Linking Perceived Quality and Customer Satisfaction to Store Traffic and Revenue Growth*

Effects of perceived merchandise and service quality, relative to competition, on retail store performance are investigated using store traffic and revenue growth as outcome variables. A model is proposed and tested using aggregate customer data and store performance outcomes from a group of stores owned by a national retail organization. Results suggest that both service and merchandise quality exert significant influence on store performance, measured by sales growth and customer growth, and their impact is mediated by customer satisfaction. Implications of the results and future research directions are discussed.