E-Commerce: Consumer perceptions
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Published: Mon, 24 Apr 2017
Since the explosion of the Internet and businesses rush to embrace them, one of its primary uses has been for marketing. The Internet will become an important distribution channel for the majority of successful organizations. Organizations seem to be in the midst of exploring the Internet as new business models and discovering ways to leverage on it. Before an organization can envision how they can tap onto the online shopping bandwagon in the coming years, it must first understand the attitudes and behavior of its potential customers. Hence, this study will examines attitudes toward various aspects of online shopping and provides a better understanding of the potential of electronic commerce for both researchers and practitioners. This paper will focus on examining the factors and relationships that influence the browsing and buying behavior of individuals when they shop online. Specifically, the research is interested in individual buyers using business-to-consumer sites.
Due to the rapid advancement in technology and increased literacy in terms of information technology, E-Commerce is growing in size and reaching more people. With ever-increasing Personal Computers (PC) and Internet Access penetration rate, the trend provides greater opportunities for Singapore to conduct both business and shop online. However, regardless of all the figures and success stories of many online merchants, local firms are still having anxiety of going online and setting up their presence on the Internet. Local companies appear to be lagging and fear to take risk into online retailing. This is because Internet commerce is still relatively new and there are no hard and fast rules to live by, with no tried and tested business model to imitate (Louis and Leon, 1999).
The growing use of Internet in Singapore provides a developing prospect for online marketers. If online marketers know the factors affecting online Singapore buyers’ behavior, and the relationships between these factors and the type of online buyers, then they can further develop their marketing strategies to convert potential customers into active ones, while retaining existent online customers. According to Georgette Tan, online shopping is growing in popularity despite the current economy downturn, as consumers realize the convenience and ease of shopping online. However, as businesses look to grow their online retail presence, they need to be aware of the preferences and concerns that drive online shoppers (Yeo, 2009).
It is important for companies to have a thorough understanding of the marketplace of their products and their target customers before involving themselves in E-Commerce. Having a good understanding of the customers’ demographic information, organizations are able to develop more successful online strategies that will meet the requirements and expectations of their new online shopping customers (Shannon, 1997). This is vital to facilitate the successful realization of their online retailing business in Singapore.
Although E-Commerce is getting more attention as an alternative to physical store shopping, surveys and researches have been done in the recent years to find out how Singaporeans react to the phenomenon of online shopping, much are needed to be identified and understand on the online shopping behavior of internet users. There is a lack of understanding and knowledge on consumers’ attitudes towards online shopping. Considering that online shopping is still developing at an early phase, little is known about consumer attitudes toward adopting this new shopping channel and factors that influence their attitude towards it (Eastlick and Lotz, 1999). This is particularly true in the context of Singapore where consumers are less familiar and often skeptical towards online shopping, but know very little of them. Therefore, this paper aims to examine current users of online shopping in Singapore with the purpose of establishing a preliminary assessment, evaluation and under-standing of the characteristics of online shoppers in Malaysia. While there also seems to be little understanding on the perception of what makes an effective B2C web site, this paper intended to help addressing the gaps.
Data about online consumer purchasing behavior is needed to help companies define their online retail strategies for website design, online advertising, market segmentation, product variety and inventory holding and distribution (Lohse & Bellman, 2000). This study is divided into three sections and it attempts to address the gaps in the literature. Each section of the study seeks to provide answers to the following research questions:
Are there relationships or associations between online shopping through the Internet and demographics variables (Gender, race, age, marital status, level of education, profession, and income)?
The study is interested in examining shopping preferences based on various demographic categories that might exhibit distinct purchasing attitudes and behaviors for certain categories of products and services. We examine these behaviors in the context of both products and services.
What are the motivating or restraining factors of online shoppers that affect their shopping behaviors?
The study is to discover what factors, positive or negative, that will motivate or discourage internet shoppers, or influence their online shopping experience.
What website features that will enhance internet users shopping behavior?
The question then is how to structure a website so that it appeals to those potential buyers. The objective was to explore the types of website features that draw online shoppers to shop at a site.
In the study, the author aims to tackle specifically the issue of consumer perceptions and preferences on online shopping, by delving into how consumers’ shopping on the Internet is effected by their demographic characteristics, their Internet experience and preferences for website attributes. Hence, this research focuses on the attitudes of Internet users toward online shopping and the Internet. By understanding such attitudes, businesses can better understand the factors influencing a consumer’s decision to buy online, thereby enabling them to design more appropriate strategies to promote e-commerce. In particular, this study focuses on individual buyers who use business-to-consumer sites.
The paper is organized as follows. First, the relevant literature on the three sections is examined, and then followed by an explanation of the research methodology applied. Research results are subsequently presented and discussed, after which the research limitations are highlighted. Finally, academic and executive contributions and avenues for future research are identified.
The Internet and E-Commerce
The arrival of the commercial use of the Internet and its World Wide Web (WWW) has been defining the new e-commerce since 1993 (Zwass, 1996). With the emergence of the Internet and World Wide Web (WWW) as a medium for commercial transactions, it has thrust e-commerce into the spotlight, becoming the main focus of the international community. The world is tremendously moving towards Electronic Commerce (E-Commerce) activities. According to International Data Corporation (IDC), E-Commerce consumer’s spending will grow from United States dollar (USD) 118 billion worldwide in 2001 to USD 707 billion in 2005. E-Business revenue will grow from 4% of companies’ total revenue worldwide in 2000 to 7% in 2001 (Troy Wolverton, 2001).
The Internet and WWW have made it easier, simpler, cheaper and easily accessible for businesses of all sizes and consumers to interact and conduct commercial transactions electronically as compared with the traditional approach of using private value-added networks (Margherio, 1998). By virtue of the Internet’s network architecture, e-commerce is born global, where geographical boundaries and political boundaries mean little in this networked environment (OECD, 1997). As a result, e-commerce through the Internet dramatically shrinks the distance between producers and consumers, who can make their purchases directly without involving traditional ‘middlemen’ such as retailers, wholesalers and distributors. Although new intermediaries are required (for example network access providers, electronic payment system, and authentication and certification services), these are far less labor-intensive than traditional channels (Wyckoff, 1997).
Electronic retailing over the Internet or online shopping first started in 1994 (Hsin, 2000). It is considered as one form of direct consumer marketing of non-store retailing using online channels. This new concept of retailing has captured the interest of many retailers and merchants because of the general recognition that online shopping will establish itself as an alternative channel alongside traditional offline retail channels such as physical retail stores (Rowley, 2000). Electronic retailing predominantly started in the form of online storefronts whereby products from a single merchant are offered to consumers through an online catalogue. Merchants tend to choose to establish online storefronts as an online retailing method when the product brand names and reputations are well established and widely known among consumers. A good example is The Dell Online Store that sells personal computers (The Economist, 1997) to consumers everywhere.
History of Internet and E-Commerce
The latter half of the 1990s witnessed an explosion in the number of companies that promised to sell only on the internet. It brought the so called dot com boom, a short, intense period of commercial investment in Internet companies and their technology. The US stock market fell in love with them, pushing prices for shares in such companies to stratospheric heights.
In the year 2000, however, the stock market suddenly re-valued technology companies, including the dot coms, and stock prices and the stock market as a whole dropped dramatically. However, the boom was quickly followed by the dot com bust, felt by many in 2000 and continuing on well into 2001 and beyond. Eventually, this period of dramatic speculation and growth followed by an equally dramatic failure rate came to be referred to by the media as the Internet, or dot com, bubble.
After the dotcom bubble, it seems clear that the internet has changed essentially the ways that most companies do business, because it has enabled communication and business capabilities that can considerably lesser the costs for both consumers and businesses. However, the internet has not removed the need for face-to-face and voice-to-voice contact between people. It has not reduced the importance of customer service before and after sales. It has not removed the need for competent and responsible management, be it in logistics, marketing, or employee relations. Much of the dot-com boom was fueled by overreaching expectations about the changes to the ways of doing business that the internet would bring. The dot-com crash was due to a realization by investors that many of these expectations were not reasonable.
It is common sense knowledge that the World Wide Web has grown extensively over the past decade to become a gargantuan medium of communication, participation and transaction across the world. With it has come a plethora of changes in the ways people interact with each other, how they go about their everyday activities and conduct business with one another. With opportunities of growth and expansion like never before, businesses worldwide are aspiring to ride the Internet wave for greater success and cater to markets they thought were beyond their reach before. However, knowing that Internet is in a state of constant evolution and has reverberating effects on every entity it involves, one is goaded to deliberate how businesses deal with such dynamism and continue to uphold the consumers’ interest from the marketing and consumer behavior points of view. To sustain and succeed in this virtual dynamic world, businesses are inevitably required to understand the factors that underlie (potential) buyers’ purchase decisions and how these interact with the different properties of Internet at all times.
Inter Agency Task Force on Electronic Commerce, IATFEC (1997), define E-Commerce as “all form of business transactions conducted over public and private computer networks. It is based on electronic processing and transmission of data, text, sound and video. E-Commerce includes transactions within a global Information Economy such as electronic trading of goods and services, online delivery of digital content, electronic funds transfer, electronic share trading, electronic bills of lading, commercial auctions, collaborative designs, engineering and manufacturing, online sourcing, public procurement, direct consumer marketing and after sales service. It includes both products (consumer goods, specialised medical equipment) and services (information services, financial and legal services, traditional services) and new activities (virtual malls). It involves the application of multimedia technologies in the automation and redesign of transactions and workflow, aimed at increasing businesses competitiveness (http://e.com.ec/necc/report19971007.html).
In adopting the above definitions, the current study considers E-Commerce as a non-linear interaction, without involvement of face to face communication between consumers (Interne t users) and companies (Internet sellers) via computer networks to facilitate any kind of commerce transaction (browsing or purchasing products or services) easier, faster and cheaper electronically beyond traditional geographical boundary.
In the study by Datamonitor, the global Internet retail market, consists of the total revenues generated through the sale of retail goods via online channels, valued at retail selling price (exclude travel and ticket bookings, online corporate purchasing, and online auction transactions) generated total revenues of USD 325.2 billion in 2008, representing a compound annual growth rate (CAGR) of 24.6% for the period spanning 2004-2008.
Buying trends and Internet adoption indications have seen the overall Electronic Commerce value in Malaysia rise from US$18 million in 1998 to US$87.3 million in 1999. IDC believes this will increase to an expected US$5.37 billion by year-end 2004 (Lai, 2000). The growth of Information Technology (IT) and Government initiatives are expected to accelerate further and motivate individuals to increase their knowledge on Electronic Commerce in the near future.
“The Net Generation,” which represents about 14.5 percent of the total population, is one of the fastest growing online segments. Globally, over 77 million users are expected by 2005 (NUA 1999). Because online consumers tend to be better educated, younger, and more affluent than the general population, this segment is extremely attractive to marketers (Berkowitz et al. 2000, p. 205).
In Finland, 82 percent of the population under 20 years of age are Internet users (Taylor Nelson Sofres Interactive 2001). In the US corresponding figure is 72 percent (ibid.). In 2001 the percentage of Internet users in Finland was 45 percent of the total population (Taylor Nelson Sofres Interactive 2001)1. According to the same source the percentage of online shoppers was 8 percent of the total population. In this study by Taylor Nelson Sofres Interactive (2001), an online shopper was defined as someone who had personally purchased online in the past month at the time of the interviews. At the same time the percentage of people in Finland who had shopped online was 36 percent of the total population in 2001 (Tekes 2001). The most common products purchased online were clothes (32% of online shoppers), music/CDs (17%), and holidays/leisure travel (15%) (Taylor Nelson Sofres Interactive 2001). According to a recent study by Cap Gemini Ernst & Young in 2002, the percentage of e-shoppers in Finland is 16 percent of the total population (eMarketer 2002). In addition, the study found that more people window shop online in Finland than shop online – 28 percent and 16 percent respectively (ibid.). These people use the Internet to gather information on the products they are interested in, but they purchase the items by a more traditional way.
Computer literacy is a basic skill needed by any user wanting to use online shopping facilities. However, computer literacy among the population is difficult to measure as there is no benchmark to ascertain how much knowledge one must have in order to purchase on Net. Thus knowing the proportion of population that has access to the Internet and the factors that affect the access may be a better form of barometer guide.
The local online survey by www research (1998) found that 34% of Internet users have had Internet access for less than 12 months. This means that most of the users have had access for more than a year. In addition there is an increase in the number of people using Internet; the number of Singaporean wiring into the Internet increased from 175,000 in 1st quarter of 1997 to 300,000 in the 1st quarter of 1998.
The same survey shows that among the users, 85% of them access Internet from home. Other popular points of access were from work, University and at friend’s place, respectively. The survey also found that 76% of the users access the Internet daily and more than a third spent an average of an hour online a day.
The implications of these trends are highly significant. Industry executives must learn everything possible about online consumers. In today’s rapidly expanding global online market space, knowledge of the e-shoppers’ buyer behavior, as well as the buyers’ electronic decision-making process, can provide valuable insights for marketing managers wishing to capitalize on vast worldwide opportunities.
The advent of the Internet and the world subsequently tuning up to become a global village has led to dissolution of international boundaries of commerce. In 2005, ACNielsen conducted a large global study covering 38 markets and polling 21,000 respondents in these countries to find that North America and Europe had the highest number of online shoppers. In Europe, Germany, Austria and the UK topped the list with approximately 95% of Internet users purchasing online. South Korea and Taiwan ranked to be highest in the Asia- Pacific sector, with at least 90% of respondents claiming to have made an online purchase. In addition, the reported mentioned both an upward trend in global online shopping and a faster growth rate in less developed countries. In the long run, this implied opening of new markets, where the manufacturers would need minimal infrastructure requirements to reap huge profits. Moreover, as Internet begins to come of age and Internet literacy grows worldwide with more consumers showing higher levels of confidence using the Net and marketers growing confident by adapting websites to indigenous market sensibilities, the prospects for online shopping gets even more rosier.
Commerce via the Internet, or e-commerce, has experienced rapid growth since the early years. It is well known to most of the Internet researchers that, the volume of online business-to-consumer (B2C) transactions is increasing annually at a very high rate. According to ACNielsen (2007), more than 627 million people in the world have shopped online. Forrester (2006) research estimates e-commerce market will reach $228 billion in 2007, $258 billion in 2008 and $288 billion in 2009. By 2010 e-commerce will have accounted for $316 billion in sales, or 13 percent of overall retail sales. AcNielsen also reported that, across the globe, the most popular items purchased on the Internet are books (34%), followed by videos/DVDs/games (22%), airline tickets/reservations (21%) and clothing/accessories/shoes (20%).Goecart forecasts that US online population will increase nearly 50%, from 1471.5 million in 2001 to 210.8 million by 2006 (Cumulative Annual Growth Rate of 8.2%) and online retail sales will grow from US$47.8 billion in 2002 to $130.3 billion in 2006. Similarly WIPO (2007) cited that about 10% of the world’s population in 2002 was online, representing more than 605 million users.
After a period of decline in recent months, online shopping is on the rise again. By some estimates, total U.S. spending on online sales increased to $5.7 billion in December 2001 from $3.2 billion in June of 2001 [3, 5]. By these same estimates, the number of households shopping online increased to 18.7 million in December 2001 from 13.1 million in June 2001. Consumers spent an average of $304 per person in December 2001, compared with $247 in June 2001. According to an analyst at Forrester: “The fact that online retail remained stable during … such social and economic instability speaks volumes about how well eCommerce is positioned to stand up to a poor economy” .
As online shopping is expected to grow substantially, there is increased interest in studies overseas recently on online shoppers and their shopping behaviour (Hoffman and Novak, 1996; Bellman et al., 1999; Andrews and Currim, 2000; Yoh et al., 2000; Morganosky and Cude, 2000; Doherty et al., 2000).
Much research has been concentrated on the online shopping in the world. However, there is still a need for closer examination on the online shopping buying behavior in specific countries. While both established and new, large and small scale businesses are now using the Internet as a medium of sales of their products and services (for example Dell computer, Amazon.com, in the world and jobstreet.com, blooming.com in Malaysia). Still there is a huge research gap exists not only between countries, especially between developed and developing countries, which may differ significantly between countries (Stiglitz, 1998; Shore, 1998; Spanos et al., 2002) that limit the generalization of research results from developed countries to developing country contexts (Dewan and Kraemer, 2000; Clarke, 2001). Shore (1998) and Stiglitz (1998) reported that implementation of information system depend on specific social, cultural, economic, legal and political context, which may differ significantly from one country to another country. Dewan and Kraemer (2000) and Clarke (2001) argued in their study that findings from developed countries are not directly transferable to developing countries. Thus, this research is needed for non-transferability of findings from research in developed countries and also for the improvement of understanding of the determinants of online shopping in developing countries.
Online shopping holds a great potential for youth marketers. According to Vrechopoulos et al. (2001) young are the main buyers who used to buy products through online. Dholakia and Uusitalo (2002) study examined the relationship between age and Internet shopping; found that younger consumers reported more linen to the online shopping. Another study by Sorce et al. (2005) found that younger consumers searched for more products online and they were more likely to agree that online shopping was more convenient.
Studies have shown that online shoppers tend to have higher education and income and are more likely to be in middle to senior management or professionals (Kehoe et al., 1998; Hoffman et al., 1996). Online shoppers who have higher income tend to be less price sensitive and more covenience oriented (Degeratu et al., 1999). They also have more ‘‘wired lifestyles’’, with high usage of the Internet for e-mails, news, etc. (Bellman et al., 1999).
The research findings on Internet shoppers’ characteristics are mixed and inconclusive. Gender, age, education and income being the most investigated demographic indices, some of the studies (Zhou et al., 2007, Chang et al., 2005, Blake et al., 2003a) reported the online shopper to be male, older, having higher (college level) education and high income levels. While other studies failed to replicate these findings, such inconsistency has been explained by the dynamic nature of the Internet and the online shopper by other researchers (Raine, Fox & Horrigan, 2005; Card, Chen & Cole, 2003).
In 2003, Swinyard and Smith examined the life style characteristics of online US households to provide a perspective on the ‘who’ and ‘why’ of Internet shopping. The study was based on a sample of 1738 respondents and used a mail-in questionnaire. The findings from the study indicated that as compared to the non shoppers, the US online shoppers were younger, wealthier, better educated, had higher computer literacy, spent more time on their computer and the Internet, found on-line shopping to be easier and more entertaining, and were more fearful of financial loss from on-line shopping. Furthermore, the researchers identified and profiled different online shopper segments (i.e. shopping lovers, adventuresome explorers, suspicious learners and business users) and non shopper segments (i.e. fearful browsers, shopping avoiders, technology muddlers and fun seekers) based on their unique Internet related lifestyles. Describing each segment briefly, shopping lovers were competent computer users who frequently bought online and really enjoyed doing so. Internet explorers believed Internet shopping was fun and could be considered opinion leaders for online buying. Suspicious learners were not very computer literate, but were open-minded for learning new things and were suspicious of giving their credit card number. Business users did not often make personal online purchases. They mainly used the Internet for business purposes and looked at the Internet in terms of what it could do for their professional life. Fearful browsers were very computer literate and often practiced “Internet-window shopping”. They did not buy online for the moment since they distrusted the security on the Internet, disliked shipping charges and were reluctant to buying things without seeing them in person. Shoppin avoiders were difficult to be turned into online shoppers since they did not want to wait for product delivery and wanted to see things in person before they buy. Technology muddlers did not spend much time online, were somewhat computer illiterate and were not interested in increasing their computer knowledge. Fun seekers valued the entertainment of the Internet, but were afraid of buying online. Furthermore, they had a relatively low education and income level leaving them not much spending power. Based on such distinctions, the researchers emphasized that such a segmentation schema had marketing implications and required recognition of the differences between the segments and the unique perceptions of each, for reaping benefits.
Kau, Tang and Ghose (2003)
Kau, Tang and Ghose (2003) examined the online buying behavior among a group of 3700 Internet users in their effort to explore their information-seeking patterns as well as their motivations and concerns for online shopping. The researchers employed factor analysis and cluster analysis to classify the respondents into six types of online shoppers- on-off, comparative, traditional, dual, e-laggard and information surfer. The study used the respondents’ demographic information and actual buying behavior to characterize them into distinct profiles for each of the segments. The researchers also conducted discriminant analysis to seek out the important attitudinal variables that differentiated the various clusters of online shoppers. These included Web advertisement, absence of salespersons, warranties, saving on cost, difficulty of locating products on the Web, and security concerns amongst others.
Vellido, Lisboa and Meehan (2000)
In their study, Vellido, Lisboa and Meehan (2000) explored demographic, socioeconomic and Web usage variables as a part of their endeavor to propose a quantitative framework for identifying latent factor descriptors of Internet users’ opinions on Web vendors and on-line shopping. Based upon publicly available data from GVU’s ninth WWW user survey and, more specifically, it’s Internet shopping (Part 1) questionnaire administered to 2,180 individuals, the researchers found that variables such as age, household income, and Web usage patterns did not predict Internet purchasing behavior. In addition, the study found nine latent factors underlying Web users’ opinions with regard to online shopping which were control and convenience, consumer risk perceptions/ environmental control, customer service, affordability, ease of use, product perception, assurance and reliability, elitism, and vendors’ performance. According to the researchers, the results had implications from a business perspective and suggested that management decision-making may focus on factors under in-house control (such as consumer risk perception, shopping experience, customer service, environmental control) as their ability to influence prospective customers outweighed the effects of demographic, socioeconomic, or Web usage variables.
Bellman, Lohse and Johnson (1999) in their study ‘Predictors of Online Buying Behavior’ recruited a panel of Web users from all over the world wherein 10,180 people completed a survey asking 62 questions about online behavior, attitudes about Internet communication and privacy issues, and routine demographic questions. Amongst other findings, the study reported that a very small percentage of people (3.1%) used Internet for shopping. These online buyers were reported to be living a ‘wired and time starved’ lifestyle, with having used the Internet for years, for both product information search and purchasing products and services. With respect to the demographics, the study found that higher the person’s income, education, and age, the more likely that person was to buy online, and the higher a persons income, the more online transactions that person was likely to make. However, demographics predicted only 1.2% of the decisions to buy online or not and explained only 0.3% of the variance in the number of purchases madeby online buyers. The researchers explained this finding by advocating past behavior as being the most important information for predicting online and offline shopping habits over demographics. The study reported that security and privacy concerns were less important predictors of shopping behavior.
Donthu and Garcia (1999), in their article ‘The Internet Shopper’ reported that Internet shoppers were older and earned a higher income than Internet non- shoppers. Based on a telephone survey on 790 respondents, the findings of the study indicated that Internet shoppers sought convenience and variety, were innovative and impulsive, and less averse to risk than non shoppers. The other characteristics that characterized the Internet shopper included low brand and price consciousness and a more positive attitude toward advertising and direct marketing.
Previously, Crisp, Jarvenpaa and Todd (1997b) while exploring the effect of various individual difference factors on the consumers’ beliefs, attitudes, and intentions toward Internet shopping found that affluent women, with advanced degrees, were as likely to develop favorable attitude and greater intention to shopping on the Web as their male counterparts. The study also reported that shoppers from larger households were more likely to develop a favorable intention to shop on the Web. For their sample, the study had 220 respondents drawn from affluent sections of a southwestern metropolitan area and from the university community, and the data collection involved an experiential survey. As for the other findings, the study found that prior Internet experience, attitudes towards computers and frequency of shopping via direct ma
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