ISSN 0798 1015

Vol. 41 (Issue 12) Year 2020. Page 9

Factors affecting purchase intention in luxury fashion brands on generations Y and Z in Indonesia

Factores que afectan la intención de compra en marcas de moda de lujo en las generaciones Y y Z en Indonesia

SANNY, Lim 1; IRWANTO, Felisha G. 2

Received: 08/11/2019 • Approved: 23/03/2020 • Published: 09/04/2020

Contents

1. Introduction

2. Methodology

3. Results

4. Conclusions

Bibliographic references

1. Introduction

Luxury goods are items that carry higher price points and are exclusive in some way to customers of a higher means. Back to the earliest times, luxury goods often purchased and owned by the wealthy, since the materials are scarce, it carries higher prices and were accessible to those who could afford such niceties (Quan and Shen, 2016). However, time has changed, and the luxury market has grown considerably and luxury goods became more affordable for the middle class customers. For example, middle class customers in the United Kingdom who have purchase luxury goods have increased by 50% (Hauck and Stanforth, 2007). According to Silverstein and Fiske (2003), the increases in luxury purchases are influenced by business and social factors. Due to the changes of luxury goods market, the definition of luxury market itself was also redefined. One of the redefined explanations, from Twitchell (2011), considers luxury as the things that other people have that I think they should not have.

Tracked by Bain and Company (2017), there are nine segments of luxury industry, including cars, personal goods, hospitalities, cruises, private jets and yachts, and fine art. Luxury cars, hospitality and personal goods together account for more than 80% of the total market.

1.1. How the super-rich spend their money

Out of the total global expenditure on luxury goods of $1.1 trillion in 2014, luxury cars was the lead market with $437.8 billion, followed with personal luxury goods such as shoes, handbags and jewelry, with $278.1 billion. That means personal luxury goods have a decent position in the market and people do actually purchase personal luxury goods (McCharty, 2015).

Even though the general market growth will depend on many factors, such as geopolitical factors, but the growth in luxury industry will continue to grow and will not be affected by the market growth, unlike in other industries. However, to keep in mind, to have a solid and steady rate of sales growth, all brands and companies in luxury industry have to face all the new challenges happening and deal with them in a correct way (Deloitte, 2018).

In the past two decades, the luxury fashion industry has faced numerous changes. The variety of economic trends, the growth of digital transformation and evolving customer preferences are creating new competitive markets. Deloitte (2018) confirmed that the sales of luxury industry and profitability have been underperformed in recent years and that is caused by the adjusting process to demographic changes. Generation Y and generation Z will represent more than 40% of the whole luxury industry by the 2025, compared with 30% back in 2016. With that being said, the future of luxury fashion industry hugely depends on generations Y and Z.

Y and Z are the current latest generations in the world, with generation Y (24-38 years old) and generation Z (8-23 years old) populations of 83,657 million and 90,821 million, respectively (Statistics Indonesia, 2018). Generation Y spend $600 billion/year or around $85/day; that is, 28% of the total daily spending by a person. Generation Y has lived through a period where changes continuously happen. As a result of that phenomenon, their shopping patterns also changed a lot from the previous generation, generation X. Bain and Company (2017) have found that the main growth of the luxury industry is a generational shift, with 85% of growth caused by generations Y and Z. But the way generation Y thinks affects the industry and changes the ways all generations make purchases. This also pushes what the brands want to deliver to the customers and how do they deliver it.

Since generations Y and Z highly contribute to the growth of luxury industry as stated on Bain and Company (2017), brands should know what are the trends among these generations, how can they attract them to purchase their products and what affects their purchase intention. Purchase intention is frequently measured by marketing managers as an input for decisions regarding their products or services and it is used to predict future sales (Morwitz, 2012).

1.2. Factors affecting purchase intention

1. Brand consciousness. It can be seen as the psychological preference towards well-known brands in the market (Zhang and Kim, 2013); Asian customers see luxury goods as something that can boost their status, pride and self-esteem.

2. Materialism. This means the importance a person puts on things (possessions) as a necessary form to reach their desired end states, even happiness. People who consider material possession is important tend to belief that more possessions lead to more happiness. At the highest level of materialism, possessions will be considered as the center of a person’s life and it is believed to provide the greatest sources of their satisfaction and dissatisfaction (Zhang and Kim, 2013).

3. Social comparison. A statement from Schiffman and Kanuk (2004) is that individuals might also compare themselves with people who is lower than themselves as well as with people higher such as celebrities, singers, et cetera. Chan and Prendergast (2007) stated that social comparison with friends and public figures have positive impact on worldly possession; individuals are also more easily influenced if they often interact with other people (Zhang and Kim, 2013).

4. Product price. Mirabi, Akbariyeh and Tahmasebifard (2015) points out that the price of a product is defined as the amount of money a customer spent in order to get the value of a product/service they purchased. A luxury company needs to have customers who are willing to pay a higher price since there are so many competitors with a lower price (Levy and Weitz, 2012). According to Kotler and Amstrong (2014), there are two price setting methods, customer value-based pricing and cost-based pricing.

5. Fashion involvement. It can be described as how customers see a particular purchase decision and perceive it to be important to them (Zhang and Kim, 2013). High fashion involved customers tend to have more power to passing fashion information, are highly interested in fashion and often monitor the fashion trends. The importance of involvement in fashion clothing could be seen from the fashion in the society; high fashion involvement has great relevance to  self-esteem. It  has also been identified as the relational variable for purchase behavior (O’Cass, 2004).

6. Website quality. Chang et al. (2014) state that one of the keys to customers’ purchase intention is website quality, because customers’ perception positively impact their intentions to use a website and will also affect the purchase intention itself. Liang and Lai (2002) found that customers are more likely to do online shopping when the website itself serves high function such as product catalogue, search engine and other functions.

7. Social media entertainment. Social media is an important indicator on customer’s purchase intention. Nowadays, more customers are using social media to communicate not only with other customers, but also with the brands. As the time spent on social media increases, marketers of luxury brands are expanding to the online platforms (social media) to be able to engage the customers with brand messages (Ahmed and Zahid, 2014).

8. Product review. The review  usually from other customers who have purchased and used the product; it includes their opinions, experiences and evaluations (Park, Lee and Han, 2007). According to Liu and Zhang (2014), product review is categorized into 2 factors, which are the review of the product itself and the review of the service given.

9. Store atmosphere. Hussain and Ali (2015) stated that the probability of customers staying longer in a store increases if the store has a nice atmosphere; when customers feel satisfied with the store environment, they will likely to spend more time in the store. A nice atmosphere of the store enhances customer’s satisfaction and purchasing level (Silva and Giraldi, 2010).

10. Brand awareness. Macdonald and Sharp (2000) stated that customers often use brand awareness for their consideration when buying products. It happens because they think that well-known brands are more reliable than some unknown brands. Lu, Chang and Chang (2014) categorize brand awareness into brand recognition and brand recall.

11. Corporate image. Nguyen and Leblanc (2001) pointed out that factors affecting corporate image may come from customer perception of the corporation itself, including the name, vision and variety of products or services offered, and knowledge of the customer itself.

12. Product packaging. According to Mirabi, Akbariyeh and Tahmasebifard (2015), every product definitely has their own packaging to wrap the product. Fung, Chong and Wang (2004) stated that customer’ feelings are attached with the design and packaging. Cahyorini and Rusfian (2011) also found that packaging has significant effects on customers’ purchase intention because customers are triggered by appearance of product.

13. Attitude towards sponsored posts. Zhu and Tan (2007) stated that sponsored recommendation posts tend to reveal the sponsorship information in the endorsers’ social media; it can be on the description or on the caption section of the post itself. These authors also suggest that sponsored recommendation posts should be seen as a form of online advertisement rather than a personal review of a product (Zhu and Tan 2007). Lu, Chang and Chang (2014) claimed that, if the reader find the sponsored recommendation in a specific time frame and they believe that the claims are true and proven, their attitude towards the credibility will be positive.

14. Service quality. Huang et al. (2014) explained service quality as the gap between satisfaction actually felt by the customers after receiving the services and their expectation. To simplify, service quality equals to the expected service subtracted by perceived service.

15. Payment method. The main effects of payment method can be seen in online shopping; the variety of payment methods provided will increase the purchase intention (Chen, Hsu and Lin, 2010). Technical protection will enhance the customers’ perceived security which can positively affect the purchase intention (Liu and Zhang, 2014).

16. Word of mouth marketing. Erkan and Evans (2016) stated that word of mouth marketing can be seen as a communication between two people where one person receives from the other some non-commercial information about the brands, products or services.

17. Corporate social responsibility. Company responsibilities should not be all about maximizing the profits, but they should be balanced with the environment as well (Huang et al., 2014). Ferrell et al. (2010) believe that company should be responsible for all parties related to them, including shareholders, employees, partners, customers, suppliers, channels and local communities.

18. Advertisement. It can be used to create an emotional link with the customers and the result is that the customers automatically create an emotional link with the advertisement of that specific brand (Latif, Saleem and Abideen, 2011). Studies by Kurdsholi and Bozjani (2012) and Mirabi, Akbariyeh and Tahmasebifard (2015) proven that advertisement is an impactful tool to inform and eventually affects customer behavior to purchase the product.

19. Return policy. Retailers usually use return policies to relieve consumer risk and to increase customer demand. McWilliams and Zilbermanfr (1996) categorize it into 4 factors, which are the length of time allowed for the return, the costs associated with the product return, the terms of the policy and additional restrictions.

20. Product quality. Customers have their own perception on seeing the quality of a product or service based on the purpose of the product or services itself and they also tend to compare it with other alternatives (Mirabi, Akbariyeh, and Tahmasebifard, 2015). Product quality is the main variable of purchase intention; quality should be improved every time (Tariq et al., 2013).

Research on factors that influence purchase intention is not a new thing. However, the present research aims to focus on generations Y and Z who is going to be the future customers of luxury brands, because researches regarding this topic are still rare, especially in Indonesia. Furthermore, in order to suggest and apply the marketing strategies, the factors that are influencing customers’ purchase intention should be investigated. By doing that, brands could have a better understanding of the factors affecting generations Y and Z purchase intention. This research is done to address all the above mentioned problems, which is to know the theoretical factors that can affect purchase intention, whether the theoretical factors can be reduced into more concise exploratory factors, and the new exploratory framework to purchase intention especially in Indonesia.

The populations of this research are generations Y and Z with income above Rp 5,000,000/ month because the spending patterns of cunsumers with monthly income above IDR 5 Million demonstrates a shift from basic necessities (Deloitte, 2018). The sampling method used in  this research is convenience sampling method. Questionnaire are spread online and there are 112 samples that can be processed. The analysis of this research starts from collecting the result of the questionnaire which uses Likert scale in order to measure a statement in which respondents rate their level of agreement. After obtaining the results, the data was tested through processes to ensure  validity of an assessment tool is the extent to which it measures what it was designed to measure, without contamination from other characteristic and reliability of an assessment tool is the extent to which it consistent and accurately measures learning. Exploratory Factor Analysis (EFA) is used to reduce several data to a smaller set of variables and also to explore the theoretical reason behind the phenomena.

Out of 112 respondents, 65 of them (58%) are female and the remaining (47%) are male. 75% of the respondents are Generation Z who were born in 1995-2010 and the remaining 25% are Generation Y, born in 1980-1994. The percentage of respondents with income above IDR 10 Million is 43%, and the majority of the respondents have income between IDR 5 – 10 Million (57%).

Based on the SPSS (Statistical Package for the Social Sciences) result, all the questions’ value are above the r table. This indicates that all questions are valid. The result for reliability test with Cronbach’s Alpha is 0.901, hence the questionnaire is reliable. Using KMO (Kaiser-Meyer-Olkin) and Bartlett’s Test, the magnitude  of Kaiser-Meyer-Olkin is 0.684 > 0.5, and also the magnitude of Bartlett’s Test of Sphecirity is 2648,931 with significance of 0.000 < 0.05. Therefore, the data is already qualified for further analysis. The value of Measure of Sampling Adequacy is around 0 until 1. After conducting the second test, all the indicators have value of higher than 0.5. In Factoring and Rotation Process, communalities is the sum of variance of a variable that can be explained later by the factors formed. All 39 indicators have extraction value > 0.5. That means all of the indicators are suitable for describing the factors formed. Therefore, the total of 12 factors will explain 74,838% of the origin 39 variables.

The exploratory factors will be 12 factors in which with each factor is formed, the eigenvalues remainsabove 1 until the 12th factor is formed. In the 13th factor, the eigenvalues decreases into 0.960, which makes the factoring process stop in the 12th factor. This represents that 12 exploratory factors are the suitable factors that can summarize all 39 items. After knowing the total factors that will be formed is 12 factors, Table 1 below will show the distribution of all 39 items to the 12 exploratory factors formed. The result is seen from the factor loading which is the correlation between a specific variable and all the factors formed.

Table 1
Component Matrix (The amount of correlation between a specific indicator to all the factors formed)

Most of the indicators already have their strong correlation to a specific factor. But still, there are some indicators that do not have a strong correlation to all 12 factors which are A2, D2, G1, I1, J1, N1, O1, P1, R1, T1, and T2. Also, there is an indicator that has strong correlation to more than 1 factors which is L2 to the 2nd (0.637) and 3rd (0.548) factor. Thus, a rotation process needs to be done. Rotated component matrix will show a more clear variable distribution. The rotated component matrix result is in Table 2 Rotated Component Matrix. After the rotation took place, there are few indicators that still donot have any strong correlation to all exploratory factors. Thus, the highest correlation will be chosen. Table 2 will show the distribution based on the new exploratory factors formed.

Table 2
Rotated Component Matrix (The distribution based on the new exploratory factors formed)

Based on the result of the analysis, it can be concluded that after the categorization process the factors became different in some way. The difference is caused by the Exploratory Factor Analysis that has been conducted before. From the total of 20 theoretical factors that each consists of 2 indicators, it became smaller to 12 exploratory factors that are formed after going through all the processes. This means the factor’s name also changes and the naming process for the exploratory factors will adjust to the indicators that are part of the factor. The 12 exploratory factors formed are as follow:

Table 3
Exploratory Factors Distribution

According to the present results, the 20 theoretical factors can be summarized into 12 new exploratory factors that can affect purchase intention in luxury fashion brands on generations Y and Z.

Brand & website quality, intangible value, individual pride, expected value, service given, fashion trendiness, comfortless, brand image, advertisement consciousness, payment recommendation, attractiveness & variativeness, and categorized display were the best categorized factors.

For practical implications, these results can be used for determining the factors that can affect purchase intention by using the exploratory factors found in this research.

Since this research only made new theory about the factors affecting purchase intention without describing the correlation itself, the results can be used as the variables when doing an associative research of purchase intention in luxury fashion brands on generations Y and Z.

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1. Associate professor. Management Department. Bina Nusantara University. lsanny@binus.edu

2. Student. Management Department. Bina Nusantara University. felishageraldine@yahoo.com