The Impact of the Financial Crisis on Consumer Behavior and the

Implications of Retail Revolution

NIE Biao, ZHAO Feng, YU Jiafeng
School of Management, Zhejiang Gongshang University, Hangzhou, Zhejiang, P.R.China, 310035
nbb9119@163.com
Abstract: This article mainly discusses the issues of Retail Revolution. Through the review of literature,
we analyze and gain the impact on consumer behavior caused by the economic crisis, including:
consumerss confidence declined, spending budget significantly reduced; consumers become more
rational and sensitive to price, etc. Compared to the change of Japans retail industry in the context of
the financial crisis, we imply the method of comparative analysis to gain some implications about
China's retail industry, including: adjust industry structure; establish brand awareness, create its own
brand; improve service quality, and create a better shopping experience; plan network layout rationally.
Keywords: Financial crisis, Consumer behavior, Retail revolution

1.

Introduction

A macroeconomic fluctuation, caused by financial crisis, not only makes a significant impact on the
retail industry, but also makes the market environment of retail in the world more competitive. This
impact to the development of the global economy including its retail in the future still remains, although
it may gradually bottom out in the second half year of 2009. It is undeniable that the financial crisis has
been quietly taking place leading to changes in consumer behavior. Faced with this change, how to
adjust the marketing strategy of retail? How to make choice of the development direction of retail in the
future? These are the urgent problems which need to seriously study and solve. Japan's retail industry is
a global leader in the development level. Particularly after the last century 90's economic crisis, the
Japan's retail industry gradually got out of the woods and onto the road of healthy development through
a series of adjustments and changes. China and Japan are different in terms of economic development,
consumption, consumer market, consumer attitudes, geographical characteristics, but learning from its
retail business development ideas and change course as retail enterprises in China will overcome the
financial crisis, out of a road with Chinese characteristics, the road of sustainable development has
important practical significance.

2.

Overview of Consumer Behavior Researches

There are two main aspects define the meaning of consumer behavior: behavior level and policy level.
The definition of consumer behavior from behavior level can be describe as consumer collect, purchase,
use, evaluate and deal with product to meet its demand (Schiffman & Kanuk (1991)),that also means
consumers performance various of acts and activities during purchase products, and the occurrence of
such acts and activities mainly based on the desire of individual. So consumer behavior can be say a
problem-solving process to meet the demand. The definition of consumer behavior from policy level can
be describe as all consumers action involved in the process of acquire, consume and process product
or service, it also include all decisions before or after the operation (Engel, Kollat and Blackwell
(1993)).Every time consumers make purchase decision, they may play one or more roles: initiator,
influencer, decision makers, buyers and users, they will play different roles in different circumstance.
When consumers play the role of buyer, they will collect data before they buy products and choose a
reasonable price among a different products or brands. (Kotler (1998))
There are two ways making consumer behavior research: macro level and micro level (Yang xiaoyan,
2003).Because consumer behavior is linked to lifestyle; its study is based on the description of
demographic characteristics of the consumers and consumer behavior characteristics. The current
researches on consumer behavior in China are mostly made by Engel and others through measuring the
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four dimensions of the lifestyle: attitudes, activities, views, and demographic characteristics. In micro
level, it mainly related to the behavior of consumers awareness, attitude, purchase intention and
decision-making process. It make explanatory research about information communication, purchase
decision, product use, brand attitude, etc. There are two choices about consumer behavior research route,
one is positivist research, and the other is post-modern Marxist route. The former believe that
consumers buying process can be divided into several steps: consumer perception, cognition, attitude,
decision-making, and feedback process (Loudon, 1993) .The latter believe that consumer behavior is
affected by the situation; there is no common pattern of behavior, we need combine consumers and
environment together to understand consumer behavior characteristics. (Douglas. B. Holt, 1997) When
consumers make purchase decisions, they are not only focus on product utility, but also pay attention to
the symbol value it brought (Yan Guoqiang, 2008).However, this route is deeply influenced by
subjective factors, it is difficult to draw objective conclusions.

3.

The Impact of the Financial Crisis on Consumer Behavior

(1) Consumer confidence declined, spending budget significantly reduced

The global financial crisis has seriously affected the world economy, rising unemployment, shrinking
wages, etc, has bring consumers great psychological pressure. Consumers cut their spending conscious.
According to a survey shows, as the uncertainty of economic development and job security increase,
consumer confidence index in china fall 94.5 in march 2008 to 86 in march 2009, which is the lowest
point in recent years. By the impact of the current economic situation, many shopping centers, said
consumers will reduce expenses. Consumers will regulate their own future consumption by reducing the
number of purchase frequency, lower grade, etc. (Shao Changbin, 2009). Consumers spent less in the
household products, personal care products, food and drink. Meanwhile they buy less in the area of
leisure and entertainment, and postpone buy large goods.
(2) Consumers become more rational and sensitive to price
As economic situation becomes uncertain, consumers will be more rational and sensitive than ever
during the financial crisis. They change their original buying habits. In the future, Consumers will more
concern about price and quality, when purchasing goods. They will choose domestic brands instead
foreign brands and put emphasis on product efficacy, durability. Consumers pay more attention on price
and quality than on style, brand and service. (Shao Changbin, 2009). In addition, more consumers are
beginning to get access to shops and make internet research when they are shopping. Take the electronic
evaluation web site as an example, in the first quarter in 2009; visitors are more than twice in the second
quarter, which reach 20 million. It shows that consumers focus more on the goods and retailers
information and details in order to make rational buying decisions.
(3) Consumers focus on the promotion of change
In general, the main factors affecting retail industries are: convenience, shopping environment, product
quality, variety, price, reputation and image of shopping malls, etc. But in financial crisis, consumers are
turning rational and calm; they care about product prices, cost, etc. For advertising, in financial crisis,
consumers attach great importance to the collection of information on buying and value product
performance information which ads delivery, such as product functionality, durability and so on.
Consumers prefer measures which reflect the interests of themselves, for example: the price reduction.
On the contrary, consumers have little interest in awards, because compared to the direct price cuts, this
promotion have great uncertainty.
(4) The change of consumers shopping places
Since consumer become price sensitive and rational, they compare information which they collect
before buying. With the rapid development of Internet technology, online shopping is attractive to
consumers, because of practical and convenient. On the one hand, online shopping is low-cost,
consumers can enjoy more benefits. On the other hand, under the pressure of financial crisis and
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accelerating pace of life, consumers have no time shopping at the store, and online shopping provides
people with convenience. Domestic Research agency Airui joint Taobao issued the 2008 Report on
online shopping market. The report shows that China's online shopping market in 2008 has the first time
breaking 100 billion, reaching 120 billion Yuan; it is increase by 128.5 percent this shows that online
shopping has gradually become hot in shopping.

4.

The Transform and Development of Japans Retail in the Context of

Financial Crisis

(1)The situation of Japans retail

During the bleak of Japans economy bubble in 1990s to the late of 20th century, Japan has lost ten
years. Now, after the economic crisis, Japans economy was in a difficult time again. The reasons are
follows: Japan has savings deposits about 1500 billion dollars, more than half of them can be directly
used for consumption. But the consumers in Japan are not willing to spend, which affects economic
development.
The end of economy boom. The longest time of economy boom after war ended, it lasts six years.
Nevertheless, the GNP of the six years increases only 4.4%. The Japans economy depends mainly on
export; export grew by only 75.6%. Private investment in equipment grew 18.2%, family consumption
does not exceed 3.2% and government expenditure grew 6.6%, so this phase is believed to be an
growing economy without true sense.
The traditional retailers--the stores and comprehensive supermarkets are in recession, and the new
retail, for example, the monopoly stores, are in a period of good development. In the life cycle of
Japans retail formats (shown in figure 1), it can show development level of different formats in retail: in
Japan, department stores are in recession; comprehensive supermarket has undergone mature phase, and
now entered recession; Conveniences stores are in the development phase, the total revenue of
convenience stores in 2008 exceed the total revenue of department stores. Daieis sales exceed
Mitsukoshi department in 1972, which is No.1 in national sale. Before 2001, supermarkets take the lead.
Around 2000, convenience stores exceed supermarkets and take the lead, for example, Mitsubishi
electronic exceed Daiei in revenue.

(2) The transform and development of Japans retail

Japans retail is undergoing fierce and complex transformation. Stores and comprehensive supermarkets
decrease their scale in order to survive. In the view of total retail sales, gross retail sales reach 9700
billion JPY in 1991, after 16 years later, it decreased from 2000 billion JPY, equal to 7705 billion JPY.
Though supermarkets, malls are not change dramatically as store, they are slowly decreasing and
negative grow (shown in table1). Meanwhile, new types of retail enterprises are developing and
emerging continually. At present there are four new kinds of shape in Japans retail monopoly stores
(shown in table2): A Vertical Integration Type. Because Japanese are higher wages, take the human
cost into consideration, many companies were moved to abroad (low human cost place), such as China
and Southeast Asian countries. Produce in the abroad and manage brand themselves. Open shops in
Japan collect consumers demand information timely and feedback information to the company
headquarters. Because the low production cost and low promotion prices, it gain advantage.
Entertainment Type. Japans drugstores are most typical. They are full of contents to let the customer
not have a feeling of oppression. Take an example of youth drugstores which their clients are students.
In addition to arrange the warm environment, they also provide some personal consultants, such as
privacy question in the adolescent which are related to the high school students, etc. At the beginning,
drugstores only sell drugs to customers. Then, according to some consumers (high school students)
needs for cosmetics and snack, they increased the types of goods. As it can meet the demand of the

Part of this paragraph cited from the statements of Cui Xiang tie, the Japanese Circulation Technology Professor,

on the "Sino-Japanese Circulation Change" Seminar, sponsored by the Ministry of Social Science research base Zhejiang Gong Shang University Research Center of modern business.
489

youth, the recreational drugstores develop quickly. Life Proposal Type. Japans furniture enterprises
are most typical, such as NITORI. The representative of the enterprise shall be cut off. In the furniture
industry, furniture mainly demands on his price and quality, but because foreign furniture enterprises can
offer lower prices, it brought NITORI bad environment. And NITORI provides consumers furniture
scheme to help consumer buying furniture, they also commit fashion and ensure the quality of products.
They inspect quality in all processes. And carry quality manager from big consultant firm such as the
Toyota makes quality control, which make the enterprises growing quickly.
Blank Market
Development Type. In Japan, because the demand of office supplies of medium-small enterprises is not
bigger than large enterprises, generally stationers cannot meet their needs. Consumer demand for
stationer cant be satisfied. Some enterprises such as Aisuke investigate which items the medium-small
enterprises need, then write it in their companys files, form pamphlets. Then deliver the pamphlets to
medium-small enterprises. Medium-small enterprises can buy the stationery together, which called the
scale effect. By this way, Aisuke increased its commodities to sixty-seventy thousand and won the
market.

Figure 1 The Life Cycle of the Japanese Retail Industry

Table1 Japanese department stores, hypermarkets (GMS) changes in turnover over the years
Department Stores
Years
Turnover(billion yen)
1991

GSM

Over the previous

year

97,125

0.00%

Turnover(billion yen)

Over the previous

year

148,489

0.00%

1992

95,196

-1.99%

153,326

3.26%

1993

89,603

-5.88%

154,444

0.73%

1994

87,713

-2.11%

157,806

2.18%

1995

85,683

-2.31%

160,341

1.61%

1996

88,406

3.18%

166,958

4.13%

1997

91,924

3.98%

168,636

1.01%

1998

91,774

-0.16%

168,341

-0.17%

490

1999

89,934

-2.00%

165,965

-1.41%

2000

88,200

-1.93%

162,632

-2.01%

2001

85,725

-2.81%

159,104

-2.17%

2002

83,447

-2.66%

143,701

-9.68%

2003

81,117

-2.79%

144,268

0.39%

2004

78,787

-2.87%

142,532

-1.20%

2005

78,509

-0.35%

141,482

-0.74%

2006

77,700

-1.03%

140,224

-0.89%

2007

77,052

-0.83%

139,788

-0.31%

Table 2 The Four Kinds of New Format of Retail Outlets in Japan

New retail formats

Typical enterprise

Innovative features

Vertical integration
Type

Fast Retailing, Shimamura Co.Ltd, Aoyama

Trading Co.Ltd

SPA(Manufacturing Retail), Logistics

Innovations

Entertainment Type

Daiso Industrial Co.Ltd, Matsumotokiyoshi

Co.Ltd

Shopping Pleasure

Life proposal type

Blank market
development type

5.

MUJI, NITORI

The Overall Proposal

ASKUL, Don Quixo te, Yodoba Shi Camera,

BOOK OFF

Raiders Blank Market Development

Implications of the Chinas Retail Industry

Although the impact appears to have bottomed out, the impact to the development of the global
economy in the future including retail still remains. Japan's retail development is at the leading level in
the world. Changes and experience in its development process have important implications to overcome
the crisis for retail enterprises in China, in particular how to seek further development after the crisis.
(1) Grasp the rules, adjust the form structure, and develop the special operations
For a long time, department store is as the main mode of operation in China. The operating range of
most large shopping centers and the mode of operation are similar and lack of personality. Japan's retail
development shows that retail formats from generation to decline have their laws, and department stores
have been into recession from maturity. Lower performance of department store business is the
validation of this law. With the influx of foreign retailers which makes environment more competitive, it
is urgent to change the retail industry in China which lags behind the situation. First, develop
department stores stably and explore innovative business model of department stores. Transform
department store into a shopping, leisure, culture and entertainment giant shopping mall or the
implementation of trans-regional mergers, restructuring and achieving the scale of operation, to reduce
operating costs. Segmenting the customer base, will not only target customers located in the high-end
customers, but also will be concerned about the general consumer groups. Select new service tools,
innovative marketing methods to improve business results. Second, we should actively develop the store
which meets the diverse needs of both business and characteristics. Japan's retail development shows
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that the traditional single-shop type of merchandise format failure to engage in large-scale procurement
of economic strength without large-scale distribution network. With the increase of consumer incomes,
consumer demand has become more individualized and diversified, which makes the development of
chain store or specialty store format imperative. Third, online shopping is a choice for more and more
people with the popularity of the Internet. In addition to the development of discount stores,
supermarket chains form, we should develop high-tech nature of online sales step by step. It can reduce
operating costs, and provide a huge virtual store space. Companies can keep consumers information
which can help to determine the direction of future change.
(2) Increase brand awareness, create private brand
Throughout the Japanese retail industrys change and innovation, one path is to develop their own
business brand (Private Brand referred to PB). Japan's retail sales of PB products account for about 5%,
many companies also want to share some percentage of PB to 10%--20% expansion. Such as Japan
AEON Group PB goods Toppubaryu, its sales will be expected to reach 750 billion yen in February
2011, accounted for 18% of total sales. At present, China began to implement but not many enterprises
achieved success, primarily based on the reality: Retail depended on the collection of channel cost to
survive more and more; the short-term gain from development of own brands is less than gross margin
and channel revenue; PB goods suppliers do not provide additional interest for retailers. These factors
lead to weak development of the Private Brand. But no doubt that the commercial development of its
own brand will bring long-term business interests, mainly in: a. PB products are basically designed by
the retailers and produced by manufacturers. The development of PB product can help enterprises to
establish their own position with the competition among the manufacturers and other suppliers,
contribute to the control of the supply chain, and reduce purchasing costs. b. Contribute to the
implementation of Differentiation Strategy. At present, Chinas retail homogenization is serious and
competition has been limited to price competition of suppliers. In contrast to foreign retailers such as
Uniqlo, IKEA etc, easy to see that not only do they have the initiative and price competition on the ones
who enjoy a wide space, but also have differential advantage brought by PB. This advantage which can
increase customer's loyalty and achieve sustainable high return was performed by the diverse
merchandise mix, represented by highlighting the product's personality, characteristics, and the store's
taste and style.
(3) Improve service quality and create a better shopping experience for customers
The consumer is not only concerned about the quality, but also made higher demand for service.
Retailers should carry out detailed market research to understand the changes in consumer demand, and
actively provide better service, so that customers have a wonderful shopping experience. a. Furnished a
pleasant shopping environment. One of the reasons for Japan pharmacies loved by customers is that it
will not give people a sense of the past to suppress dark. When laying shop out, open up space for
children, such as children playground to give customers exclusive shopping experience without the
distraction to children; in some special areas such as drug sales, arrange professionals for customer
queries in order to provide customers professional advice. Meanwhile, the features of staff should meet
the characteristics of customer groups for better communication. b. Display of goods is not simply piling
up in the sale field, requires careful analysis of the goods characteristics. According to the frequency of
purchase and the proportion of sales revenue, design a mode to highlight the main commodity status, to
provide consumers with value what they seek exactly, so that customers can buy the goods with high
turnover frequency in a more convenient way.
(4) Commercial network layout should be reasonable and flexible
In the commercial network layout, we can see that there is an imbalance in china's retail industry. That is
the relative saturation in urban centers, and relatively weak in remote villages and towns. Japan's retail

Gu Guojian. Chinese retail must change from profit view to value view (in Chinese)

492

development experience tells us that the "convenience, benefit, for people" principle in Network Layout
is an important factor for successful development of business enterprises. a. Network should be laid to
residents of the community. Flexibly adjust or extend the hours of operation, timely change management
projects, on the base of the change of local residents' needs and win the favor of customers by providing
convenience. b. Along with the improvement of farmers income, the rural market is big, and the
implementation of the country's "Ten Thousand Villages Project" and "appliance car to the countryside"
bring vigor and vitality to the rural retail market. Therefore, developing the rural market should be the
new strategic choice of commercial enterprises. Retail companies can directly invest in the form of
franchising, go deeply into the rural areas and enhance their credibility by relying on "Ten Thousand
Villages Project". According to the characteristics of farmers living and production, introduce the
varieties of goods and provide farmers with one-step service. While in the convenience of farmers in the
rural market, open up a piece of heaven and earth for themselves.

6.

Conclusion

In the context of the financial crisis, there is no epoch-making innovation. But incremental innovation is
possible and necessary. Many companies in Japan acquire substantial development through a small area
of innovation. Of course, there are many cases about the failure of the Japanese retail industry .the
failure such as Japanese department stores is worth thinking. We should treat successful format only as a
reference, not copy, and specific things should be done with the national situation. On the demand-led
all today, retail businesses should give more consideration to the consumer's point of view, explore the
factors which impact consumer purchasing decisions, and grasp the trend of consumer behavior timely.
They should also think over what the new format is in order to prepare for the development in the future.

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