1. Introduction
Since Korea liberalized a retail market in 1996, world retail giants like Wal-Mart USA, Tesco UK, Carrefour France, and Macro Dutch, actively extended their business into the Korean market. In, recent, it is, however, difficult to find out theiThe authors acknowledge the support of the three anonymous referees and the two discussants of 2017 KODISA International Conference.r branches in Korea. In other word, the above retailers left the South Korean market, because of poor sales performance or accounting scandals in their domestic markets. Nevertheless, what is apparent is that market opening has been regarded as one of growth opportunities for foreign multiple retailers.
On the other hand, the world retail giants who are based on Japan do not pay their attention to Korea which is geographically one of the nearest countries, whilst large foreign retailers competitively opened their shops in Korea.Associated with the reasons why Japanese retailers have passively invested in the Korean market, there is no doubt that they have believed that the historical background between Korea and Japan should discourage Korean customers to visit Japanese shops. As a result, the historical factors between both countries tend to show different retail structures in a retailing industry, as pointed out by Malhotra, Agarwal, and Baalbaki(1998).
However, there is recently a market change that a few Japanese retailers have started to open their shops in the Korean market, hiding their nationality. As one of representative examples, FRL Korea(UNIQLO) has dramatically grown from first store in 2004 to 176 shops in 2017, despite anti-Japan sentiment, according to FRL Korea homepage in 2017. Surprisingly, it is witnessed that Muji Japan has expanded its own business into Korea through the strategic alliance with Lotte Group. This retailer announced that the number of a loyal customer as a member of Muji Korea has been over 0.2 million in November in 2017. Given that Japanese retailers have continuously achieved outstanding sales performance, it can be said that Japanese retailers have changed their Korean market entry strategies. Regardless of retail formats, also, they have begun to open their stores in Korea. Similarly, it should be expected that Korean customer attitudes towards the nationality of retailers have continuously become blurred.
It is, therefore, necessary to investigate how Korean customers react to Japanese retailers. In more detail, the authors will examine how the nationality of a Japanese retailer has an influence on the store selection as well as the store visiting intention of Korean customers. The next section will review the existing literature concerned about the effect of retailers’ nationality on customer behaviours, and then, develop research hypotheses, based on literature review results. The fourth section presents research methodology as well as research population profiles, whilst the fifth section shows research findings. Finally, the last section is followed by conclusions with some implications, research limitations and future research directions.
2. Literature review
Compared with the research that focused on exploring the link between consumer products and country-of-origin(e.g.Bilkey & Nes, 1982; Janda & Rao, 1997; Klein, Ettenson, & Morris, 1998), retailing academicians have hardly paid considerable attention to customer animosity. Nevertheless, a few researchers are interested in investigating how store country-of-origin affects customer attitudes(e.g. Zarkada-Fraser & Fraser, 2002; Chaney & Gamble, 2008). In the same vein, it is very difficult to find the research result that authors have studied the link between anti-Japan sentiments and Japanese retailers in Korea.
It was, therefore, difficult to find out the Japanese retailers who directly opened their stores in Korea before 2000s. Given that Korean customers are not favorable to Japanese retailers, they are likely to enter into the Korean market as a joint venture to hide their names. Nonetheless, retailing academicians have not been interested in investigating how much such a feeling influences Korean customer attitudes towards Japanese retailers. In addition, Korean customers should believe that there is no Japanese retailer in the Korean market, because of information lack.
2.1. Alliances with foreign retailers
In fact, before market liberalization in 1996, local Korean retailers tended to learn retailing knowhow through strategic alliances with Japanese or American retailers, as shown in the [Table 1]. Considering that Japanese retailers actively expanded their own business into other Asian countries like Taiwan, Hon Kong, China, Thai, and so on during the 1980s(Mukoyama, 1996), the thing that they did not open their stores in Korea is enough to attract a researcher’s interest. However, no attention has been paid to such a research topic.
[Table 1] Korean retailers’ strategic alliances with foreign retailers
Source: Cho(2011)
Furthermore, because of war animosity, it can be expected that the Japanese retailers who operate shops in Korea do not want to let Korean customers know such a fact. Probably, they might believe that anti-Foreign or anti-Japan sentiment strongly influences their sales performances.
After financial crisis in 1997, foreign retailers have joined Korean market with the sophisticated retailing knowledge accumulated in their domestic market. Together with this kind of market trend, Japanese retailers have directly or indirectly expanded their business into Korea. At the earlier stage, foreign retailers entered the South Korean market with a joint venture like Tesco UK as well as Daiso.
In recent, however, Japanese retailers are likely to prefer their own facias in Korea such as FRL Korea, Muji Lotte and Ministop Korea. It means that Japanese retailers have self-confidence to get over anti-Japan sentiment, and then, believe that they do not need the help of local Korean retailers any more. On the other hand, it is expected that local Korean retailers do not need any collaboration with foreign retailers, because they have already accumulated their own retail knowledge through a survival game in a domestic market.
2.2. Effects of country-of-origin
As mentioned earlier, there is a huge number of researches explored customer attitudes towards products manufactured in foreign countries. Generally speaking, authors commonly found that country-of-origin influenced customer shopping patterns(e.g. Nagashima, 1970; Bilkey & Nes, 1982; Ettenson, Wagner, & Gaeth, 1988; Verlegh & Steenkamp, 1999). However, there are conflict arguments.
According to the researches carried out by Nagashima (1970) as well as Shimp and Sharma(1987), customers tended to perceive domestic product more favourably than those of foreign origin, whilst Lin and Sternquist(1993) highlighted that they prefer the product made in foreign countries. Furthermore, Ettenson et al.(1988) stressed that the customers who are favourable to domestic products are less likely to be affected by country-of-origin, while making buying decisions. In addition, foreign products tend to be perceived differently by demographic variables like gender, ages, education levels and income levels(e.g. Schooler, 1971; Wall & Heslop, 1986). Although there is a serious conflict, it has become apparent that country-of-origin is typically used as a cue to evaluate product quality(e.g. Bilkey & Nes, 1982; Ahmed, Johnson, Ling, Fang, & Hui, 2002; Diamantopoulos, Schlegelmilch, & Palihawadana, 2011).
By contrast, as Mckenzie(2004) pointed out that researchers were not interested in exploring the relationship between retailer country-of-origin and customer store selection, retailing academicians have paid less attention to this research topic except for a few researches(e.g.Zarkada-Fraser & Fraser, 2002; Chaney & Gamble, 2008;Maruyama & Wu, 2014) in recent. When authors discuss this research area, most of them are likely to focus on customer ethnocentrism(e.g. Chaney & Gramble, 2008;Maruyama & Wu, 2014). In other words, researchers believe that ethnocentrism significantly influence customer store selection.
2.3. Anti-Japan sentiment
Without doubt, it can be said that Korean customers are significantly unfavorable to Japan. As evidence, according to the survey conducted by a BBC World Service Poll in 2014, 79 % of Korean tended to view Japan negatively. It was, thus, expected that Japanese retailers hesitated to open their shops in the Korean market in the past.
Before suggesting hypotheses, there is a need to explain what anti-Japan sentiment is. Furthermore, it is necessary to distinguish anti-Japan sentiment from animosity, because the both concepts can be correlated with each other. The latter should be based on the past war like Japanese invasions, that is, the past emotion against Japan, whilst the former should be related to the present favourability towards Japan.What is apparent is that past invasions significantly influence the formation process of anti-Japan sentiment in Koreans’ mind. Because of the lack of Japanese government’s efforts to improve the relationship with Korea, anti-Japan sentiment based on the past historical background has been strengthened. Without completely sorting out the diplomatic problems such as comfort women, territorial dispute and history distortion, it will be expected that anti-Japan sentiment should not be improved in Korea.
Nevertheless, Japanese retailers have continuously improved their sales performance. It is, thus, interesting to examine this research topic.
2.4. Consumer ethnocentrism and animosity
With respect to customer ethnocentrism, Shimp and Sharma(1987) stressed that the customers who are more ethnocentric are likely to avoid purchasing foreign products because of the belief that they have to protect their own domestic economy for themselves. In the same vein, it is expected that ethnocentric customers tend to show similar consumer store choice behaviour, that is to say, they prefer local retailers, rather than foreign retailers, as demonstrated by the empirical study carried by Zarkada-Fraser and Fraser(2002).
It is, nevertheless, difficult to find the literature concerned about the relationship between anti-Japan sentiment and the formation process of consumer ethnocentrism and animosity.It is, therefore, necessary to investigate what kind of elements influence customer ethnocentricity and animosity, and further, examine how they work when choosing a shopping destination.
First of all, the meaning of the term “consumer ethnocentrism” should be explained here. Moreover, the difference between consumer ethnocentricity and animosity should be mentioned. Although there are many different definitions associated with ethnocentrism(e.g. Lewis, 1976; Shimp & Sharma, 1987; Rushton, 1989), the authors adopt Shimp and Sharma’s one and slightly change a few words, that is, from purchasing foreign made products to selecting foreign-owned retailers. As a result, the authors define consumer ethnocentrism as the term that customers believe that visiting foreign retailers as a shopping place is to hurt domestic economy, that is to say, selecting local retailers makes a contribution to the development of their own economic growth.
On the other hand, animosity is closely related to the relationship between countries. In particular, war-based animosity is one of the most important predictors, as noted by Klein et al.(1998) who studied that Chinese animosity towards Japan and Japanese products plays a significant role in making buying decisions. Accordingly, it is evident that country-specific animosity is an important factor when entering oversea markets, from a company’s point of view.
Considering that Korea was invaded by China and Japan in the past, it can be said that Korean customers harbor anti-China and anti-Japan sentiment in their mind.Furthermore, the fact that Korea helped Japan to build a nation a long time ago, and that Japan colonized Korea in recent tends to make Korean customers feel betrayed. It is, however, interesting to explore to what extent this influences the store selection process of Korean customers. Without such a historical background, there is no reason why Korean customers are against Japan, Japanese products and Japanese retailers.
3. Hypotheses development
On the basis of literature review, the authors propose the following conceptualized research model and hypotheses:
H1. Anti-Japan sentiment affects the formation process of consumer ethnocentrism.
H2. Anti-Japan sentiment affects the formation process of consumer animosity.
H3. Consumer ethnocentrism influences the formation process of consumer animosity.
H4. Consumer ethnocentrism affects store selection process (attitude).
H5. Consumer animosity affects store selection process (attitude).
[Figure 1] Conceptualized model
4. Research methodology
In order to measure whether the above hypotheses can be accepted or not, it is very important to select a right research method. Depending on the different research techniques, authors can argue different research results(e.g. Reynolds, Howard, Dragun, Rosewell, & Ormerod, 2005; Griffith & Harmgart, 2005).
First of all, the authors will adopt different research techniques to achieve research objectives.
4.1. Research population profiles
The 400 questionnaires were distributed to the acquaintances of the researchers from March to April in 2018, and then, within a month, 360 are returned. It means that the response rate is 90.0%. The 353 out of 360 questionnaires are available, as seen in [Table 2]. In order to measure the variables proposed, the researchers have utilized Likert five-point scales. These scales were adapted to explore the customer attitude toward the nationality of foreign retailers.
[Table 2] Demographic Factors
With respect to a questionnaire structure, it is necessary to note that under each construct based on the previous research results, the researchers developed a variety of questions to identify the relationship amongst the variables.Statistic program R studio 1.1 was used to carry out the confirmative factor analysis and path analysis.
4.2. Research reliability and validity
Confirmative Factor Analysis(CFA) was used on the collected data to evaluate the uni-dimensionality of each of the dimensions of research model and results show the fitness of our research model. R studio 1.1 was used to carry out the CFA. The x 2 statistics was 422.738(df=99, p=0.000) and overall assessment measures(GFI=0.866, AGFI=0.816, RMR=0.089, CFI=0.902, TLI=0.882, RMSEA=0.096) support the fitness of our research model. Cronbach's alpha was used to verify reliability and all of the measurement satisfied.
Convergent validity is the extent to which indicators of a construct converge or share a high proportion of variance in common. All the individual factor loadings were found to be highly significant, giving support to the convergent validity. Composite Reliability(CR) was higher than the recommended value of 0.7 and Average variance extracted(AVE) was higher than the recommended value of 0.5. as summarized in the [Table 3].
[Table 3] Results of Confirmative Factor Analysis
As shown in the [Table 4], the square root of the correlation coefficient of the individual potential variable factors was used to verify the validity. The square root of AVE(ANTI=0.601, ETHNO=0.547, ANIMO=0.649, ATTI=0.514) were greater than the coefficient of correlations, so it is fair to say that the discriminant validity is secured.
[Table 4] Correlation and AVE Matrix
5. Findings
All of the hypotheses are supported with ***p<0.01 except that H4 is supported with **p<0.05. A summary of path analysis is displayed in the [Table 5] and a simple illustration of the model with path coefficients is shown in the [Figure 2] developed by a structural equation model(SEM).
[Table 5] Path Coefficient on Structural Model
Note: *; p< 0.1, ** ; p < 0.05, *** ; p < 0.01
[Figure 2] SEM Research Model
As indicated in the [Table 5] as well as the [Figure 2], it is apparent that anti-Japan sentiment influences the formation process of consumer ethnocentrism and animosity.In other words, anti-Japan sentiment is more likely to strengthen consumer ethnocentrism and animosity.
Moreover, it is demonstrated that consumer animosity is affected by their ethnocentricity. What is interesting is that customers tend to be influenced by their ethnocentrism, when choosing a shopping place, Rather than consumer ethnocentrism, animosity tends to importantly affect customer attitudes, associated with store selection behaviours.
6. Conclusions
Through an empirical research, the authors found that Korean customers have still strong anti-Japan sentiment in their mind. In other words, this research shows that Korean customers are not favorable to Japanese retailers. Moreover, anti-Japan sentiment has significantly affected Korean customer attitudes.
In the same vein, war animosity is more likely to discourage Korean customers to visit Japanese retailers, rather than consumer ethnocentrism.
Based on the research findings, this study has some practical implications for foreign retailers, particularly for Japan-based retailers. In order for Japanese retailers to increase their market shares in the Korean market, they have to make a significant effort to alleviate the degree of anti-Japan sentiment, together with Japanese government. In fact, it would be difficult to solve this kind of problems from the retailer’s point of view, without the help of a government.
In addition, Japanese retailers have to significantly allocate marketing resources to make Korean customers favourable to Japan, Japanese products and them.Furthermore, they have to put significant political pressure on the Japanese government to improve the relationship between Korea and Japan. Over time, it is apparent that anti-Japan sentiment would become blurred, if the diplomatic relationship should be improved. Although animosity should be based on the Japanese invasion of Korea, what is important is that they have to sustainably try to mitigate anti-Japan sentiment with many different marketing strategies.
Like any other research, there are some research limitations like small sample size and coverage area, in terms of research populations. Also, in contrast with research findings, Japanese retailers have done their business very well in Korea, as noted earlier.
Accordingly, future researches should focus on exploring the gap between the above research results and the Japanese retailers’ performances, depending on sociodemographic factors like income levels, age, gender, and education levels. Compared to the past when there was no Japanese retailer until 1990s, they tend to actively expand their business into Korea in recent. Commonly, Japanese firms have focused on enticing younger generations, rather than older customers. Similarly, considering that Japanese retailers target younger customers and achieve their business goals in Korea, demographic elements should be involved in the next research process.