Barriers To Online Shopping And Purchases

Despite the seeming incursion of the Internet into our lives many people still don’t shop online both non internet users and those that use the internet for other purposes, those who do shop online may not do so regularly or will only buy particular product types. We look at the barriers to people shopping online.

Keywords: Online Shopping, e-commerce, barriers, perceived risk, trust, internet shopping, security, SSL, Website Design, e-commerce design, Product ordering, multi Channel retailing, retail, Clicks and Mortar, Bricks and Mortar,

Table of Contents 2

Introduction 3

Knowledge and Access 3

Access 3

Internet Ability & Education 4

Perception 4

Reputation 6

Website Design 7

Payment 7

Navigation, Layout and Ordering 8

Product Information 10

Advantages of Offline 11

Customer Service 11

Immediacy 12

Shopping for Leisure 13

Delivery Cost 13

Convenience 14

Product Types 15

ROBO – Research online Buy offline 17

Issues relating to Internet companies including Systems and Processes 18

Risk 18

Foreign Websites Cross Border Trade 21

Security 22

Conclusion 23

Bibliography 24

Introduction

According to Chang et al (2004) the dot-com boom and bust was caused by the expectation that take-up of online shopping would be massive and international, however even now in 2010 many people still prefer to shop online and far from deserted High Streets many High Street Chains are still in good health. Some countries have seen good take-up of online shopping while other markets have seen barriers major barriers such as access and culture. (Chang et al 2004) (Miniwatts Marketing Group 2010) (Lee et al 2007)

The reasons why many people do not shop online or rarely shop online has been studied at length. The following is a review of some of the main reasons and the relevant research. (Chang et al 2004)

Knowledge and Access

Access

Most people who do not buy online will know about the opportunity to buy online, some will not have access to the internet or will have limited access to the internet, for example by using a friend’s internet connection or accessing the internet in a public place such as a Library or Internet Café where there is a higher risk of losing privacy and having details stolen. Some people do not see online shopping as an option therefore. According to Miniwatts Marketing Group (2010) around 28.7% of the world’s population have some access to the internet as of 30th June 2010, numbers are as high as 77.4% in North America (not including Central America) and as low as 10.9% in Africa in Europe the figure is 58.4%. (Miniwatts Marketing Group 2010)

Internet Ability & Education

Some people will not consider shopping online an option due to lack of ability to use the internet or at least a lack of confidence to shop online successfully, some may have tried found it to steep a learning curve and given up. Chang et al (2004) found that 6 out of 7 studies they looked at found that prior internet usage was positively linked to ‘intention to use and actual usage of online shopping’ as was prior computer training and computer experience. (Chang et al 2004)

Perception

Those who have not tried online shopping may have an inaccurate perception of it; Bhatnagar et al (2000) found that many non internet users or non internet shoppers perceived shopping online to be either difficult, unsafe, expensive or unable to provide sufficient product information. (Bhatnagar et al 2000)

Many shoppers who don’t shop online don’t see the advantages of shopping online whether they would be able to or not or see more advantages to shopping offline. Some of the main reasons people shop online include the ease of use, convenience and price. People who are not Price Sensitive or are not concerned about time and convenience are therefore less likely to see any reason to shop online others may not be aware of these advantages.(Bhatnagar et al 2000) (Ahuja et al 2003)

People’s perceptions of online shopping are likely to be often formed from the press and other media as well as Word of Mouth with close friends and family being a major influence. This means that some demographics may have an inbuilt resistance to shopping online if few people within that demographic shop online and many of them have a poor view of online shopping which they spread amongst their peers, a 2004 study by Garbarino and Strahilevitz found that ‘recommendations from friends strongly influenced women to buy online but had no significant effect on men’.

Online Word of Mouth is also important according to a report in the Business Standard of India (2010) 50% of Indian consumers use social media sites to help them make purchasing decisions. (Business Standard of India 2010) (Beaumont 2010) (Garbarino & Strahilevitz 2004)

Reputation

Apart from using recommendations it can be difficult for consumers to tell which websites are safe and which ones shouldn’t be trusted. For this reason many online shoppers will use well known brands and brand loyalty sticking to a few websites that they know are safe rather than shopping elsewhere. This was looked at by Van Beveren and Wilson (2002) who wrote that “Consumers use risk reducing strategies in choice situations where they perceive risk and to reduce the consequences of the decision, consumers might employ brand loyalty”. Ward & Lee (2000) however despite finding that internet users relied on branding before making a purchase in around 50% of cases also found that as people became more experienced web users they became less reliant on brand and they therefore suggested that in the future brands would become less important, more recent research suggests that brand may be fading in importance but that it is still important especially as choice increases.(Moore 2004) (Van Beveren and Wilson 2002) (Ward & Lee 2000)

Some brands have been built online and are now trusted names such as Amazon, known even to those who haven’t shopped online before, while others are more established brands. This is part of the reason why bricks and mortar stores who have become clicks and mortar stores, Offline retailers with an online shop as well, are often very successful, by having a shop people feel they are dealing with a more reputable firm rather than a ‘back bedroom operation’ in some cases this may be an independent store which people may not have heard of but can see evidence of and in other cases they may be the websites of national or international chains in both cases customers also have the added comfort of having a physical outlet to go to in order to complain about bad service etc. (Seock & Norton 2007) (Ko and Roztocki 2009) (Schlooen bacher & Gordon 2003)

Website Design

Payment

Websites generally accept Credit and Debit cards as payment though some offer other payment solutions such as Paypal.

Many people especially those under a certain age do not have credit or debit cards and in many countries use of credit and debit cards is low. This may make it difficult or impossible for many people to use some websites, Paypal and similar services allow users to add money from a bank account or even send a cheque to add money to their accounts, also vouchers including pre paid cards which work like a credit card can be bought at Bricks and Mortar stores which expands the number of people who can use some websites and in some countries paying by calling premium rate numbers is increasingly popular, however many people are unaware of these services and therefore will not attempt to buy online. (Kelly 2008) (Wagener 2004) (Lee & Lee 2008)

Navigation, Layout and Ordering

Regular online shoppers can be said to have formed opinions in the 16 years that online shopping has been available as to what is a good website and what is a bad website although this does evolve. Bad website design can put off customers both by affecting trust and making a site difficult to use.

Many websites are designed in such a way that they look amateur. In a study by Elliot and Speck 2005 they looked at 30 websites and found that 5 main areas: ease of use, product information, entertainment, trust, and currency (being up to date) were most important to customers. (Elliot and Speck 2005)

Yang’s 2007 study found that information and service quality in websites was most important to their 668 respondents and led to improved Loyalty and Satisfaction. (Yang 2007)

Another study by Fang and Holsapple (2007) looked at the effect on buyers of navigation design finding that usage oriented hierarchies was far more positive than subject based hierarchies or combined hierarchies. (Fang & Holsapple 2007)

An Interesting study by Moore 2004 looked at how people considered the risk of failure of the website or ‘Performance Risk” and how it led to Abandoned Cart Syndrome, a major problem for some websites, where customers decided that they did not trust the website and were unhappy to enter information or being unsure how to proceed with the checkout or just fed-up with it being too time consuming the study found that design was actually less important than Brand or Reputation. (Moore 2004)

A 2007 report by Naidu and Chaparro on shopping cart usability (repeating an earlier 2002 study) found that many sites made mistakes such as:

‘Giving little to no visual feedback that an item has been added to the cart’ ,

‘Forcing the user to view the Shopping Cart every time an item is placed there’,

‘Asking the user to buy other related items before adding an item to the cart’,

‘Requiring a user to REGISTER before adding an item to the cart’,

‘Requiring a user to enter shipping, billing, and all personal information before knowing the final costs including shipping and tax’,

….all of which can confuse and put off users making abandoned carts more likely and repeat use less likely. (Naidu and Chaparro 2007)

Further specific reasons for Cart Abandonment were given by Vividence Corporation (a CEM provider) 2001 who surveyed 719 website users who gave these reasons:

1. High shipping prices (72%)


2. Comparison shopping or browsing (61%)


3. Changed mind (56%)


4. Saving items for later purchase (51%)


5. Total cost of items is too high (43%)


6. Checkout process is too long (41%)


7. Checkout requires too much personal information (35%)


8. Site requires registration before purchase (34%)


9. Site is unstable or unreliable (31%)


10. Checkout process is confusing (27%)

(Vividence corporation 2001)

Product Information

Information available on a product can make a big difference and can be an area where websites lose out to Bricks and Mortar stores, although a study by Seock and Norton (2007) showed that many people research a product offline before buying it online especially where a retailer has high street and internet stores. Other internet users may research a product on various websites before going to the cheapest, however it is certainly true that there is a correlation between product information provided and sales of a product as shown by Liu and Arnett (2000) whose study supported their hypotheses that ‘Information quality is directly related to Web site

Success’. This includes information such as descriptions, reviews, specifications (such as dimensions), delivery costs and even the prices at which it is available on other websites (if it is the cheapest). Photos including product shots and in situ / in Use shots, Videos and even 3D images can make a big difference to sales as they help people insure they are getting exactly what they want. (Liu and Arnett 2000) (Lee & Lee 2008) (Seock & Norton 2007) (Noyes 2007) (Trifts & Haubl 2003)

Users will judge information on whether they believe it to be accurate and unbiased so images and feedback from other users can instill more confidence than a review written by someone working for the website itself. (Ba & Pavlou 2002)

Advantages of Offline

Although Online shopping has advantages such as the ability to shop quickly from home at any time for a wide range of products and the ability to quickly compare prices shopping offline has several intrinsic advantages over online shopping which to some people may be more important than the advantages of online shopping.

Customer Service

Many customers prefer direct interaction with customer service rather than the offerings of a website which are usually via phone or instant messaging, good customer service is one reason why people prefer bricks and mortar stores. (Williams et al 2009) (Ooi 2010) (Lee et al 2007)

Interaction with a product prior to purchase is also important to many people, being unable to have a product in front of you presents two main problems when shopping online, customers rely on more than just visual cues and will gauge the quality of a product based on factors such as its weight and texture which they cannot judge online.

Some products can also be tried and tested in store for example trying a gadget, trying on a dress or smelling a perfume. (Noyes 2007) (Ooi 2010)(Bhatnagar et al 2000)

Immediacy

Customers may also simply need a product instantly or would rather not wait, regardless of price etc. In this case e-commerce stores generally cannot compete unless they offer instant delivery services, which for example a florist may do.

Li (2010) mentioned that where prices are the same online and offline people will normally shop offline to avoid waiting as well as delivery charges. (Schlosser et al 2006) (Li 2010)

Shopping for Leisure

Some put the ongoing success of the High Street down to its importance for socialising and as a leisure activity, Ahuja et al (2003) found that 15% of students and 9% of non students gave lack of social interaction as a reason for not shopping online.(Ahuja et al 2003) (Williams et al 2009) (Ooi 2010)

Shopping at local stores is also imbedded for some people especially where they have been using the same stores for a long time, it has been found that older people are more likely to have store loyalty and this will include continuing to use a local store rather than buying online. (Burke 2002)

There are also campaigns in many countries and local areas to ‘buy local’ partly to support local businesses and also for environmental reasons i.e. cutting down the distance goods are transported, this may effect online businesses as well as national chains as people either revert or continue to use local independent shops such as greengrocers and butchers selling local produce. (Hinrichs and Allen 2008)

Delivery Cost

Even compared to national chains some people may worry about the environmental cost of having items sent individually, whereas with for example a supermarket many items are sent to the store in one go. Matthews and Hendrickson (2001) however did find that this was generally not the case but depended upon shipment size.(Matthews & Hendrickson 2001)

People certainly worry about the actual monetary delivery costs of shopping online, although the internet is known for often being cheaper and being easy for comparing prices many people are put off by delivery prices which are unpredictable and often not included in price comparison sites and not clear on websites until people have been some way through the checkout process meaning they risk wasting time. A 2007 study by Naidu and Chaparro showed that 44% of sites still required some personal information before showing shipping costs. (Naidu and Chaparro 2007)

Convenience

As has been mentioned the Internet is often perceived as being quick and easy compared to going to shops particularly when comparing prices. However this is not the case for all people especially those who are less price sensitive and who may only check one price anyway, there is a steep learning curve for those who have not shopped online often before and even steeper for those who have little knowledge of using the internet or computers in general they may well continue to use bricks and mortar stores therefore which for them involves less of an investment in time. (Adams et al 2005) (Sundstrom 2008)

Sundstrom (2008) discusses convenience being relative to the consumer but also relevant to the type of product for example it is more convenient to buy clothes in an offline store where the size can be easily checked by trying on a garment. (Sundstrom 2008)

Supermarkets where in many countries a large percentage of people buy their weekly groceries offer an increasing range of non food products often competing against the internet on products which sell well online, the convenience of buying in a shop where you already intend to purchase other items means that supermarkets in comparison to the internet involve less investment of time. (Adams et al 2005) (Forsey 2008)

Buying by phone has been in decline since the advent of online shopping however many who wish to benefit from being able to shop without having to leave there homes will use shop by phone for some products rather than use the internet particularly if they are put off by other factors such as a steep learning curve or lack human interaction. (Bhatnagar et al 2000) (Ahuja et al 2003)

Product Types

Internet sales are best suited to small items with relatively high value these are generally cheaper to post and to store making these costs a small percentage of the total cost. Items which are more likely to be returned, particularly clothing and shoes, add to a website’s costs and risk where a large number of items may be returned after they have been reordered from a supplier. Items where choice of a number of variations is important, for example different sizes, colours etc are well suited to the internet where a large collection can be housed more cheaply than in an offline store, Amazon are known for having a much bigger range than any high street book store.

Perishable goods such as Groceries have limitations on how they can be sold online and holding them in stock has a high risk involved as they quickly lose value, this is why groceries are often sold by Supermarkets and Grocers who have items in stock already and have suitable storage as well as a network of outlets from which they can quickly distribute deliveries. (Brassington and Petitt 2003) (Sundström 2008)

Some products may not be available online or only have limited availability online.

This may be due to some suppliers managing the outlets from which their products are available in order to control pricing and association with particular retailers as well as to give an idea of exclusivity all of which are important for brand values. In some cases products will be only available from Clicks and Mortar stores which have a website and physical premises for example Harrods has many products in its store unavailable in many or any other retailers but which it may also have online.

The internet is often associated with low price which many premium brands will not want associated with their products they may also be concerned that online retailers would undercut their current retailers or the producer themselves.

Some producers of course only sell their products themselves so if they do not have an online presence their products will have to be bought offline otherwise they will only be available from one outlet. (Okonkwo 2009)

ROBO – Research online Buy offline

For collecting some information on products the internet can be better than collecting information in store, the internet offers reviews of many products which are rarely available in a store and may offer more information and specification, price as well can be checked online for both online and offline stores, the internet therefore can help people collect the information they need to then go and buy in a bricks and mortar store and as such devalues what is seen as one of it advantages.(Kumar & Tomkins 2009)

Issues relating to Internet companies including Systems and Processes

The systems for a bricks and mortar store can be fairly simple for a shopper to understand and use compared to those for online stores where there may be more risk involved for the customer.

Risk

Firstly many people have been found to be put off online shopping due to the risk of not receiving their goods Saprikis et al (2010) found this was particularly the case with Non Adopters of Internet shopping but also something that existing internet shoppers were aware of. In some cases this will be where an order has been lost, an item is lost in the post or it turns out that a store has no stock all of which are not present in a bricks and mortar store where the item is there immediately. This is a particular issue for people who needs items by a particular date, for example as a gift, inaccurate delivery times and poor postal services also put off customers. In 2009 it is estimated businesses in the UK lost £1.5 Billion due to a postal strike a couple of months before Christmas, with internet retailers hardest hit, putting customers off taking the risk of ordering presents online. (McGinty 2009) (Schlosser et al 2006) (Li 2010) (Saprikis et al 2010)

Some customers also may not use online stores where they are concerned that the store may use Direct Dispatch where the store does not hold an item in stock but has it sent straight from a wholesaler or the manufacturer, as this increases the risk of an order being lost or delayed. (McGinty 2009)

Receiving the wrong product is another risk of buying online confusion with similar products and similar product codes can lead to confusion as can products being given the wrong or inaccurate descriptions. Products damaged in transit is another risk inherent in buying online but not present when buying in a bricks and mortar store. (Gabriel & Nyshadham 2008)

Furthermore research by Arar (2008) found that fake products were sold more online as consumers were unable to examine products prior to purchase. (Arar 2008)

As well as the time being important to people making buying online a risk there is also the risk of having to return an item where customers may be concerned that they will end up paying the costs of returning an item or a second delivery charge, which despite many countries having Distance Selling Regulations to stop this (where the product is incorrect or faulty), it is still a common occurrence, there is also the risk of having to invest ones time into contacting the seller and arranging return and the possibility of the seller not accepting responsibility. (Gabriel & Nyshadham 2008)

With a Bricks and Mortar store returns are generally easy especially if they are local and customers feel that by being physically present in a store it is more difficult to be ignored plus the risk of having to pay returns costs is also removed. With items that people may buy and decide to return having simply changed their minds it is again easier to a Bricks and Mortar store and a replacement can if necessary be taken away at the same time. Although according to Distance selling Regulations in the UK and similar elsewhere online sellers must accept returns they sometimes refuse too and their are exceptions within these rules, the customer returning an item as long as it was the correct item and not damaged may be required to pay all postage costs. Moore 2004 found that interview participants linked reputation of a website to returns policy with well known brands expected to have better polices and therefore lower risk. Anderson et al (2008) found that returns had a particular effect on some demographics and some product types for example a good return policy for shoes increased sales by around 50% due to the likelihood of needing to return shoes that didn’t fit. (Moore 2004) (Crown Copyright 2000) (Saprikis et al 2010) (Anderson et al 2009)

Foreign Websites Cross Border Trade

Many people are put off specific websites due to them being foreign website especially if it doesn’t have a domain ending they are familiar with (well known ones include: .com, .net. org .de .co.uk .fr etc).(McAfee Inc. 2009)

Some countries may be associated with having disreputable websites either because the country does not have specific rules about for example Distance Selling or because Law Enforcement is known to be poor meaning disreputable sites are unlikely to be shut down or prosecuted for breaking laws. (Crown Copyright 2000) (Stock & Mulki 2009)

As released by McAfee in 2009 the 5 most dangerous domain endings are:

Cameroon (.cm) 


PR of China (.cn) 


Samoa (.ws)


Philippines (.ph) 


Former Soviet Union (.su)

with 36.7% of .cm sites posing a risk. (McAfee Inc. 2009)

As well as reputation the Country where a business selling online is operated is important to some people who may be put off by the potential for extra shipping charges from foreign websites as well as having to pay extra duties and taxes on goods, being uncertain about exchange rates may also put people off foreign websites and they may not have the time to research. (Stock & Mulki 2009)

The European Commission (2009) found that 37% of respondents to their survey would rather shop in their own country and 27% of respondents gave language barriers as a reason and 71% the problems of resolving problems cross border for not buying from other EU countries.(Commission Of The European Communities 2009)

Security

As previously mentioned privacy is important to online shoppers and website features can improve privacy, some potential shoppers may be concerned about the company operating the website either stealing or misusing information, for example to send advertising to and to sell to mailing lists, the reputation of a website is important then and many users will read a website’s privacy policy as well. (Li 2010) (Moore 2004) (Kim et al 2007)

Moore 2004 found that many interview participants would be willing to pay more to use a site they trusted and Sherard and Buchannan-Oliver(2000) found that inclusion of security messages lowered people’s perception of risk with heavy amounts of security information having a larger effect. (Moore 2004) (Sherrard & oliver-Buchannan 2000)

Having an SSL certificate is also very important to customers, some websites may not have them but send people to payment solution providers such as Google Checkout and Paypal which also adds extra trust as people only have to enter their details on reputable brand’s websites and this is a preferred option for new websites with an unknown brand. SSL certificates though are seen as vital by many customers to ensure that their details will be sent securely over the internet so that they can not be intercepted and stolen. (Li 2010) (Kim et al 2007)

Li (2010) reports that Data Encryption and Third Party monitoring systems are the most commonly used methods of ensuring safety on online stores.(Li 2010)

Kim et al (2007) found that Third Party Seals of Approval on a website, such as WebTrust, have only a limited affect on people’s confidence in a website compared to features such as SSL.(Kim et al 2007)

Conclusion

Many of the barriers given here are causes of perceived risk and lack of trust and there are many things a website can do in order to increase trust and minimize a customer’s risk however various research shows that different demographics need to be approached in different ways.