Some Post-Secondary Education 22 5 Bachelor’s Degree 377 66 Master’s Degree 96 23 Doctoral Degree 4 1 Employment Status Full-Time Employment 391 93 Part-Time Employment 21 5 Unemployed 5 1 Retired 2 0.5 Income (US) $0–$10,000 4 1 $10,001–$20,000 24 6 $20,001–$30,000 35 8 $30,001–$40,000 60 14 $40,001–$50,000 64 15 $50,001–$60,000 74 18 $60,001–$70,000 31 7 $70,001–$80,000 40 10 $80,001–$90,000 28 7 $90,001–$100,000 34 8 Above $100,000 25 6 Total Sample 419 Source(s): Table by Karun Tangri Table 4. Demographics of the sample IJRDM 51,9/10 1102
male, compared to approximate 67% for this sample. Our sample is also significantly more educated than the general population, with 32.1% of adults 25 and older holding a bachelor’s degree, compared to 66% of our sample (Nietzel, 2022). Only 13.1% of Americans hold an advanced degree (master’s degree or higher), compared to 24% of the sample (U.S Census Bureau, 2019, p. 1). The unemployment rate of the sample is lower than the national unemployment rate, which as of September 22, 2022 is at 3.7% (Bureau of Labour Statistics, 2022). Income levels for the sample appear to be in line with the USA median of US$44,225 (PK, 2021). 4.2 Measurement model 4.2.1 Reliability and validity. Cronbach Alpha and composite reliability were used to test reliability. Validity was evaluated using convergent [factor loading and average value extracted (AVE)] and discriminant validities. The recommended reliability thresholds of 0.7 were satisfied (Hair et al., 2017). Convergent validity was also confirmed with factor loadings and AVEs surpassing the recommended threshold of 0.4 (Hair et al., 2017). Discriminant validity was tested using Henseler et al.’s (2015) heterotrait-monotrait ratio (HTMT) of correlations criterion. Using this criterion, discriminant validity was confirmed as all correlation coefficients are less than 0.90 (Henseler et al., 2015). These values can be seen in Tables 5 and 6. 4.2.2 Model fit. When SmartPLS structural equation modeling (SEM) is used, as is the case for this study, Henseler and Sarstedt (2013) recommend that the model fit can be assessed using the formula √[(average AVE) 3 average of R2 values. The value for the model in this study, √ [(0.6688) 3 (0.2254)], is equal to 0.39. This value is greater than the recommended 0.3 critical value, indicating that the model fit is acceptable (Henseler and Sarstedt, 2013). 4.3 Structural modeling results As previously mentioned, SmartPLS was used to conduct hypothesis testing. Hypotheses 1 and 2 posit that attitudes toward re-commerce influence purchasing behaviors of recommerce luxury fashion, as measured by dollars spent and shopping frequency over the last three months. The mean shopping frequency was 5.51 articles of clothing and the mean dollars spent was US$897.49. The impact of attitudes toward re-commerce adoption was also found to be statistically significant (p < 0.05, t > 1.96). This suggests that the model proposed in this study of these barriers and motivators affecting attitudes and ultimately adoption of re-commerce is empirically supported. Hypothesis 3 posits that the each of the following motivators will positively influence attitudes toward re-commerce: ecological (3a), self-extension (3b), status consumption (3c), economic (3d), originality (3e) and nostalgic (3f). While economic reasons, originality and selfextension were found to be statistically significant (p < 0.05, t > 1.96), ecological reasons, nostalgic motivations and status consumption were not. Hypothesis 4 proposed that superstitious beliefs will negatively impact attitude toward adoption of re-commerce. This was supported statistically (p < 0.05, t > 1.96). The barriers in this study such as superstition are quite novel and have not been previously investigated in their role of driving re-commerce purchases. The significance of superstitious beliefs provides insights on re-commerce adoption from a cultural perspective and may point to challenges that can deter the growth of this sector. Figure 2 shows the revised conceptual model. Table 7, also shown below, provides an overview of the results of the hypothesis testing. 5. Discussions Current research on ecological consciousness as a motivator toward re-commerce is mixed, with some studies finding it not to be a major motivator, while others do (Guiot and Roux, Re-commerce luxury fashion 1103
2010; Silva et al., 2021). However, there is evidence that consumers in general are becoming more environmentally conscious and that sustainability is influencing purchasing decisions (Widlitz, 2020). Construct Factor loading Mean Cronbach’s alpha Composite reliability Average variance extended Attitude 0.824 0.8777 0.587 Motivators Ecological Motivations 3.704 0.850 0.886 0.525 Eco1 0.736 Eco2 0.653 Eco3 0.725 Eco4 0.742 Eco5 0.742 Self-Extension 3.940 0.864 0.896 0.551 Se1 0.763 Se2 0.687 Se3 0.734 Se4 0.753 Se5 0.753 Se6 0.784 Se7 0.719 Status Consumption 3.758 0.817 0.879 0.645 Sc1 0.801 Sc2 0.789 Sc3 0.797 Sc4 0.825 Economic Motivations 3.744 0.804 0.864 0.561 Em1 0.727 Em2 0.705 Em3 0.715 Em3 0.798 Em5 0.795 Originality 3.689 0.863 0.893 0.511 Org1 0.738 Org2 0.697 Org3 0.728 Org4 0.701 Org5 0.712 Org6 0.684 Org7 0.744 Org8 0.712 Nostalgic Motivations 3.487 0.871 0.902 0.606 Nos1 0.788 Nos2 0.734 Nos3 0.798 Nos4 0.767 Nos5 0.799 Nos6 0.783 Barriers Superstition 3.490 0.915 0.934 0.701 Sup1 0.831 Sup2 0.850 Sup3 0.841 Sup4 0.828 Sup5 0.839 Sup6 0.833 Source(s): Table by Karun Tangri Table 5. Reliability and convergent validity IJRDM 51,9/10 1104
These conflicting results have been examined in prior studies that found a gap between purported values and actual actions in regards to environmentally conscious behavior (Chaplin and Wyton, 2014). When examining the environmental actions of students, Chaplin 1 2 3 4 5 6 7 8 9 10 1. Shopping Frequency 1.00 2. Dollars Spent 0.209 1.00 3. Attitudes 0.226 0.049 0.766 4. Ecological Motivations 0.183 0.049 0.484 0.725 5. Self-Extension 0.136 0.052 0.541 0.555 0.742 6. Status Consumption 0.205 0.080 0.479 0.514 0.643 0.803 7. Economical Motivations 0.193 0.081 0.690 0.510 0.500 0.451 0.749 8. Originality 0.246 0.101 0.735 0.620 0.601 0.554 0.708 0.715 9. Nostalgic Motivations 0.286 0.102 0.625 0.603 0.491 0.577 0.631 0.797 0.778 10. Superstition 0.210 0.095 0.388 0.621 0.535 0.703 0.393 0.583 0.715 0.837 Source(s): Table by Karun Tangri Table 6. Discriminant validity Figure 2. Final SmartPLS model Re-commerce luxury fashion 1105
and Wyton (2014) found the most significant contributor to this value-action gap to be the displacement of responsibility to other individuals and organizations. However, a variety of other reasons were also found, including cost and a lack of knowledge. Overall, literature on the gap between awareness of environmental issues and actual behavior is quite disparate and no studies have outlined a conclusive model (Kollmuss and Agyeman, 2002). The intention behavior gap has also specifically been studied in the context of consumer behavior, with an analysis of Australian consumers finding that shopping context, behavioral control and environmental involvement moderate the relationship between intentions and behavior (Grimmer and Miles, 2017). The lack of significance of environmental consciousness in this study further reinforce the existence of this value-action gap and suggests that similar factors found in prior literature may also apply to the second-hand luxury fashion context. The role of self-extension as a motivator is also validated by prior studies investigating how apparel can function as an expression of our identities (Badaoui et al., 2018; Salem and Salem, 2018); however, status consumption was not found to be statistically significant in this study. This finding contradicts existing literature surrounding the role of status consumption as a motivator of shopping behaviors and warrants further research (Eastman et al., 2018; Han et al., 2010). We speculate that while luxury purchases in general are found to elevate the perceptions of one’s status, the fact that the goods are used may change that perceived association. This is consistent with prior literature that has found that there is an element of social embarrassment when shopping for second-hand goods (Silva et al., 2021). There may be a clash between the status elevation associated with luxury goods and the social stigma from the fact that they are used goods. The impact of economic motivations and originality on attitudes toward re-commerce are consistent with prior literature (Ferraro et al., 2016). This suggests that these constructs function in the same way as a motivator in the context of luxury fashion shopping, regardless of new or used. Path coefficients T statistics Dependent constructs p value R-Squared Shopping Frequency 0.051 Attitude → Shopping Frequency (H1) 0.226 6.367 0.000*** Dollars Spent 0.002 Attitude → Dollars Spent (H2) 0.049 2.071 0.038* Attitudes 0.623 Ecological Motivations → Attitude (H3a) 0.009 0.135 0.893 Self-extension → Attitude (H3b) 0.127 2.178 0.029* Status Consumption → Attitude (H3c) 0.108 1.949 0.051 Economical Motivations → Attitude (H3d) 0.279 4.755 0.000*** Originality → Attitude (H3e) 0.396 4.612 0.000*** Nostalgic Motivations → Attitude (H3f) 0.155 1.702 0.089 Superstitious → Attitude (H4) 0.213 2.801 0.005** Note(s): *p < 0.05; **p < 0.01 and ***p < 0.001 Source(s): Table by Karun Tangri Table 7. Results from hypothesis testing IJRDM 51,9/10 1106
The lack of significance of nostalgic motivations was another surprising piece of finding, which challenged prior research that nostalgia is a driver of re-commerce adoption in the luxury segment (Turunen and Leip€amaa-Leskinen, 2015). This may be due to the reason that nostalgia is not a primary motivator for all consumers (Guiot and Roux, 2010). For example, Guiot and Roux (2010) found that a particular shopper segment identified as “nostalgic hedonists” were especially attracted to re-commerce due to nostalgic pleasure, while another segment, such as “thrifty critics”, were not. It is possible that a large portion of the sample perceive nostalgia as less relevant. The significance of superstitious beliefs as a barrier in this study reinforces existing literature, confirming its negative role on consumer attitudes and its potential connection to other issues such as hygiene (Bozacı and Durukan, 2020). However, the lack of research on the subject, particularly in the context of re-commerce, makes it difficult to draw further conclusions. Hence, further research on this topic will be worthwhile. 6. Implications and contributions Despite the rapid growth of the segment, re-commerce luxury fashion has only recently become an area of focus in literature (Berg et al., 2021). This study proposes and empirically tested a model demonstrating the linkage between motivators and barriers, attitudes and ultimately shopping behavior. This model advances literature in the field of re-commerce and uses ET along with other established frameworks to showcase which factors drive purchase behaviors of second-hand luxury fashion. This can be used to offer guidance to firms operating in the retail industry on how to drive growth and cater to consumer tastes in this segment. It also provides a foundation for further research into second-hand luxury fashion and direction for future studies. Ecological motivators were not found to be statistically significant, which further emphasizes the gap that exists between reported values and attitudes and actual environmentally conscious behavior (Kollmuss and Agyeman, 2002). The social impact of this is significant and retailers should continue to search for ways to motivate more sustainable purchasing behavior. Research has not identified a single clear motivator for the valueaction gap, which may pose a challenge to businesses utilizing sustainability as a major selling point for second-hand luxury fashion (Kollmuss and Agyeman, 2002). Our suggestion would be to find new ways to make sustainability-focused marketing more salient, with some research suggesting that “nudging” consumers through the use of small shelf posters can trigger changes in purchasing behavior (Becchetti et al., 2020). Providing more direct and upfront promotion of the benefits of shopping second-hand may encourage consumers to be greener with their purchases. The significance of self-extension in second-hand luxury fashion adoption is critical from a marketing perspective. Second-hand luxury apparel offers consumers an opportunity to discover unique garments that represent them. This has significant managerial implications, especially given the connection between self-identity and attitudes toward luxury fashion that has been established in the literature (Salem and Salem, 2018). Second-hand retailers should emphasize to consumers how their garments can be an expression of themselves and how the unique styles available offer greater variety and originality. The finding that status consumption was not significant was interesting and suggests that the status appeal of used luxury fashion goods varies from new goods. This has significant implications from a branding perspective, as elevation of status has long been considered a major motivator of luxury purchases (Eastman et al., 2018). A potential interaction between the social embarrassment of buying used and the elevated status of luxury goods may be a possible explanation and warrants further investigation. Second-hand fashion retailers should consider ways to mitigate the social stigma around buying used Re-commerce luxury fashion 1107
goods, to capitalize on the brand appeal of the luxury segment. Social media may be an avenue to accomplish this, with an article in Retail Insider noting that social media influencers have had success in promoting thrift shopping as being trendy and fashionable (Finch, 2020). Research has also shown that second-hand shoppers tend to be more style-conscious, which suggests that focusing promotional efforts on the fashionability of used luxury fashion may be effective (Grimmer and Miles, 2017). The importance of economic motivators should be noted by businesses operating in the re-commerce segment. Price consistently appears in research as one of the leading drivers of re-commerce adoption (Guiot and Roux, 2010). Given the higher price of luxury fashion, second-hand retailers should emphasize the affordability that comes with buying used when promoting their products. Originality is also a key motivator and practitioners should be aware of the role of fashionability and style in the adoption of second-hand luxury fashion. Used clothing offers shoppers the opportunity to stand out and develop a highly personalized look (Ferraro et al., 2016). This should be emphasized when promoting products and can be used to cultivate excitement and engagement among shoppers. The shift away from the stigma and embarrassment traditionally associated with second-hand clothing represents a major opportunity (Silva et al., 2021). This change has already began to take place with thrifting becoming increasingly popular throughout markets such as Canada and Australia, in part because of products’ perceived trendiness (Finch, 2020; Grimmer and Grimmer, 2022). The lack of significance of nostalgic motivators directly contradicts scholarship on the subject (Turunen and Leip€amaa-Leskinen, 2015). However, the possibility that the chosen sample is motivated by reasons other than nostalgia and recreation remains open (Guiot and Roux, 2010). Retailers operating in the second-hand goods space should be aware of the different categories of consumers and which motivators appeal to each when considering how to attract customers. The importance of superstitious beliefs in the development of attitudes toward re-commerce luxury fashion is a novel finding and has implications regarding the role of culture and personal beliefs on shopping behavior. Operators in the second-hand goods space should be aware of customer concerns regarding superstition and understand its impact as a deterrent toward purchases. As future research expands on this topic, practitioners will be able to better understand this dimension and mitigate its effects. Retailers should alleviate concerns of contamination and the transfer of attributes from the former wearer to the current owner when addressing superstitious beliefs, as this appears frequently in the literature as a concern among shoppers (Roux and Korchia, 2006; Silva et al., 2021). Possible strategies could include clearly communicating and promoting the cleaning process for second-hand clothes to consumers. Some second-hand clothing retailers such as The RealReal (2021) also maintain strict labeling standards that communicate the condition of the garment. This can provide assurances to shoppers that their garment is clean and uncontaminated. Retailers should also emphasize the cleanliness and organization of their stores, as some literature shows that disorganization and poor presentation is a deterrent to second-hand shopping (Connell, 2010; McColl et al., 2013). The findings of this study also have the potential to have a significant social impact. There is a growing focus on sustainable retailing and existing research purports that consumers are becoming more environmentally conscious, with a study of 19,000 consumers across 28 countries revealing that 60% of consumers are willing to adjust their shopping habits for environmental reasons (Widlitz, 2020). Although re-commerce is a highly sustainable retail model, practitioners should be aware that ecological motivations are not a major driver. In summary, this study makes meaningful contributions to the nascent field of re-commerce and has significant implications for both theory and practice. Specifically, by re-examining previously studied constructs that have produced mixed results such as environmental consciousness, we were able to clarify their impact in the context of second-hand luxury fashion. IJRDM 51,9/10 1108
The inclusion of new constructs such as superstitious beliefs provides early insights into its impact on the adoption of re-commerce. We have also reconfirmed the role of some wellestablished barriers and motivators, such as economical motivations and tested their relevance in the context of re-commerce luxury fashion. Retailers can utilize our findings to develop strategies to broaden the appeal of re-commerce, while scholars can build on the initial results of study to seek new discoveries in the area of second-hand luxury fashion. 7. Limitations There are several limitations associated with this study and its design. This study utilized convenience sampling through Amazon Mechanical Turk which resulted in skewed demographics, with the majority of participants identifying as men. Ensuring that participants belong to diverse backgrounds would strengthen the generalizability of this study and broaden the application of its results. Some constructs such as superstitious beliefs are inherently vague and it may be useful to provide definitions and ask additional questions to understand how cultural values may affect results. 8. Areas of future research There are several avenues for future research. Additional research should explore the role of superstitious beliefs on attitudes toward re-commerce luxury fashion, as existing research on this topic is very limited. Additional factors such as the role of culture on the impact of superstitious beliefs should also be examined. Given that this study relied on data from USA consumers, the findings regarding superstitious beliefs may not be applicable to consumers from other regions. A cross-cultural study would be particularly valuable in assessing the role of superstitious beliefs and would provide a direct point of comparison across beliefs and value systems. The role of status consumption on attitudes to re-commerce luxury fashion should also be revisited. The finding that status consumption was not significant – rather than a motivator as originally predicted – was puzzling and further research is needed to uncover why this was the case. Current literature on luxury fashion at large indicates that it is a motivator, which suggests that it may be the re-commerce element causing the unique finding (Eastman et al., 2018). How status consumption differs from second-hand luxury products vs other product categories along with the role of cultural values should be further investigated. Future studies on this construct may also benefit from deeper analysis of participants based on demographic and socioeconomic factors, to determine how different consumers view status consumption. Further research on ecological motivators toward re-commerce is also warranted. As mentioned earlier, the gap between environmental awareness and actual sustainable purchasing behavior is not fully understood. The specific factors that drive the gap in the luxury fashion industry should be examined. Furthermore, experimental research could be conducted to see if consumers can be motivated to be “greener” with their shopping behavior. Lastly, future studies may benefit from deeper segmentation of their chosen sample. Given that certain constructs that were measured in this study (such as status consumption and superstitious beliefs) may vary greatly based on cultural beliefs and background, a deeper dive into study participants may provide more specific and detailed results. 9. Calculations √[(average AVE) x average of R2 values] Avg AVEs 5 0.6688 Avg R2 Values 5 0.2254 √ [(0.6688) x (0.2254)] 5 0.3882 Re-commerce luxury fashion 1109
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Young luxury fashion consumers’ preferences in multi-channel environment Hanna Lee, Lori Rothenberg and Yingjiao Xu North Carolina State University, Raleigh, North Carolina, USA Abstract Purpose – The purpose of this paper is to explore and examine the relative impact of product and channel attributes on luxury product shopping in the multi-channel environment. Design/methodology/approach – A D-optimal discrete choice conjoint design was used. The data were analysed using a multinomial logit model and desirability indices. Findings – Findings indicate that low price was the most important factor that influenced young consumers’ preferences. After price, young luxury consumers placed a greater importance on channel attributes such as human-assisted service and virtual fitting rooms. Research limitations/implications – The sample consisted of young consumers in their 20s and 30s, who utilise both online and offline channels. Hence, the income level was relatively low. Also, the results cannot be generalised to all luxury consumers. Practical implications – Providing preferable channel attributes is more crucial to young luxury fashion shoppers than focusing on improving product attributes, with the exception of price. Originality/value – The paper proposes the optimal combination of key product and channel attributes that is most preferable to young luxury fashion consumers in the multi-channel environment. Keywords Multi-channel, Conjoint analysis, Luxury consumer, Product attribute, Channel attribute Paper type Research paper 1. Introduction With the growth of digital technology, luxury fashion consumers today utilise several channels including brick-and-mortar stores and online channels to search for information and purchase products. Luxury products have been traditionally sold at brick-and-mortar stores (e.g. offline) because of their highly priced and prestigious characteristics (Vigneron and Johnson, 1999). Luxury fashion consumers expect personalised customer services and tactile shopping experiences corresponding to the higher price (Dauriz et al., 2014). Thus, a common form of multi-channel shopping has been found to be using the online channel for information, product discovery and price comparison, whereas the offline channel is used for the actual purchase (Yu et al., 2011). However, this way of thinking has evolved. According to Achille et al. (2018), approximately 78 per cent of luxury sales are digitally influenced or conducted online. Moreover, online luxury sales currently make up 8 per cent of total luxury sales in the United States; however, these are expected to grow up to 25 per cent by 2025 (D’Arpizio and Levato, 2017). About 23 per cent of younger consumers between 18 and 35 years old have used an online channel for their first luxury purchase. Therefore, it is important to understand what attributes young consumers prefer in their online luxury shopping journey compared to an offline shopping journey. With several luxury retailers experiencing stagnant growth due to market saturation in the luxury industry, the effective utilisation of multi-channel was emphasised in recent years (Dahlhoff, 2016). Multi-channel practices refer to using multiple channels, both online and offline channels, to attract more cross-shoppers, a broader range of consumers and provide convenience, a key benefit sought by young consumers (Harris et al., 2011; Yu et al., 2011). Variations in the attributes of each channel can elicit differing levels of utility, and the ways consumers perceive these attributes can IJRDM 48,3 244 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0959-0552.htm Received 22 November 2018 Revised 27 November 2018 21 April 2019 1 May 2019 Accepted 21 October 2019 International Journal of Retail & Distribution Management Vol. 48 No. 3, 2020 pp. 244-261 © Emerald Publishing Limited 0959-0552 DOI 10.1108/IJRDM-11-2018-0253
significantly influence their channel choice (Schoenbachler and Gordon, 2002; Shin and Kim, 2006). Consumers can enjoy broader and deeper product assortments, lower prices and detailed product information in the online channels compared with the traditional offline stores (Choi and Shen, 2017; Lu, 2017; Noble et al., 2005). Moreover, virtual technology began to be used in the online channel by several luxury retailers such as Burberry and Dior to provide comparable service quality and experience to the offline environment (Paulet, 2017). In contrast, in the offline environment, consumers experience superior employee-based service quality with the availability of instant access to the product through direct acquisition (Al-hawari and Mouakket, 2012; Lebel, 2016; Shackleton, 2016). However, there is an inherent dilemma in the management process of multi-channel. In the past, when consumers opted to use online channels, the sales in offline stores were cannibalised (Schoenbachler and Gordon, 2002). Hence, to establish an effective strategy that does not undermine the strength of either online or offline channels, it is imperative to understand what consumers prefer and expect from luxury retailers in the online versus offline channels. Also, it is critical to find the ideal combination of attributes for each type of channel. In the luxury industry, it is important to account for the influence of the product category and price point on the channel choice, because the luxury sector can be sub-divided with these criteria (Quan and Shen, 2017). Similarly, Taillez (2017) argued that luxury exists in diverse sub-categories, which use different strategies. Even if luxury products are characterised by their limited production, craftsmanship and high price, a variety of products are provided today to increase the sales, bringing democratisation of luxury (Kapferer and Bastien, 2009; Truong et al., 2009). In fact, there are a total three types of luxury based on price point, which are absolute, aspirational and affordable luxury, and the product categories can be largely classified into four, which are beauty, ready-to-wear apparel, accessories and watches and jewellery (Achille et al., 2018; Rambourg, 2014). According to Rambourg (2014), the order of luxury segments in terms of price point is depicted as a pyramid. For instance, the lowest segment is affordable or accessible luxury. Generally, consumers who purchase accessible luxury have a tendency to purchase products online more than aspirational and absolute luxury consumers because the higher prices of these two segments pose greater risks to them (Dauriz et al., 2014; Taillez, 2017). In the case of product category, some categories experience more purchases online than via offline channels. Specifically, beauty products were most purchased in the online channel by luxury consumers, followed by ready-to-wear apparel because of their lower price points (Achille et al., 2018). Hence, channel attributes as well as product attributes within defined product categories and price points should be incorporated into the profiles for analysis. In this paper, based on relevant literature, two major groups of factors that affect consumers’ channel choice were investigated: product-related factors and shopping-related factors (Chen et al., 2010; Kim and Hyun, 2009; Shin and Kim, 2006). Overall, the findings of previous studies lacked the ability to explain the differences in consumer preferences between online and offline channels despite a plethora of literature on product and shopping attributes that consumers evaluate (Chen et al., 2010; Chiam et al., 2009; Kim et al., 2015; Schaupp and Belanger, 2005). Additionally, previous studies only evaluated the importance of each attribute and did not consider the interaction among the attributes, even though in reality consumers make an overall judgement by incorporating the relative importance of each attribute, requiring complex trade-offs (Green et al., 2001). Moreover, these attributes should be examined specifically in the luxury industry because the way young luxury fashion consumers make trade-offs can be quite different from consumers in other sectors. Given the importance of growing young luxury fashion consumers as well as the necessity of establishing effective strategies in the multi-channel environment, the purpose of this Preferences of young luxury shoppers 245
study is to compare preferences for distinct product and shopping attributes between online and offline channels when young consumers purchase luxury products. This study employs a conjoint analysis method to investigate how different attributes affect the channel choice in more realistic settings. 2. Literature review 2.1 Luxury fashion consumers in multi-channel environment Luxury goods are defined as products with higher price points, perceived to be of superior quality and only accessible to those who can afford higher prices (Quan and Shen, 2017). Hence, luxury goods have been typically purchased in brick-and-mortar stores due to its ability to mitigate the risks of purchasing and to provide a high level of service quality (Kim and Hwang, 2014). However, owed to the diversified multi-channel strategies that many luxury brands adopted for competitive advantage and the growth of consumers’ purchasing power that created a wider and deeper consumer base, it became difficult to understand what consumers prefer in each type of distinct channel (Silverstien et al., 2008). Compared to the single-channel practices, in the multi-channel environment, consumers consider a number of characteristics of channels in their decision-making process (Kwon and Jain, 2009). These channels are interchangeably utilised during the shopping process, allowing consumers to implement showrooming and choose the most effective purchasing channel. That is, consumers process these attributes in a comprehensive manner, comparing channels and deciding where to purchase products (Yu et al., 2011). In fact, luxury fashion consumers are becoming increasingly interested in satisfying their shopping needs by optimising their shopping experiences using the best channel among multiple channels provided by luxury fashion brands (Dahlhoff, 2016). According to Al-Hawri and Mouakket (2012), consumers now complementarily choose service delivery channels that fit their needs. However, the way consumers choose the final purchasing channel can be directly influenced by their perception of the attributes associated with that channel (Pookulangara et al., 2011). Prior researchers have examined the online and offline channel attributes that influence consumer behaviour such as e-quality, perceived usefulness and ease of use in the case of the online channel and service quality in the offline channel (Al-hawari and Mouakket, 2012; Hahn and Kim, 2009). However, these studies are limited when examining which attributes and combination of attributes are the most preferred in each channel. In this regard, it is critical to examine the distinct attributes each channel offers consumers. Currently, the number of online businesses keeps increasing every year as they try to capture the opportunity presented by the growth of Internet (Hahn and Kim, 2009). Luxury firms have recognised the sales potential of utilising both offline and online channels since the online sales growth rate in global women’s luxury fashion is expected to reach approximately 17 per cent by 2018 up from 3 per cent in 2015 (Schmidt et al., 2015). However, luxury purchases in the online and offline environment are not occurring evenly in all sectors but vary in terms of product category and price point. Specifically, the biggest category for offline sales was beauty products, followed by accessories such as handbags and small leather goods, watches and jewellery and ready-to-wear apparel (Deloitte, 2018), while the biggest category for online sales was beauty products, followed by ready-to-wear apparel, accessories and watches and jewellery in that order. In terms of price segments, consumers show the greatest inclination to purchase affordable luxury online followed by aspirational luxury and then absolute luxury (Achille et al., 2018). Considering these variations in the use of an offline versus online channel, it is important to incorporate product category and price point into the study to fully examine the differential consumer preferences towards each type of luxury channel. IJRDM 48,3 246
2.2 Important attributes for luxury fashion consumers 2.2.1 Consumers’ decision-making. Consumers’ decision-making consists of different stages consumers undergo that determine their purchasing behaviour before, during and after the purchase of a product or service. (Erasmus et al., 2001). In addition, the way consumers make decisions can be influenced by several factors such as consumption value (Sheth et al., 1991). In this regard, Sheth et al. (1991) suggested the theory of consumption values to explain consumers’ choices and consumption behaviour throughout the decision-making process in a consumer journey from start to finish. They identified five consumption values, which are functional, social, emotional, conditional and epistemic values based on the assumption that a consumer choice is a function of multiple independent consumption values. It was assumed that these consumption values make different contributions in any given choice context (Sheth et al., 1991). Specifically, social value was defined as the perceived utility from an alternative’s association with specific social groups, functional value represents the perceived product value of consumers, emotional value represents consumers’ emotion towards the products, conditional value represents the perceived utility according to a specific situation and epistemic value represents consumers’ inclination to desire knowledge and seek novelty (Lin and Huang, 2012; Sheth et al., 1991). In previous research, functional values, which are primarily generated by a product’s salient attributes such as price and quality, were found to be a primary driver of consumer choice (Lin and Huang, 2012; Sheth et al., 1991). Because the aim of this study is to examine consumer preferences in the online and offline luxury shopping channels, channel attributes, which can contribute to the social, functional and emotional values by meeting utilitarian and hedonic needs (Kwon and Jain, 2009; Noble et al., 2005), were incorporated as the key attributes that can explain the consumers’ decisionmaking in the multi-channel environment. In this respect, the unexplored combination of product and channel attributes in channel choice may provide further understanding about why consumers choose a certain type of channel for purchase. While theory identifies conditional and epistemic values as key, researchers have argued that these values are only relevant to the one-time purchase context, as they are transient and less enduring than the other three values (Sweeney and Soutar, 2001). 2.2.2 Product attributes. Product attributes are aggregates of every component that can be associated with a product (Zeithamal, 1988). Basically, consumers evaluate a product using various product attributes that are physical and observable, from which they then form their evaluative criteria and acceptable price (Klenosky et al., 1993). Joshi and Rahman (2015) stated that consumers consider various aspects of product attributes when they evaluate products and show choice behaviour by weighing values on important product attributes. In other words, the choice of consumers is not based on simple preferences, rather it is the choice of a combination based on the evaluation of several perceived benefits provided by each product attribute. Earlier researchers have identified several product attributes. Specifically, Im and Go (2015) classified product attributes as functional cues (e.g. quality, design) and symbolic cues (e.g. price, brand). Lee (2008) found price, quality and brand as the important product attributes for fashion products. Also, in most prior studies, “product assortment, price, and quality” were commonly identified as important product attributes (e.g. Chen et al., 2010; Kim and Hyun, 2009; Zeithamal, 1988). Product assortment, which is product offering per se, is a critical product attribute because greater breadth and depth of product offerings can impress the consumers and create favourable consumer attitudes, especially in the online environment (Chen et al., 2010; Shim et al., 2001). In addition, price plays a critical role in the product evaluation process, by being the key information cue, enabling the estimation of attributes that are difficult to measure (Zeithaml, 1988). Some luxury product attributes were studied by prior researchers. Heine and Phan (2011) found price, quality (e.g. materials, construction principle, workmanship, features, product size, service) and rarity to be the concrete product Preferences of young luxury shoppers 247
attributes of luxury products. In Wiedmann et al. (2009)’s study, quality and price were commonly identified as important product attributes for both general products and luxury products. However, consumers strongly associate luxury products with high quality in general (Quan and Shen, 2017). Moreover, consumers’ perceived product quality can be assumed to be consistent for genuine luxury products in the multi-channel environment, which is either online or offline, because the product presented in both channels by a single luxury brand is physically the same when the channels are well integrated and a single strategy is implemented across channels (Berman and Thelen, 2004). Thus, only the attributes of product assortment and price were chosen to be examined for luxury products. 2.2.3 Channel attributes. Channel attributes are inherent individual and website characteristics associated with shopping experiences in a specific channel (Chen et al., 2010). These channel attributes, also called shopping attributes, enable consumers to evaluate channels carrying the products and form either a positive or negative impression, perception or belief towards a specific channel (Im, 2012). Specifically, through the perception of channel attributes, consumers form a preference towards a certain type of channel, which is closely related to the choice of channel for purchases (Verhoef et al., 2007). Moreover, Kim and Lee (2011) argued that consumers evaluate product attributes such as price and channel attributes together when they shop. The price sensitivity of consumers is not solely determined by the change of prices itself but also by the evaluation of channel attributes such as service quality, which are quite intangible in nature (Kim and Lee, 2011). Being monopolistically competitive in nature, fashion products including luxury products are differentiated based on intangible and psychological attributes in addition to objective product attributes (Lee, 2008). Moreover, consumers may find difficulty in evaluating product quality solely based on price, as luxury products are symbolic products (Forsythe et al., 1999). Due to the coupling of quality and price for luxury products, it has been difficult to study price in the fashion industry (Choo et al., 2012). In addition, because luxury products have wide variations in the price range for different product categories (Deloitte, 2018) and no product discounts (Lee, 2008), luxury fashion brands put rigorous efforts into providing extra dimensional benefits to consumers to differentiate their channels from competitors (Lee, 2008). In fact, product attributes such as quality and price were basically consistently presented in each type of channel without compromise and discount in the luxury industry (Jacobson et al., 2011). Similarly, Shin and Kim (2006) emphasised the importance of incorporating channel attributes to fully examine the consumers’ choice behaviour, stressing service and convenience as the key factors. Moreover, they insisted the significance of providing appropriate channel attributes for each type of channel as consumers seek differential benefits from each channel (Shin and Kim, 2006). In other words, the degree of utility provided by differential channel attributes can affect the consumers’ channel choice (Schoenbachler and Gordon, 2002). Specifically, Seong (2008) and Son and Lee (2003) found differences in the importance consumers placed on each type of channel attribute among department stores, discount stores and online stores. Table I is a summary of the product and channel attributes identified in the previously mentioned studies. As shown in Table I, regarding the influence of channel attributes on consumer’s channel choice, prior research found several important channel attributes.Kim and Hyun (2009) found customer services such as product exchange and return services, convenience expressed in things such as delivery options and availability of an information provider to provide detailed product and usage information as important channel attributes. Similarly, customer service and personal selling, which involve human interactions, and store environment, which offers specialised displays for experience enhancement, were found to be critical channel attributes in Levy and Wetlzl (1998)’s and Chang et al. (2015)’s studies. Kim and Hwang (2014) also mentioned service quality, which can be commonly achieved through human-assisted IJRDM 48,3 248
service, and store environment as important channel attributes. To sum up, “customer service, convenience, human-assisted service, and store experiential factors”, were commonly identified as critical channel attributes when evaluating channels. Customer service (e.g. Kim and Hyun, 2009; Levy and Weltz, 1998) and convenience (e.g. Kim and Hyun, 2009; Chen et al., 2010) were found to be important channel attributes because product exchange and return service can reduce consumer’s perceived product uncertainty (Chen et al., 2010). Also, reliable and timely product delivery or acquisition method, which is the total time spent in shipping and handling, is essential to consumer satisfaction (Chen et al., 2010). Moreover, the importance of human-assisted service as well as store experiential factors was commonly emphasised by prior researchers (e.g. Kim and Hyun, 2009; Kim and Hwang, 2014; Levy and Weitz, 1998). Kim (2002) also argued that sensory stimulation is one of the critical factors that enhances consumers’ experiences in the shopping mall and online channel. Considering that luxury consumers today demand a way to experience fit before purchase even in the online environment, new service attributes such as virtual fitting rooms (VFRs) need to be incorporated as a part of channel attributes to fully evaluate consumers’ preferences. The availability of VFR technology could be one of the critical store environment factors, as it provides specialised product displays and can be utilised in the both online and offline channels (Blazquez, 2014). 3. Methodology 3.1 Data collection and sample profiles Data were collected from US consumers between May 1, 2018 and July 30, 2018 using an online survey utilising Qualtrics. A convenient sampling was used, and a URL link to the survey was disseminated using social media platforms such as Facebook and Instagram. The survey consisted of conjoint profiles and demographic questions. Young fashion consumers in their 20s and 30s were chosen as respondents for this study as they are one of Researchers Product attributes Zeithamal (1988) Price; quality; product assortment Im and Go (2015) Price, quality, design Kim and Hyun (2009) Price; quality; product assortment Kim and Hwang (2014) Price; product assortment Levy and Weitz (1998) Price; product assortment Chen et al. (2010) Price; quality; product assortment Lee (2008) Price, quality Wiedmann et al. (2009) Price, quality, originality, status, reputation Heine and Plan (2011) Price; quality (e.g. materials, construction principle), rarity Researchers Channel attributes Kim and Hyun (2009) Customer service (e.g. A/S, product exchange and return services, membership); convenience (e.g. order waiting time, delivery); information provider (e.g. availability of product and usage information) Kim and Hwang (2014) Service quality (e.g. human interaction); store environment (e.g. specialised and aesthetic display) Levy and Weitz (1998) Customer service; personal selling (e.g. human interaction); store environment (e.g. specialised display) Chang et al. (2015) Service quality (e.g. human interaction; service delivery); store atmosphere (e.g. convenience) Chen et al. (2010) Customer service; convenience (e.g. delivery); trustworthiness Table I. Previous studies related to chosen product and channel attributes Preferences of young luxury shoppers 249
the primary purchasers and users of the multi-channel environment when purchasing luxury products (Achille et al., 2018). A total of 245 subjects participated in the survey, but only 240 responses were retained for data analysis after five incomplete surveys were excluded. Using the sample size calculation method suggested by Orme (2006), a sample size of 240–267 was found to be acceptable using a margin of error of 5 per cent, confidence level of 90 per cent, a population size of 20,000 and response distribution of 50 per cent. The population size was set as 20,000 because the sample size does not change significantly for populations larger than 20,000 (Orme, 2006). Also, the general rule of thumb for conjoint analysis is a minimum of 200∼300 completed surveys (Orme, 2006). The sample profiles are shown in Table II. In addition, the respondents indicated that they have purchased luxury products, primarily beauty products (96.67 per cent), at least once a year, followed by accessories (72.1 per cent), ready-to-wear apparel (65.0 per cent) and watches/jewellery (22.5 per cent). 3.2 Conjoint analysis 3.2.1 Conjoint profiling. The purpose of this study is to elicit young luxury fashion consumers’ preferences regarding the shopping channel choice between online and offline channels using primarily product attributes and channel attributes. In order to fully assess product and channel attribute options of luxury products within the marketplace and to have reasonable attribute levels for the chosen attributes, which is critical for accuracy and appropriateness (Green et al., 2001), several luxury brands were investigated through searching Web resources to find average price points (Bourne, 2015; Driscoll, 2016; Roumeliotis, 2015; Weisman, 2009). As a result, three specific levels were defined for the price points, including high ($5,000∼$10,000), which falls into absolute luxury; moderate ($2,000∼$5,000), which falls into aspirational luxury; and low ($100∼$1,200), which falls into affordable luxury. Also, four luxury fashion product categories were specified as follows: beauty products, ready-to-wear apparel, accessories (e.g. handbags, small leather goods) and watches and jewellery. A focus group was conducted with 10 graduate students, who had purchased genuine luxury products at least once a year. This was to explore whether respondents agreed with Demographic variables Frequency (N) Percentage (%) Gender Female 165 68.75 Male 75 31.25 Age 18∼29 186 77.50 30∼39 54 22.50 Education Some college, no degree 34 14.17 Bachelor’s degree 70 29.17 Graduate degree 136 56.67 Annual income Less than $20,000 61 25.42 $20,000∼$35,000 137 57.08 $35,000∼$49,999 27 11.25 More than $50,000 15 6.25 Total 240 100 Table II. Demographic profiles IJRDM 48,3 250
the levels of classification to be used on the survey to ensure validity. The listed brands the participants purchased include Gucci, Bottega Veneta, Proenza & Schuler and Marc Jacobs. The identified brands were perceived as international brands that expanded their presence with multiple physical and online selling points to global consumers, encompassing at least American and Asian consumers. Also, a number of product categories, including beauty products, ready-to-wear apparel, accessories and watches and jewellery, are provided by these brands. With regard to the channels they used for purchases, they used Matchesfashion.com, Shopbop.com, SSENSE.com and theOutnet.com as the representative online channels. Also, they listed flagship stores and department stores such as Saks Fifth Avenue and Neiman Markus for the offline shopping channels. From the focus group, two dimensions of the product assortment, which are the breadth and depth, were integrated into a single-dimension construct to simplify the levels, and the focus group members were asked to evaluate the appropriateness of the suggested levels. Two levels were defined for product assortment: “Narrow”, which indicates that the product assortment has a low level of breadth and depth; and “Broad”, which indicates that the product assortment has a high level of breadth and depth. Among the channel attributes commonly identified in the literature, we only asked about human-assisted service and VFRs. In this study, we only compare the online and offline channels which have the same customer service such as product exchange and return policy and convenience level such as delivery policy by restricting the scope of study to a single luxury brand, which implements multichannel strategies through operating official retail channels in both online and offline environments. Thus, we excluded customer service and convenience since these two attributes are controlled in the context of our study. As a result, availability of humanassisted service was divided into three levels: “Yes” (e.g. salesperson), “Moderate” (e.g. mediated communication: call centre) and “No” with simple descriptions for each. Also, availability of VFRs was divided into two levels: “Yes” and “No”. To sum up, a total of six attributes with their corresponding attributes levels were obtained from the focus group and used for the conjoint analysis. 3.2.2 Discrete choice design. Conjoint analysis was conducted to identify the relative values luxury fashion consumers attached to different product and channel attributes. As conjoint models can be used to assess not only the importance of product attributes but also the level of each attribute, this is an effective means of examining the combined impact a set of product and channel attributes has on people’s preferences and their choices (Green et al., 2001). Considering the number of attributes and attribute levels, there are 288 (2X4X3X2X3X2) different potential combinations. In order to decrease the number of judgements respondents need to make, while obtaining the most precise estimates at the same time, a full profile Doptimal discrete choice design was employed (Rothenberg and Matthews, 2017). This method enables the creation of a conjoint or treatment design with an optimal arrangement of attribute levels (Paczkowski, 2016). Each survey presented six options of luxury products. The respondents were instructed that for each option shown in the survey, they were to rate the option based on their purchase intention, which ranged from 1 to 10. A one signified “I would definitely not purchase this luxury product” and a 10 signified “I would definitely purchase this luxury product”. JMP 13 Pro was used for conjoint analysis and to design profiles that resulted in precise estimates. 3.2.3 Discrete choice design analysis. The basis for the multinomial/conditional log model is the random utility model. Ujs ¼ x’jsβ þ εjs In the model, Ujs represents the utility that a respondent attaches to alternative profile j in choice set s, xis is the k 3 1 vector containing the attribute levels of profile j in choice set s, β is the k 3 1 vector of parameter values representing the main effects of the attribute levels on Preferences of young luxury shoppers 251
the utility and εjs is the IID Gumbel error term l (McFadden, 1974). Then, the multinomial logit probability that a respondent chooses alternative profile j in choice set s is: Pjs ¼ ex’ jsβ Pj t¼1ex’tsβ The desirability index is used in the present study to order the combinations of attributes from most preferred to least preferred. The desirability index is defined as “the geometric mean of the desirability measures for each attribute (Rothenberg and Matthews, 2017).” The desirability function is described as follows: “The desirability functions are smooth piecewise functions that are crafted to fit the control points [specified by the user]. The minimise and maximise functions are three-part piecewise smooth functions that have exponential tails and a cubic middle” (SAS Institute Inc., 2015, p. 41). In order to assess how likely respondents are to choose one luxury product over another one, probabilities are used. These predicted probabilities are defined as exp(U))/(exp(U) þ exp(Ub)) where U is the utility for the current settings and Ub is the utility for the baseline settings (SAS Institute Inc., 2015). 4. Results and discussions 4.1 Attribute importance The relative importance of each attribute is determined by the ratio of Var(E(yjxj))/Var(y), where xj is each attribute and y is the response. This gives a measure of the sensitivity of the preference to each attribute. Table III displays the attribute importance from the greatest to the least sensitivity. Preference was sensitive to price (0.536), followed by the availability of human-assisted service (0.156), availability of VFRs (0.083), product assortment (0.067), product category (0.054) and channel type (0.005). Also, price (log worth 5 86.274, df 5 2, p < 0.001), product category (log worth 5 10.904, df 5 3, p < 0.001), product assortment (log worth 5 15.400, df 5 1, p < 0.001), availability of human-assisted service Attribute Main effect Level Marginal utility Product factor Price 0.5360 -High: 5,000$∼10,000$ 1.1565 -Moderate: 2,000$∼5,000$ 0.4220 -Low: 100$∼1,200$ 1.5785 Shopping factor Availability of human-assisted service 0.1560 -Yes 0.8797 -Moderate 0.1423 -No 0.7374 Availability of virtual fitting room (VFR) technology 0.0830 -Yes 0.4949 -No 0.4949 Product factor Product assortment 0.0670 -Narrow 0.4422 -Broad 0.4422 Luxury product characteristics Product category 0.0540 -Beauty products 0.5433 -Ready-to-wear apparel 0.2155 -Accessories (e.g. Handbags) 0.2781 -Watches & jewellery 0.4807 Channel classification Channel type 0.0050 -Online channel 0.1460 -Offline channel 0.1460 Table III. The conjoint analysis results IJRDM 48,3 252
(log worth 5 31.880, df 5 2, p < 0.001), availability of VFRs (log worth 5 18.973, df 5 1, p < 0.001) and channel types (log worth 5 2.183, df 5 1, p < 0.01) were all statistically significant in the effect test. 4.2 The marginal utility estimates The marginal utility estimates, also called as the part-worth utilities, show the desirability and preferences respondents attach to each level of the attributes. Because “utilities” are simply numerical representations that express the value consumers place on each level, the marginal utilities were calculated to describe the part-worth utility values for the separate parts of the product among the multiple attributes assigned to the product (Green et al., 2001). The higher marginal utilities suggest greater desirability or preferences for that level of the attribute (Green et al., 2001). Also, the sign indicates whether an attribute level adds value or takes value away from luxury product shopping context. As suggested in Table III, luxury products priced $100∼$1,200, which is relatively accessible and low, had the highest mean utility value (1.5785), followed by luxury products priced $2,000∼$5,000, which can be categorised into the price range of aspirational luxury (0.4220). Luxury products priced $5,000∼$10,000 had the lowest mean utility value among the levels of price attribute (1.1565). This indicates respondents preferred low priced luxury products, which are accessible to the mass consumers. Also, respondents were reluctant to purchase beauty products the most (0.5433), perhaps because it is less cost-effective to purchase beauty products considering they are consumable. In contrast, respondents preferred to purchase more tangible and long-lasting luxury fashion products such as watches and jewellery (0.4807) and accessories (0.2781), followed by ready-to-wear apparel (0.2155). In terms of product assortment, a broad range of product assortment was shown to be desirable (0.4422) compared to a narrow range (0.4422). Moreover, shopping attributes added value as respondents showed higher preferences towards availability of human-assisted service (0.8797) and VFRs (0.4949). It makes sense considering the respondents’ tendency to value the higher service quality presented by additional services such as human-assisted service and fitting experience, which are the common types of in-store experiences. Lastly, offline channel (0.1460) was valued by respondents compared to online channel (0.1460). 4.3 Ranking of consumer preference As shown in Table IV, among the top 25 combinations of attributes, the luxury product category with the highest utility (4.022) and the highest probability (0.7191) of being purchased was luxury watches and jewellery with a price range of $100∼$1,200 provided in offline channels, which have a broad range of product assortment, human-assisted service and VFRs. The desirability indices were displayed to the fourth decimal place since some values were found to have close values if these are rounded up to second place (e.g. seventh and eighth). The common values found in desirability indices with minor differences in the utilities are not too surprising when recalling that channel type and product category relatively had small influences on the respondent’s willingness to purchase luxury products. Furthermore, price, human-assisted service, VFRs and product assortment were the four most important attributes that determined the ranking. The preference for each attribute in each shopping condition will be discussed shortly. 4.3.1 Price. Price was the most important attribute for young luxury consumers (0.5360). Specifically, respondents preferred luxury products that were priced $100∼$1,200 (1.5785), which is the lowest price range for the price attribute. It also appears these consumers are price-sensitive at upper levels as they were unlikely to buy luxury products that were priced $5,000∼$10,000 (1.1565). As shown in Table IV, 24 out of 25 preferred luxury shopping Preferences of young luxury shoppers 253
combinations were at the price point between $100 and $1,200, which implies greater price sensitivity. Contrary to the current findings, in prior research, luxury consumers were willing to pay higher prices because they tended to associate the price with higher product quality expected of luxury product (Shukla and Purani, 2012). The preference in the current study for lower price could be due to different characteristics of young consumers. Comparatively, young consumers are characterised by increased Internet proficiency as well as a positive and practical mind-set (Harris et al., 2011). With the growth of online channels, young consumers have become more price-conscious because they are able to exercise more options in finding an effective purchasing channel based on their Internet proficiency (Kapferer and Bastien, 2009; Truong et al., 2009). 4.3.2 Availability of human-assisted service. The effect of shopping attributes related to human-assisted service was noticeable as the second important factor (0.1560) when purchasing luxury products. Respondents were more likely to purchase luxury products when human-assisted service is available (0.8797). Similarly, excluding the 20th option seen in Table IV, human-assisted service was fully or partially preferred in all of top combinations. In addition, consumers preferred full human-assisted service until the eighth option in either Rank Price Human service VFR Assortment Category Channel Desirability Utility 1 $100∼1,200 Yes Yes Broad Watches/ jewellery Offline 0.7191 4.0220 2 $100∼1,200 Yes Yes Broad Accessories Offline 0.6994 3.8194 3 $100∼1,200 Yes Yes Broad Watches/ jewellery Online 0.6907 3.7300 4 $100∼1,200 Yes Yes Broad Accessories Online 0.6717 3.5274 5 $100∼1,200 Yes Yes Broad Apparel Offline 0.6516 3.3258 6 $100∼1,200 Yes Yes Narrow Watches/ jewellery Offline 0.6335 3.1376 7 $100∼1,200 Yes Yes Broad Apparel Online 0.6236 3.0338 8 $100∼1,200 Yes No Broad Watches/ jewellery Offline 0.6235 3.0322 9 $100∼1,200 Moderate Yes Broad Watches/ jewellery Offline 0.6204 3.0000 10 $100∼1,200 Yes Yes Broad Beauty Offline 0.6202 2.9980 11 $100∼1,200 Yes Yes Narrow Accessories Offline 0.6142 2.9350 12 $100∼1,200 Yes Yes Narrow Watches/ jewellery Online 0.6056 2.8456 13 $100∼1,200 Yes No Broad Accessories Offline 0.6041 2.8269 14 $100∼1,200 Moderate Yes Broad Accessories Offline 0.6011 2.7974 15 $100∼1,200 Yes Yes Broad Beauty Online 0.5924 2.7060 16 $100∼1,200 Yes Yes Narrow Accessories Online 0.5864 2.6430 17 $100∼1,200 Moderate Yes Broad Accessories Online 0.5734 2.5054 18 $100∼1,200 Yes Yes Narrow Apparel Offline 0.5674 2.4414 19 $100∼1,200 Moderate Yes Broad Apparel Offline 0.5545 2.3038 20 $100∼1,200 No Yes Broad Accessories Offline 0.5451 2.2023 21 $100∼1,200 Yes Yes Narrow Apparel Online 0.5401 2.1494 22 $100∼1,200 Yes No Narrow Watches/ jewellery Offline 0.5400 2.1478 23 $100∼1,200 Moderate Yes Narrow Watches/ jewellery Offline 0.5370 2.1156 24 $100∼1,200 Yes Yes Narrow Beauty Offline 0.5368 2.1136 25 $2,000∼5,000 Yes Yes Broad Watches/ jewellery Offline 0.5283 2.0215 Table IV. Rank and desirability indices for luxury product shopping IJRDM 48,3 254
the offline or online environment. They preferred the moderate level of human-assisted service only after the 17th option in the online channel. Consumers’ purchase intention is greatly influenced by social presence, which can provide a sense of human warmth and contact (Lu et al., 2016). The preference for human-assisted service in the current study is consistent with prior research, which suggested personal service as a way to reduce perceived product uncertainty and increase satisfaction (Chen et al., 2010; Levy and Weitz, 1998) 4.3.3 Availability of virtual fitting rooms (VFRs). Interestingly, respondents placed significant importance on the availability of VFRs when purchasing luxury products being the third important factor (0.0830). Specifically, respondents were more willing to purchase luxury products when a VFR is available (0.4949). As seen in Table IV, VFRs were preferred in the top seven combinations. Only three of the top 25 combinations (8th, 13th, 20th) did not contain a preference for VFRs. These were only when consumers use an offline channel to purchase lowly priced watches/jewellery or accessories, which are less risky product categories compared to ready-to-wear apparel or beauty products, which are relatively difficult to examine how they might look. With VFRs, consumers can have a fun experience in the offline stores by using mix-and-match systems and can virtually examine highly priced luxury products just as in the online stores, reducing purchase risks (Papagiannidis et al., 2017). Considering that consumers value specialised product displays and fitting experiences when they shop, which are common type of in-store experience (Kim and Hyun, 2009; Levy and Weitz, 1998); newly emerging VFRs can be a breakthrough for luxury retailers in both online and offline channels. 4.3.4 Product assortment. Product assortment was the fourth most important factor (0.0670) when purchasing luxury products. The respondents showed greater preferences towards broad ranges of product assortment (0.4422). In a similar manner, the top five combinations contained a broad range of product offers as the preferred product assortment as shown in Table IV. Among product attributes, a broad range of product assortment was found to be important for consumers because greater breadth and depth of products can impress consumers, leading to the formation of a positive attitude and subsequent purchase intention (Chen et al., 2010; Levy and Weitz, 1998; Shim et al., 2001). It enables consumers to enjoy a variety of products aiding them in finding the best product. Potentially, due to a diversity-conscious mind-set (Harris et al., 2011), young luxury consumers preferred a broad range of product assortment. 4.3.5 Product category. The results suggest that product category influences consumers’ purchase intention to a lesser extent being ranked as the fifth factor (0.0540). Respondents showed clear unwillingness to purchase beauty products (0.5433) and ready-to-wear apparel products (0.2155). On the other hand, respondents showed greater willingness to purchase watches/jewellery (0.4807), followed by accessories (0.2781). Consistently, as seen in Table IV, ready-to-wear apparel was preferred in only five combinations (with the fifth and seventh combinations being the highest) and beauty products in the 10th, 15th and 24th. Small durable goods such as watches/jewellery and accessories, which are comparatively easy to examine online or offline, could be desirable because they last longer and are worth the investment compared to consumable beauty and apparel products. This finding is consistent with a previous study where purchases made by digitally influenced consumers varied by product category and price point when considering the relatively high level of risk luxury products pose (Deloitte, 2018; Kim and Hwang, 2014). 4.3.6 Channel type. Despite the differential characteristics commonly found between the online and offline channels in prior studies, respondents placed little importance (0.0050) on the type of channel when they purchase luxury products, as shown in Table III. However, in spite of its low preference, the results showed that consumers relatively preferred the offline channel (0.1460) over online channel (0.1460). This indifference might be due to the fact that multi-channel consumers can actively and spontaneously utilise both online and offline Preferences of young luxury shoppers 255
channels to selectively choose the best product where desirable attributes are provided rather than simply evaluating based on the type of channel (Verhoef et al., 2015). Simply, what multi-channel consumers focus on is to maximise and enhance their experience through using channels perceived to be the most desirable among specified shopping conditions. Hence, they might perceive little differences between two channels. However, a slightly greater preference was found for the offline channel. This tendency can explain the greater relative importance placed on shopping attributes such as human-assisted service and fitting, which can be typically experienced in brick-and-mortar stores. Consistently, several researchers found the higher service quality and trust provided in the offline channels as primary advantages that consumers look for (Al-hawari and Mouakket, 2012; Hahn and Kim, 2009). 5. Implications and limitations Today, digitally influenced young luxury consumers utilise multiple shopping channels and choose the most value-added channel for purchases, compared to typical luxury consumers who tend to choose the offline channel in order to have shopping experiences they associate with the higher prices. Thus, the present study examined the relative impact of different attributes on the luxury product shopping. The results of this study provide managerial implications by providing insights into the optimal combination of product and channel attributes for young luxury consumers’ shopping in either the online or the offline channel. Six attributes, which can be classified into product attributes and channel attributes, were examined: price, product assortment, product category, availability of human-assisted service, availability of VFRs and channel type. Among the attributes, price was the most important to young luxury consumers in the multi-channel environment, followed by availability of human-assisted service, availability of virtual fitting rooms, product assortment, product category and channel type. The luxury product that survey respondents were most willing to purchase was luxury watches and jewellery with a price range of $100∼$1,200 provided in offline channels, which have a broad range of product assortment, human-assisted service and VFRs. It was clear that multiple attributes such as product attributes and channel attributes were valued and respondents appeared to make some trade-offs between attributes when purchasing luxury products. To be specific, since the price was the most important factor that young consumers consider, luxury firms can benefit from introducing additional lines of affordable luxury to both online and offline channels for short periods of time, unless it significantly dilutes their prestigious brand image. In addition, the most striking finding from the conjoint analysis was the significant importance placed on channel attributes including human-assisted service and VFRs compared to product attributes other than price. This was surprising as product attributes were considered to be more important in many studies. Several influential functional and symbolic aspects of products were basically evaluated based on product attributes (Im and Go, 2015; Wiedmann et al., 2009). This finding of channel attributes being more important than product attributes suggests that a sole focus in product attributes may not be effective. Rather, it is more important to provide complementary additional services, which were exclusive in the offline channels in the past, such as human interaction and fitting experience. In other words, rather than trying to predict which channel consumers prefer, luxury retailers need to adopt an approach which focuses on enhancing consumer experiences through offering effective experiential channel attributes that allow consumers to have human-assisted service or use VFRs. Hence, it would be more desirable to provide personalised and innovative attributes to enhance channel performance overall, unless luxury firms try to compete based on price. Specifically, in the case of human-assisted service, it is imperative to find effective ways to translate human-based interactive experience to online channels perhaps through developing innovative technologies, which are only IJRDM 48,3 256
marginally available through call centres or artificial intelligence (AI) Chatbots now. Meanwhile, in comparing the probabilities of purchasing luxury products in terms of channel types, while holding the other attributes at the most preferred levels, respondents were more willing to purchase luxury products in the offline channel. However, due to the small relative importance of channel type, the key attributes that exert greater influence on the order of the combinations were lower price, followed by availability of human-assisted service, availability of virtual fitting rooms, broad product assortment and less-consumable and durable product category. Given the small difference between online and offline, in order to thoroughly explain young luxury consumers’ channel choice, it is important to study external factors such as demographics or psychographics (e.g. shopping orientations, motivations) that can influence the way consumers process the attributes. In addition, they can be used to further segment young luxury consumers based on their unique characteristics (Kwon and Jain, 2009). However, the unique characteristic of each channel should be not discounted considering the significant differences. Academically, this study can fill a gap in the literature regarding consumers’ trade-offs between relevant attributes and channel choice behaviour in the multi-channel environment. In prior studies, attention has been primarily given to the single-channel retail environment, addressing the key factors that determine consumers’ decision-making in the online versus offline channels (Yu et al., 2011), overlooking the comprehensive nature of consumers’ decision-making. In reality, consumers make decisions based on complex trade-offs between several relevant attributes. In this respect, this study provides academic implications by presenting empirically significant attributes in the multi-channel environment, taking the connectedness among the attributes into account. Also, the study confirmed the difference between typical luxury consumers and young luxury consumers by revealing that young luxury consumers place greater importance on price, followed by supportive services provided in the channels rather than on the type of purchase channel. The present study also provides some potential directions for further research. First, more research on multi-channel consumers’ decision-making mechanisms when purchasing luxury products may aid in understanding the small differences found between the channel types and greater differences found in the product and channel attributes. Second, in the current study, luxury consumers placed great importance on shopping attributes including human-assisted service and VFRs compared to product attributes except for price. Since human-assisted service and VFRs both can have variations in their characteristics in terms of the method (e.g. salesperson, call centre, kiosk) and the level of advancement in technology (e.g. artificial intelligence, virtual reality) they use, more research on the way consumers make trade-offs among clearly defined service options can be helpful in understanding the distinction among the “Yes”, “Moderate” and “No” classification used in this study. Lastly, while this study revealed that young luxury consumers place higher perceived value on price rather than on service experiences or other aspects of product attributes, considering the greater degree of involvement in the purchase decision process of luxury products compared to non-luxury products, it would be meaningful to examine the differences in importance placed on the respective types of products in the future studies. Although meaningful implications were derived from this study, there is room for further improvement. First, the respondents to the survey in the present study are young consumers in the United States, which limits the generalisability of the findings. More generalisable results can be obtained by examining consumer groups with different demographics such as gender, education level and nationality in further studies. Second, despite the growth of young luxury consumers and middle-class luxury consumers, the use of young consumers can be problematic considering they comparatively have a smaller annual income than typical luxury consumers. Their relatively low income level indicates that they are not the primary luxury consumers, even if they may be potential consumers of affordable and Preferences of young luxury shoppers 257