Consumption of Luxury Food: Essay

1. Introduction This chapter will serve as an introduction to the concept of Luxury food consumerism in Harrods Patisserie and Bakery Food Hall. It will evaluate customer loyalty incentives, pricing and hype around its luxury food. 1. 1 Overview of Harrods and Luxury food consumerism Harrods covers 1. 2 million square feet of terrain, in the very heart of one of London, England’s most prestigious areas, Knightsbridge. The historical architectural landmark, along with the Egyptian Escalator, which was envisioned by Mr. Al-Fayed himself, is listed by English Heritage. With no less than seven floors devoted to the finest-quality international brands, as well as a sumptuous Food Hall that is like no other. It is no wonder that Harrods attracts almost 15 million people through its doors every year. (http://factoidz. com/harrods-the-famous-british-landmark-department-store-changes-ownership-in-2010-and-remains-out-of-british-hands/) The United Kingdom and many parts of the E. U have been experiencing slow growth and development. However, according to information from this website which states†¦Harrods says its Knightsbridge site is Britain’s largest shop, selling an array of fashion, food and luxury goods†¦ Qatar Holdings bought Harrods from Mohamed Al-Fayed for a reported ? 1. 5 billion last May. (www. fasttrack. co. uk) This could only have been possible if profits had a successful recorded track rate. In 2010, sales in Harrods received ? 519. 8million, leaving Harrods with a profit of ? 86. 5million (www. fasttrack. co. uk) As consumer wealth increases, so does the demand for more premium, value added products as opposed to cost-reduced commodity products. The situation is partly created by an increasingly affluent society and a widening gap with the divide of rich and middle class in the current recession. There are various factors influencing change. In the UK 10% of the population is currently defined as affluent – this figure is expected to rise to 30%. www. foodbytesni. com/text. doc The EU speciality food market (as opposed to the premium food market) is worth â‚ ¬33. 5 billion – (4. 6% of total EU food & drink spend). In Britain and Ireland it is valued at â‚ ¬6. 1 billion (4. 5% of total food & drink spend). It is forecasted to grow to â‚ ¬7. 5 billion in 3 years. It is commonly known that yesterday’s luxury becomes today’s necessity. Luxury tends to be rare and expensive. With the above profit figures, the researcher can only assume that Harrods appears to be the winner in the Patisserie and Bakery Market. With the definition of poverty completely different in the western world to the ratio of poverty in developing countries, luxury consumption of Patisserie and bakery is considered trendy and it’s demand in Harrods is ever growing. Although we may assume that luxury foods are related to income, during this current recession in the UK with dwindling income, the demand for Harrods Luxury Patisserie and Bakery foods has increased over this period of time. I have noticed this as the researcher is employed in Harrods food production unit. Although, the usual scenario for other departmental stores may be to reduce prices during recession, Harrods luxury Patisserie and Bakery foods have retained its prices and popularity. In fact with the VAT increase from 17. 5% to 20% the sales in this section of the food halls has shown no major downturn. Hence, it is my opinion that demand is so great for Harrods Luxury Patisserie and Bakery that consumers of any income group visit Harrods to buy even the lowest cost luxury Patisserie and Bakery foods which has been a contributing factor. Harrods is globally known as unique, as it has an association with class, quality and distinguishes itself from the rest of it’s competitors. This study is limited to only respondents above the age of 18 years and will only be carried out on 30-50 respondents. The study is narrowed to consumers of Harrods Patisserie and Bakery products and not consumers of the rest of the food halls. The study will not cover the life style and overall economic standard of the respondents. This has been consciously left out to avoid lengthening of the study. Hence, the study will be unable to analyse the financial background of the respondents in depth. Lastly, although luxury food consumption is a macroeconomic function, this study will only focus on a singular market. 1. 2 Research Questions 1. Is the recession affecting Consumption of Luxury Food in Harrods Food’s Patisserie and Bakery Food Hall? 2. What are the key aspects or areas of consumer spending behaviour patterns in Patisserie and Bakery Food Halls, Harrods? 1. 3 Objectives of the Research The objectives of the study are as follows: A) To investigate customer consumption and spending behaviour with luxury Patisserie and Bakery foods in Harrods. B) To make recommendations to Harrods on how to enhance their sales and maintain their market share in luxury Patisserie and Bakery foods. 1. 4 How will the objectives be achieved? Objective (A) will be achieved through examination of secondary data. Objective (B) will be achieved through findings of primary data through the use of questionnaire survey and secondary data through Harrods food industry annual reports. CHAPTER TWO Literature Review 2. Introduction. This chapter will show the existing literature in the field of Consumer Behaviour from a global perspective and narrow it down to consumer behaviour in Harrods, UK. It will include marketing concepts, psychological concepts and factual statistics. The luxury market is vastly increasing, and there have been significant changes towards consumer behaviour (Strauss & Howe, 1999). Foods that are expensive have a certain appeal and are regarded as luxuries for special occasions rather than daily meals. Conversely, foods that are widespread and cheap have less appeal. Europe is considered to be the cultural center of fashion, interior design, and cuisine. Gourmet cooking has become a fine art, and visitors to the area can find almost any type of food, and the trend more recently has become luxury foods, luxury desserts etc. http://www. foodtourism. com/ From the literature I have read it can be summarized that the current generation enjoys spending money on luxury brands due to disposable income and lifestyle that this generation avails of due to their income or that of their parent’s earning. 2. 1 A theory of luxury. When Marie Antoinette supposedly said ‘let them eat cake’, she was seen as a luxury junkie whose out-of-control spending grated on the poor and unfortunate French people. But today, cake has become one of the favourite luxury foods. A revolution has taken place where individuals in the world have got richer. Luxury is no longer the embrace of the kings and queens of France but the mass marketing phenomenon of everyday life. Simply put, luxury has become luxuri? cation of the common place (Twitchell, 2001; Berry, 1994). 2. 2 Definitions of luxury products, speciality and premium foods. In order to understand a luxury product, it is essential to differentiate it from ordinary products on the basis of its essential characteristics. Luxury products, speciality and premium foods are defined by their price, quality, aesthetics, exclusiveness, and symbolic significance. To define them, their definitions are summarised below. 2. 2. 1 Luxury products Luxury is defined as quality possessed by something that is excessively expensive http://ardictionary. com/Luxury/5550 As they are highly associated with their core products, common definitions of luxury brands refer to specific associations with their products. The essential characteristics of luxury brands therefore correspond largely with those of luxury products. Consequently, their definition can be derived from that of luxury products as follows: Luxury brands are regarded as images in the minds of consumers that comprise associations about a high level of price, quality, aesthetics, rarity, extraordinarily and a high degree of further non-functional associations (c. f. Heine 2010). As luxury products and brands include a high rating for their characteristics; this marks a differentiation for luxury manufacturers. Even amongst luxury products there are differences such as accessible luxury products, which are affordable for most consumers from time-to-time and some are exclusive luxury products, which are affordable only for the wealthy. 2. 2. 2 Specialty or gourmet foods. Specialty or gourmet foods are unique foods/delicacies, which sometimes exploit regional identity. They are less authentic than artisan products. (Workman C, 2005) 2. 2. 3 Premium foods. Premium products use quality ingredients and careful methods but can be made on an industrial scale. (Workman C, 2005) 2. 2. 4 End Product. Products made by artisan have optimum taste, texture, and flavours or aromas, (and nutrition/health benefits). They resonate with place, tradition and culture (authenticity), and reflect the producer, his/her skill, personality and ethos, and the method of production. They often have an established and stable reputation. Often they are made for fresh consumption locally, or are available in limited quantities, providing a unique, exclusive experience (often including the purchase e. g. at a market/direct with the producer). They therefore also have a high prestige factor and high profile with respect to the quantity produced and distributed. Producers of artisan products are usually hands-on from production through to sales. They are very experienced, skilled and show an uncompromised commitment to their craft, trade and to the superior taste of their products. Often there are small numbers of people making any one kind of artisan product. (Workman C, 2005) 2. 3 Food Tourism During the 20th Century, industrialisation began to threaten artisan producers and many abandoned their traditional techniques. But in the past two decades, there’s been a resurgence in demand for quality products made by time-honoured methods†¦Food tourism has become big business, worth nearly ? 4bn a year. (Lane M,2005) Food has many roles to play for consumers: it is functional (sustaining life); it plays a key role in our celebrations; it is a conduit for socializing; it is entertaining; it is sensuous and sensual; and it is a way of experiencing new cultures and countries. For many, food becomes highly experiential (i. e. much more than functional) when it is part of a travel experience, it can become sensuous and sensual, symbolic and ritualistic, and can take on new significance and meaning. Even the most basic meal can be etched in memory forever when it is eaten when surrounded by awe-inspiring scenery or at the end of a special day exploring a new city. (Hall M and McIntosh 2000) Swarbrooke and Horner have stated that food tourism stakeholders such as restaurant and cafe owners, cookery school providers, festival organizers, hotel and resort managers, bed and breakfast operators, and food producers. By understanding how tourists make their decisions to purchase and/or consume food products we will be able to gain a better understanding of when we need to intervene in their decision-making process. Appropriate intervention can, in turn, be used to persuade them to purchase ‘our’ food products and services. Consumer behaviour research is the study of why people, either individually or in groups, buy the product they do and how they make their decision (Swarbrooke and Horner, 1999). Food tourism is something that is becoming more commonly understood. But how would someone decide where to go, and what to see? http://www. foodtourism. com/ Tourists who enjoy luxury food and patisserie generally make every attempt to at least visit Harrods while in the UK. Often, like the researcher at the visit first to Harrods tourists only visit and see, but, at their second visit at least a small amount of luxury food or patisserie is purchased. Although, consumer spending has slowed down in the UK, Harrods has shown an increase in profits in their Patisserie and Bakery section with its luxury food items. 2. 4 Consumer buying behaviour Kolb M. (2006) associates Maslow’s theory and consumer purchasing as she states Maslow’s theory has a direct application for marketing because many of these needs are met through the purchase of products. Infact, once a consumer has all the food, clothing and shelter they need, all other purchases are made to meet higher needs. Thus, the researcher can state that in order to meet some part of one’s self esteem needs, UK and international consumers may be relating to Harrods luxury Patisserie and Bakery food to experience self actualization and thus for Harrods this has created a niche. The interest in premium, specialty and artisan products is also influenced by the static growth in population, which has lead to a static growth in overall grocery sales. In this situation, foods that command a premium price and higher margins become the only growth sector, and therefore become the target of multiples. Artisan, specialty and premium foods are therefore gaining broader distribution in the multiple retail sector. Workman C (2005) 2. 5 Consumer buying Trends The growth of specialty fine food is attributable to Increasing consumer affluence as consumer wealth increase, so does the demand for more premium, value added products as opposed to cost-reduced commodity products†¦10% of population in UK is defined as affluent – this figure is expected to rise to 30%. When it does premium food, including specialty food is expected to account for 45% of total food sales in UK. The specialty market is worth ? 4. 2 b in UK and has grown from 20% from 3. 5 bn in 2003. British fine food consumers spend ? 900 per year on fine food. Workman C ( 2005) CHAPTER THREE Research Methodology 3. 1 Introduction This chapter discusses the different aspects involved in the methodology used to conduct the present study of Consumption of Luxury Food in Harrods Food’s Patisserie and Bakery Food Hall. It highlights methodological approaches which will allow scope of the Research study in a sustained process of planning and design. The consideration of the process will influence the choice of methods and approaches that will be presented. This chapter, for that reason contains a discussion of the research purpose, research approach, research strategy, data collection methods, data analysis and quality standards. 3. 2 Research Purpose Yin (1994) states that research purpose can be grouped and classified as exploratory, descriptive or explanatory. Exploratory research is conducted to clarify the nature of a problem, where the purpose is to provide insights and understanding, not to provide conclusive evidence. Exploratory research is conducted with the expectation that subsequent research will proceed (Zikmund, 2000:Bryman,1989). An exploratory study method is used when the aim is to develop proposition of future research (Yin,1994). A descriptive research is used when the major objective is to describe something, such as population or a phenomenon. It seeks to answer who, what, where and how questions. In a nutshell, it does not give the explanation of the cause of the findings. However, when solving a business problem, it is often enough with the information obtained from describing a situation and it is not required to know why things are the way they are (Zikmund,2000). In order to perform a descriptive research, the researcher must have prior knowledge of the problem situation and the information needed is clearly defined. In fact, this is the major difference between exploratory and descriptive research, as well as that the descriptive research must be structured and the methods for the selecting sources of the information and collecting data are pre-planned and formal (Malhotra,1996). In explanatory research, the emphasis is on studying a situation or a problem in order to explain the relationship between variables (Saunders et al. ,2000). According to McNabb (2008) typical objectives for explanatory research include explaining why some phenomenon occurred, interpreting a cause-and-effect relationship between two or more variables, and explaining differences in two or more groups’ responses. The purpose of this Research Study is to gain an understanding of Harrods success within it’s luxury food service specifically their Patisserie and Bakery department Food Hall, Knightsbridge, London, UK. In order to achieve this objective, the Research Study will need to consider three core elements which will be how Harrods’ conducts their design, implementation and evaluation strategy of the customer. Since the aim of the research is to describe how Harrods operates within the Luxury food service industry, the study is descriptive in nature. 3. 3 Research Approach According to Zikmund (2000) research can be conducted in different ways and includes both a theoretical and a methodological approach. The theoretical approach can either be deductive or inductive, and the methodological approach is qualitative or quantitative (Zikmund 2000) 3. 3. 1 Qualitative versus Quantitative Research Zikmund (2000) further states that when collecting information, either qualitative or quantitative data can be collected. Qualitative approach may consider the following methods for gathering information like: Participant Observation, Non-participant Observation, Field Notes, Reflective Journals, Structured Interview, Semi-structured Interview, Unstructured Interview, and Analysis of documents and materials. In contrast, quantitative methods for research techniques include gathering of quantitative data, like information dealing with numbers which is measurable. Statistics, tables and graphs, are generally used to present the results of these methods. They are distinguished from qualitative methods. The study, under focus is quantitative using an exploratory design. This kind of method is widely used to gain familiarity with a phenomenon that is not adequately explored. The researcher feels the need to explore this issue since there is not much data relating to Consumption of Luxury Food in Harrods Food’s Patisserie and Bakery Food Hall. 3. 4 Sampling Techniques The universe will comprise of ‘simple random sampling’ method to select samples. This will enable the researcher achieve the desired information. According to Kumar (2008), this type of sampling is also as chance sampling or probability sampling where each and every item in the population has an equal change of inclusion in the sample and each one of the possible samples, in case of finite universe, has the same probability of being selected. To select the sample, ‘each item’ in this research study will be assigned a number from 1 to 100. The sample survey will cover respondents in the age group of 18 years and above only. This will ensure that the respondents are old enough to understand and answer questions in the interview schedule. 3. 5 Population The sample size of this study is intended to be 30-50 respondents, in the age group of 18 years and above. The study will have to be completed in Harrods Patisserie and Bakery Food Hall, Knightsbridge, London. The population will only include consumers and purchasers from the above food hall. 3. 6 Research Instruments For the purpose of this research study both primary and secondary data relevant to this topic will be used. Without the use of both instruments the research study will not verify facts and the scope of analysis if not used together will not make the research interesting. 3. 6. 1 Primary Data Primary data for this research study will result from firsthand experience with the use of questionnaires for preliminary gathering of data. Questionnaires will be prepared prior to in-depth interviews with respondents at Harrods. 3. 6. 2 Secondary Data Sources. For the scope of this research study Secondary Data Sources will include literature review with sources from the library, web, and surveys. Other secondary sources of data will be sourced and will include thesis, newspapers and internal company reports. 3. 6. 3 Data Collection Instruments This section will include the 30-50 respondents completing a questionnaire. The interview schedule will be prepared on the basis of study objectives and aims with structured open ended and close ended questions. Section A may cover income, Section B may cover types of Luxury food and section C on consumption of luxury food. 3. 6. 4 Interviews At the time of the respondents’ completing the questionnaire the researcher will interview the respondents. This approach will enable the researcher gain a better comprehension of consumer spending on Luxury Food items in Harrods. CHAPTER FOUR 4. 0 PROPOSED ANALYSIS This chapter will highlight the Research plan as it will outline the steps for conducting the research in terms of description, timing and presentation. It will be used as a guide to execute and monitor the project which will enable the researcher to achieve the purposes of the research. The data collected will be analysed and presented diagrammatically in tables and charts. This will then enable empirical findings to be compared. In order to carry out statistical analysis of the quantitative data obtained, the Statistical Package for Social Studies (SPSS) and Microsoft Word software will be used to develop a comprehensive and flexible statistical analysis and data management for the research. This will enable a range of tabulated reports, graphs, pie charts, and analysis. 4. 1 Schedule. |Planned activities | | | |March |April |May |June |July | |Topic Selection |X |X | | | | |Literature Review | |X |X | | | |Meeting with Group | |X | | | | |Meeting with Supervisor | |X |X |X |X | |Seek Permission from Harrods | | |X | | | |Write up Questionnaire for data collection | | |X | | | |Data Collection at Harrods | | |X | | | |Analysis of data & Findings | | |X |X |X | |Write up of Dissertation Introduction | | | |X | | |Write up of Dissertation Overview | | | |X | | |Drawing up summary and conclusion | | | | |X | |Proof Reading | | | | |X | |Presentation of Research | | | | |X | |Final Submission | | | | |X |. CHAPTER FIVE ANTICIPATED OUTCOMES The results of this research will provide a specific insight for Harrods Patisserie and Bakery Food Hall into consumer behaviour, trends and patterns. 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