Social Media and New Age Marketing for Students in China - Literature review Example

?Social Media and New Age Marketing for in China (Literature Review Introduction Latest reports estimate that China is bound to become “the world’s E-commerce superpower”, hosting the world’s “largest online commerce market” (Salans 2012, p. 2). China’s estimated online market size is about $300 billion. The Chinese E-commerce market is experiencing a tremendous growth since the past decade. This is because of various reasons. Firstly, the number of internet users in China is increasing at a fast pace. There has been a 462% increase in the number of internet users within a matter of seven years, i.e. from 2004-2011 (China Internet Network Information Center 2012). High-speed internet is easily accessible at subsidized rates in China, thereby enabling easy penetration of the Internet throughout the country. Secondly, the number of users who shop online is also experiencing a remarkable increase. While less than 10% of the Chinese population shopped online in 2006, by 2015 the online shopping population is expected to increase to 44%, four times the current figure (Salans 2012). The total number of Chinese users who shop online would increase from the present figure of 160 million to 231 million by 2013 and 329 million by 2015 (EU SME Center 2012; Salans 2012). Online shopping in China is becoming popular because third party payment systems like Alipay and platforms like Taobao are making Chinese consumers more comfortable with spending online (EU SME Center 2012). The Chinese government is also playing an active role in the growth and expansion of E-commerce. The Ministry of Commerce (MOC) of China aims at driving more than 80% of China’s large enterprises into adopting E-commerce (Salans 2012). Online shopping is becoming increasingly popular and businesses are leaving no stone unturned in their bid to tap into this opportunity. It is therefore necessary to study consumer behaviour and preferences regarding online shopping websites or e-stores. While people shop online because of the ease and convenience of shopping from the comfort of their own homes, several studies and reports suggest that online shopping may also prove to be a disadvantage. It is suggested that the existence of online shopping websites causes impulse buying and that the payment methods of online shopping websites lead to overspending. Moreover, it is also believed that traditional shopping behaviour will subsequently be replaced by online shopping. Each of these notions will be discussed in the following sections based on information available from literature. 2. Online Shopping Trends Worldwide Online shopping is fast gaining popularity all over the world. According to a Global consumer report by the Nielson Company, which was based on a March 2010 survey, Korean and Chinese consumers are the most frequent online shoppers in the Asia Pacific region, with 95% of the internet users intending to make a purchase online in the next 6 months (Nielson 2010). In Europe, around 79% of internet users intend to shop online in the next 6 months. Shopping on the web is highly popular in North and South American countries as well. The Middle East, Pakistan and Africa are the least frequent consumers of online shopping. The report, which surveyed more than 27,000 web consumers in 55 markets all over the world, also points out that one-third of the global online consumers prefer retailers, such as Amazon, that primarily have online presence only. Sixteen percent of the respondents said they never shopped online. While half of all North American consumers state they mostly purchase from stores that are exclusively online, one-third of Latin American consumers mostly purchase from sites that accompany traditional offline stores. The global consumption based on site preference is shown in figure 1. Fig. 1: Graph showing site preferences for online shopping of consumers in AP (Asia Pacific), EU (European Union), MEAP (Middle East/Africa/Pakistan), LA (Latin America), NA (North America (Nielson 2010, p. 3) Another salient feature of online shopping trends globally is that consumers prefer reading reviews from other buyers before purchasing a product online. This trend of reading expert and user reviews of products before buying them is more prevalent in Asia Pacific (49%), followed by South America (43%), Middle East (40%), North America (33%) and Europe (32%) (Nielson 2010). Users tend to shop online because it is convenient and time saving. However, they are wary about the safety of online monetary transactions while purchasing products on the web. 3. Online Shopping Trends in China It has already been discussed that the percentage of online shoppers in China is bound to quadruple by 2015. The Chinese E-commerce market is very different from those of Western countries, as the consumers have different expectations, preferences and behaviour patterns (Salans 2012). Forty four percent of Chinese online shoppers make a purchase at least once every week (China Internet Network Information Center 2012). The number of online transactions made per day amounts to around 11 million. China has more than 3000 group buying sites with the four most popular ones, namely – Meitauan, 55tuan, Dianping, & Lashou; Juhuasuan, 58tuan, Ftuan, Manzou, & Nuomi; Dadituan, Ayatuan, Gaopeng, Gocn, 24qun, Pintuan, Ganji, & Juqi; and Liketuan, Shuangtuan, & Tuanweihui, having more than 45% of the total market share (China Internet Network Information Center 2012). The online retail sales have increased dramatically over the last ten years. While in 2004, online sales accounted for only 0.15% of the total retail revenue, amounting to only CNY 4.5 billion, in 2010, they accounted for 7.25% of the total retail, amounting to a whopping CNY 495 billion (EU SME Center 2012). Estimates suggest that 75% of the entire online market belongs to Taobao, which is a third party platform of the Alibaba group. As for consumer behaviour, it is reported that Chinese consumers frequently compare the prices between physical and online stores, opting for the less expensive option (EU SME Center 2012). An iResearch survey has shown that more and more users will be tempted to shop online as the payment procedures become simpler and the online platforms provide more and more reviews and rankings for the products (cited in EU SME Center 2012). 4. E-commerce Websites and Consumer Behavior 4.1. Impulsive Buying Impulsive buying is a complex phenomenon. Tendai and Crispen (2009) mention two definitions of impulsive buying that attempt to capture the complexity of the concept. One is that of Chien-Huang and Hung-Ming (2005 cited in Tendai and Crispen 2009), which defines impulsive buying as “a more arousing, unintended, less deliberate and more irresistible buying behaviour as compared to planned buying behaviour, with higher impulsive buyers being more likely to be unreflective, to be emotionally attracted to the object and to desire immediate gratification” (p. 102). The other definition is that of Bayley and Nancarrow (1998 cited in Tendai and Crispen 2009), who define impulsive buying as a “sudden, compelling, hedonically complex buying behaviour in which the rapidity of an impulse decision process precludes thoughtful and deliberate consideration of alternative information and choices” (p. 102). These definitions are closely related and highlight the fact that impulsive buying is a spontaneous, unreflective, and irresistible urge to act on impulse and buy a product immediately. This shopping behavior deviates from the consumer’s normal buying behaviour. 4.1.1. Types of impulsive buying Impulsive buying behavior has been extensively studied in traditional modes of shopping. However, impulsive shopping in online environments has not been widely investigated. Stern (1962) listed four different types of impulse buying, namely – “pure impulse buying”, which is a “novelty or escape purchase which breaks a normal buying pattern”, “reminder impulse buying”, which “occurs when a shopper sees an item or recalls an advertisement or other information and remembers that the stock at home is low or exhausted”, “suggestion impulse buying”, which “occurs when a shopper sees a product for the first time and visualizes a need for it”, and “planned impulse buying”, which “takes place when the shopper makes specific purchase decisions on the basis of price specials, coupon offers and the like” (cited in Madhavaram & Laverie 2004, p. 59). 4.1.2. Theoretical background on impulsive buying Several theories have explained the phenomenon of impulsive purchasing behaviour. Schiffman and Kanuk (2007 cited in Tendai and Crispen 2009), state that impulsive buying results from a strong emotional or “impulsive decision making” influence on the decision making process of a consumer (p. 103). According to this view, buyers tend to associate certain strong emotions or feelings such as fear, fantasy, love, sexuality, joy, and sometimes even magic with particular products (Schiffman and Kanuk cited in Tendai and Crispen 2009). Therefore, instead of rationally searching, evaluating and reflecting on a particular purchase before buying, they tend to buy the product on a whim because of emotionally driven impulsivity. The consumer decision-making model explains how the “cognitive consumer” and the “emotional consumer” are strongly interrelated (Tendai and Crispen 2009). This model helps explain why most retailers focus on certain inputs such the shopping environment, promotions, discounts, packaging, etc strongly influence impulsive buying. The shopping environment and how consumers interact with it underpins impulsive buying behaviour (Verhagen & van Dolen 2011). 4.1.3. The phenomenon of impulsive buying in online retailing Madhavaram & Laverie (2004) state that the availability of online shopping makes impulse buying more prevalent because it eliminates the limitations faced by shoppers in terms of time and space. Donthu and Garcia (1999 cited in Madhavaram & Laverie 2004) have shown that those who shop online are more impulsive than those who shop traditionally at stores. Verhagen and van Dolen (2011) state that consumers tend to be more impulsive when they have to make online decisions. This could be because of easy availability of products, ease of placing orders, easy delivery, and lack of any social pressure. About 40% of all online purchases are said to be due to impulse buying (Verhagen and van Dolen 2011). However, although online shopping is often associated with impulsive buying, a 2011 study by Oracle found that 55% of the consumers believe that the advent of the internet transformed them into “less impulsive shoppers” (Ernst & Young 2012, p. 15). This is because consumers research products online before actually buying them, thereby enabling well informed and careful decision making. Contrary to this, in Madhavaram & Laverie’s (2004) study it was found that consumers believe that online retailing encourages impulsive buying behaviour. 4.1.4. Factors that lead to impulse buying online Consumers tend to indulge in impulsive purchasing behaviour due to various reasons. As already stated earlier, the ease of purchasing, payment and delivery, lack of social pressures, increased convenience and time-saving are important factors that lead to impulse buying online. Evidence suggests that website quality is an environmental cue that greatly affects a consumer’s urge to purchase impulsively (Wells, Parboteeah, & Valacich 2011). It has been demonstrated that consumers who are highly impulsive by nature can be negatively and positively influenced by the quality of an E-commerce website. Furthermore, a survey by the Yankee Group found that special sale pricing and free shipping would entice consumers into making spontaneous purchasing decisions or buying impulsively (User Interface Engineering 2002). In a study on impulsive buying on the internet, Madhavaram & Laverie’s (2004) found that the site environment such as banners, advertisements, special offers, images, and pricing are important stimuli for impulsive buying. Good mood was also attributed to be conducive to impulsive purchasing behaviour online. 4.2. Overspending E-commerce has not only been associated with impulsive shopping but also compulsive shopping or overspending. Studies have shown that internet addicts are more vulnerable to compulsive shopping (LaRose 2001). People are more prone to overspending when they shop online. This could be because of various reasons. Online shopping does not require standing in queues while checking out, it enables the use of credit cards and other cashless payment options on all purchases, entices shoppers into buying impulsively using attractive web designs and features, time-sensitive deals, discounts and auctions (Dempsy 2010). As stated by the Addiction Help Center, online shopping is highly addictive because “a person gets a quick thrill from the acquisition and fails to make a connection to an actual impact on the wallet” (2012). Moreover, strategies such as online auctions by E-commerce websites increase the lure of online shopping by creating an excitingly competitive environment for the consumers in outbidding the others, thus making it “less about the item and more about the competition” (Addiction Help Center 2012). Communication with other compulsive shoppers through the social networking features integrated in the E-commerce websites makes unregulated buying or compulsive shopping a contagious phenomenon (LaRose 2001). Vicdan and Sun (2008) have shown that compulsive buying on the internet is positively correlated with the customer’s proneness to the retailer’s sale promotions. They have also shown that the frequency of exposure to the sale promotion increases the proneness of the customer to that promotion. Apart from the sale promotions and website attractiveness, the payment options provided by the online shopping websites also contribute to compulsive shopping or overspending. E-commerce websites offer various payment options such as card payment through credit and debit cards, payment through third party websites, such as PayPal or Alipay, cash-on-delivery options etc. According to most theories, these payment options, when compared to cash payments, make it easier to overspend because money is not physically being used. Raghubir and Srivastava (2008) explain the phenomenon as follows – The vividness of the money outflow leads to a higher pain of paying with cash than with other less transparent payment modes. In other words, the pain of paying is somewhat dulled by less transparent payment modes such as a gift certificate or credit card thus increasing the likelihood of spending when using these payment modes (p. 223). Reports such as that by Maverick China Research (2009) have shown that in China, the E-commerce market has expanded tremendously owing to the improved online payment systems. Multi-channel payment solutions, increased popularity of credit and debit cards, and proliferation of third party payment sites like Alipay and Tenpay have catalysed the growth of online commerce. Chinese shoppers feel more secure with these payment systems while purchasing over the internet, and so, this has led to an explosive growth in E-commerce (EU SME Center 2012). Although the use of credit/debit card and third party payment sites has increased immensely, a significant proportion of Chinese consumers also prefers cash-on-delivery (Salans 2012). However, according to a Maverick China research report (2012), the number of consumers opting for cash-on-delivery has halved since 2009. Presently, 79.3% of the online shopping transactions occur online, while cash-on-delivery only accounts for 11.6% of the transactions. This demonstrates the increased trust of Chinese consumers in cashless transactions online. As already discussed, such payment options may be linked to overspending while shopping online. 4.3. Preferences and Attitudes towards Online Shopping The attitudes of consumers towards online shopping are also important to consider. This is because consumer behaviour and frequency of online shopping largely depend on the consumer’s attitudes and preferences towards the same. The intention to shop online and make a transaction for an online purchase depends on consumer attitudes (Li & Zhang 2002). Li and Zhang assert that consumer attitude is a “multidimensional construct” and can be conceptualized in a variety of ways. It not only refers to the “consumer’s acceptance of the Internet as a shopping channel” but also to the consumer’s attitude towards a particular web store (Jahng et al. 2001 cited in Li & Zhang 2002, p. 513). There is a third element to this construct, namely – consumer’s perceived risk. The perceived risk may be associated with financial loss, functional loss, opportunity loss, time loss and product risk upon purchasing the product online (Li & Zhang 2002). The perceived risk may also be associated with the online transactions, which impose security, privacy and non-repudiation risks. Studies have shown that perceived risks are reduced when a customer trusts the particular online store (Li & Zhang 2002). Know and Lee (2003 cited in Saprikis, Chouliara, & Vlachopoulou 2010) have demonstrated a negative correlation between consumer attitude towards online shopping and concerns about payment security. They showed that the customers who had a positive attitude towards online shopping were less worried about the security of their online payment transactions. Other important dimensions to consumer’s attitudes include perceived enjoyment, empowerment, added-value from memberships, etc (Li & Zhang 2002). Most consumers prefer online shopping to traditional in-store shopping because it is possible to shop from anywhere whenever required, it saves time, provides better bargains and makes it easy to find products that are difficult to find through traditional in-store shopping. However, some concerns that consumers have regarding online shopping is that they cannot see and feel the actual product before purchasing, they are concerned about after-sales services, they may feel that the payment system in online shopping is too complicated, they may not possess credit/debit cards for online purchasing, etc. While customer’s attitudes towards online shopping may vary over time, it is yet to be seen whether online shopping websites will completely replace traditional stores. 5. Role of Social Media With the advent of social networking, marketing via social media has become the norm. Studies have shown that the use of social networking to gather information about a product is “fundamental to purchasing behavior” (Guo, Wang, & Leskovec 2011, p. 157). Therefore, most buyers base their purchasing decisions, whether online or offline, on the reviews provided by others. Social media supports the interaction of users regarding products through reviews, ratings, blogs and microblogs, thereby assisting online shopping for goods and services (Ng n.d). According to a 2012 forecast by Booz & Co., from 2011-2015, about $30 billion annual sales will be attributed to social commerce (Ng, n.d). According to Guo et al. (2011 cited in Ng n.d.), social networks, such as Taobao in China, that “spread consumer’s rating, evaluation and advice on a product” lead to consumer’s preference for a particular retailer over another (p. 2). Therefore, viral marketing and other digital campaigns over social media are being used as important marketing tools. Online shopping websites such as eBay and Amazon have successfully integrated social networking features such as user ratings and reviews (Guo, Wang, & Leskovec 2011). Similarly, in the Chinese E-commerce market, Taobao, a third party online marketplace, has managed to remain ahead of its counterparts by incorporating instant messaging tools and promoting interaction among buyers themselves as well as with the sellers (Guo, Wang, & Leskovec 2011). According to a 2011 survey in China, around 61% of social media users admitted to having purchased because of a marketing campaign on social media (China Internet Network Information Center 2012). Chinese consumers focus on customer ratings and reviews on forums, blogs and other such social media for making purchase decisions. Around 40% of online consumers in a survey reported to have either read or posted product reviews (Salans 2012). Furthermore, the Chinese social commerce market is different when compared to the western markets. Unlike the western markets, where there is a single top contender like Facebook, that has users from a wide range of demographics, China has various social networks frequented by people from different demographics. 6. Previous Studies on Online Shopping Behaviour This section discusses previous studies that investigated trends in consumer attitudes, especially among the youth, towards online shopping. Some of the studies examined the correlation between online shopping websites and impulsive buying while others investigated consumer perceptions and behaviour with regards to online shopping. It is seen that the youth are especially comfortable with financial transactions online. This has important implications because one of the major concerns regarding online shopping is online payments and financial transactions. Chau and Ngai (2010) investigated the behaviour, attitudes, and perceptions of the youth for internet banking services. Upon carrying out a survey on 164 university students, they found that youngsters in the 16-29 age groups have “more positive attitudes and behavioural intentions” towards internet banking (p. 42). This study was based on university students in the UK and shows that the youth are more comfortable with internet banking. This shows acceptance towards financial transactions online and may also influence online shopping attitudes as most online shopping activities require online financial transactions. In another study conducted by Hahn and Kim (2009), who examined the influence of perceived internet confidence of the customer as well as consumer trust on shopping intentions from a multi-channel-retailer operated online retailer, it was found that the customer’s trust was an important predictor of the perceived internet confidence and search intention for a product from the online retailer. These two, i.e. perceived internet confidence and search intention, were in turn strong predictors of the “consumer’s behavioral intention” towards buying from the online retailer. It is thus apparent that customers are more inclined towards searching for products and shopping online if they have trust in the retailer. Chang, Lai, and Wu (2010) investigated the influence of motivations for online shopping on the shopping perceptions of adolescents, who form a significant portion of the total internet users. Adolescents tend to form their opinions and judgments not only based on their own evaluations but also based on the perceptions of others. The study found that among adolescents, sensory stimulation, role enactment, choice optimization, and other such shopping motivations are highly positively correlated utilitarian online shopping perceptions. Furthermore, the study also found that emotional utility as well as social interaction are positively correlated with hedonic online shopping perceptions. It is not only important to study the perceptions and motivations towards online shopping but also the factors that influence these perceptions. Alam et al. (2008) in their study on young consumers in Malaysia have shown that there are four main dimensions or key factors that influence the perceptions of young consumers towards online shopping. These four key factors include customer service offered by the online shopping website, the quality of the website, the design of the website, and the privacy offered by the website. As already discussed in previous sections, consumer behaviour and impulsive shopping are largely associated with the website quality and design. Koufaris (2002) applied the TAM (Technology Acceptance Model) along with other constructs from marketing and psychology to investigate online consumer behaviour. This study shows that online consumers have a double identity, both as computer users and shoppers. Therefore, the “perceived usefulness of the site” as well as “shopping enjoyment” predict the consumer’s online shopping behaviour as well as the intention to return (p. 205). It is also shown that internet skills, usage of value-added techniques for searching, product involvement, challenges, etc are significant predictors of consumer online shopping behaviour. Another similar study by Shergill and Chen (2005) on internet users in New Zealand investigated the factors influencing online buying behaviour and the relationships among them. Similar to previously discussed studies, this study also found that four website factors, namely – the design of the website, the reliability or fulfillment of the website, the customer service provided on the website, and the privacy or security offered by the website are significant predictors of consumer online buying behaviour. The findings of this study are in agreement with those of Alam et al. (2008) discussed earlier. Another important finding of this study is that different kinds of online buyers, for instance occasional buyers, frequent buyers, trial buyers, regular buyers etc have different perceptions of these four website factors. Li and Zhang (2002) conducted an elaborate review on the attitudes and behaviours of consumers with regard to online shopping. They derived that external environmental factors of the shopping website such as the legal framework governing online transactions and third party recognition for the trustworthiness of the website are positively correlated with the consumer’s trust in the online store. They also found that personal characteristics of the consumers are important predictors of the online shopping behaviour. Furthermore, they have also shown in agreement with the findings of Alam et al. (2008) and Shergill and Chen (2005) that the website quality, especially its perceived usefulness and perceived ease of use, influence the consumers attitudes and buying behaviour. Other factors include the customers’ intention to buy online and their attitudes towards shopping online. Norum (2009) examined the trends in online shopping among 4688 students from a Midwestern university. It was found that the student’s income, age, gender, ownership of car, ability in identifying a safe internet shopping website, and compulsivity in buying behaviour, all influence the online buying behaviour. Another similar study by Saprikis, Chouliara and Vlachopoulou (2010), which investigated the perceptions and attitudes of Greek university students towards online shopping has shown that those who were more experienced with the internet and had more online activity easily adopted online shopping. They also found that those who were reluctant to adopt online shopping did so because they had concerns regarding privacy and security, they felt the need to examine the product physically before purchasing, they had more preference for brick-and-mortar stores, or because they did not generally use cards for payments. Adopters of online shopping perceived lesser risks than non-adopters of online shopping. In another study, Wells, Parboteeah, and Valacich (2011) showed that customer’s urge to buy impulsively is strongly associated with website quality. This implies that the website quality serves as an environmental cue, thereby affecting the customer’s likelihood of buying impulsively. 7. Online Shopping Behaviour in University Students Reports suggest that worldwide, as well as in China, youth are the most prolific online shoppers. Youth, between 18-30 years of age, make up about 60.8% of the online consumers in China (China Internet Network Information Center, 2012). According to another consumer behaviour report cited by EU SME Center (2012), 90% of online shoppers in China comprises of youth aged between 10-39 years, especially those belonging to urban areas and having a CNY 5000 monthly income. The report also points out that most of these youth (about 28.6%) are students. It is thus apparent that online shopping is mostly done by young students. This may be because, since the advent of online shopping, Generation Y consumers, which is the first generation to grow with the internet, have now turned into young adults (Norum 2008). These young adults are mostly computer savvy young college students (Norum 2008). The young adult online shoppers choose E-commerce in order to find bargains, products that are difficult to find elsewhere, and to save time on shopping (Horrigan 2008). The present study thus chose to survey university students in order to study the influence of online shopping websites on buying behaviour in China. 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