The Factors that Affect Online Buying Decisions - Essay Example

 The Factors that Affect Online Buying Decisions I. Introduction The use of Internet in everyday activities has become an indispensable element of everyone’s life. Furthermore, its major aspects are connected with the research and the leisure, although an important part of the online activity belongs to the retail sector. However, although the growth of online activity is a fact commonly accepted its expansion among the particular countries is not equal. In this context, it is noticed that despite the phenomenal growth of the Internet over the last few years, ‘the enormous business potentials of the Internet remain largely untapped; on the surface, it is generally expected that with the Internet, national and geographical boundaries should become irrelevant when engaging in business exchanges; consequently, global expansion on the Internet could promise greater customer reach and profits. However, although the adoption rate of Internet shopping is relatively high in the West, it is still generally unpopular in the East (Lee et al., 2004, 545). The above assumptions which present the current conditions regarding the use and the evaluation of an Internet site from a consumers’ perspective, although completed regarding the issues targeted they can however been criticised as limited to the geographical aspect of the Internet usage. Current paper examines the online activity from the aspect of the transactions made, mostly the online shopping. Under these terms, the factors that affect the relevant decision are being examined in order to provide a specific and complete view on the issue. The use of research tools, such as questionnaires, has been evaluated as necessary in order to gather empirical information regarding the specific subject. Moreover, the data revealed are being analyzed and compared between them but also with the views of the literature, so that the formulation of a integrate result to be achieved at the highest possible level. II. Literature Review According to a British Computer Society research (Kavanagh, 2005) online shoppers are starting to desert the High Street; however the same survey also shows that many people are being excluded from electronic services. According to the above survey (which was conducted by interviewing a representative sample of 2,113 people aged over 15) about 35% of the people surveyed shop online — and nearly one-fifth of these now choose to shop online rather than visit the High Street; in addition, although 46% still prefer the High Street, 36% have no preference, again suggesting wide acceptance of online shopping. Furthermore, the top reasons for using the web are research and fact-finding (36%), purchasing (35%), reading information or news on favourite websites (30%), and online banking (25%). Among those who buy online, 53% have bought CDs and DVDs, 52% have booked a holiday, 45% have bought clothes, 39% have bought insurance and 38% have bought household appliances. As for the frequency of online shopping it has been found that more than 70% have bought online in the past month, with 48% buying at least twice and 22% at least four times in the past month whereas he average amount spent was about £196. Research carried out by Mintel and others (Mintel reports, Forecast, 2000) shows that there is still a significant proportion of consumers who are frightened to spend online due to security fears. This is despite ‘the absence of any high-profile case of fraud carried out in this manner’. The above assumption must be ‘challenged and resolved for online spend per head to grow significantly’. It is noteworthy though that ‘the highest categories for online purchasing in the UK are books and CDs, i.e. items that consumers are already familiar with, but items with a relatively low unit cost’. Mintel forecasts that ‘the advent of digital television will be a large factor in the growth in the online retail market in the UK, but that items bought will continue to be those of low unit cost; those at the upper end of the market will drive growth by purchasing holidays, computers and even cars online, but this will continue to be restricted to a minority element of online consumption’. A survey presented by Lindenmayer (2004) among about 2,500 consumers showed that they are just as willing to buy from small online retailers as they are from large national providers’. Moreover, roughly 90% reported buying products online; of that group, 94% said they were satisfied with their overall experience’. Table 1 - Forecast of the US and UK online retail markets, 1999-2004 (Mintel Reports, 2000) US ($bn) US Indexed UK (£bn) UK Indexed 1999 53 100 0.5 100 2000 109 206 1.2 240 2001 197 372 1.8 360 2002 305 575 2.6 520 2003 419 791 3.9 780 2004 539 1,017 5.4 1,080 The shift from conventional buying in shops and stores to retail e-commerce was estimated to generate upward of $108 billion by 2003; the number of consumers who buy goods on the Internet has increased phenomenally, and over 60% of respondents in a U.K. survey (Dittmar et al., 2004, 423) said that on-line shopping is now a serious alternative to conventional shopping. Moreover, it is stated that Internet buying prevalence is highest in the United States, where 93% of Internet users have bought on-line, but it is growing rapidly in the United Kingdom: on-line sales almost doubled from December 2001 to December 2002, a three times faster growth than that in the United States. The study of Balabanis (2001) examines ‘how different consumers evaluate online shopping sites set up by bricks-and-mortar retailers; in particular, it examines how differences in consumers' information processing abilities and motivation as well as in their predispositions towards a site's material affect their attitudes towards that site and the amount of time they spend at the site’. The above study confirms ‘the influence of existing brand attitudes on the attitude formation of online shoppers; the inconsistencies between the effects of Internet knowledge and Internet experience strongly suggest that they need to be treated differently by marketers’. Moreover, it appears that ‘different web site features are appreciated by knowledgeable users and experienced users’. In this context online retailers ‘aiming to appeal to consumers of different levels of Internet knowledge or Internet experience need to adapt their web sites in the appropriate manner’. As for the specific methods of accessing and evaluating a website, it has been stated that ‘how consumers' use web sites is highly depended on how they process information, as such this study draws from the information processing evaluation literature; in addition, work on advertising evaluation, in particular the role of attention and pre existing brand attitudes on information processing/evaluation, is also drawn upon’. Regarding the above assumptions it is stated that ‘the processing and evaluation of information depends primarily on three factors; the individual's (i) motivation, (ii) ability, and (iii) opportunity to process information’. It has also to be noticed that a differentiation seems to exist between the men and women regarding the use of Internet. A recent survey by Yahoo! claimed that 84% of women get distracted from their original purpose when online; for men, who are seen as being more focused on one thing at a time, it's about 25%; while it's great that people take advantage of the Web to roam and explore, this behaviour makes tracking customer visits and sales much more problematic (Drury, 2005). One of the major issues when shopping online is the safety of the relevant transaction. In this context it has been noticed (Mayer, 2002, 121) that ‘many consumer organizations and government agencies provide tips on how to shop safely on the Internet; these tips often include the exhortation to search the retailer's web site for key information, such as its return policy and privacy practices’. However, in practice it has been proved that this information is not always available. In theory, ‘consumers could choose not to patronize sites that fail to provide key information, but in practice, consumers do not search for this information, if at all, until after they have spent considerable time investigating a site's product offerings; at this point, they are unlikely to terminate a buying decision’. Under these terms, consumer educators need ‘to stress the importance of seeking information on an online company's basic practices before searching the site for goods and services’. Moreover, in order for the safety regarding the online transactions to be secured, there is a need for an extended net of regulations that will be formulated in accordance with the increased demands that the online transactions have imposed on the markets. In this context, self-efficacy beliefs are ‘important predictors of online shopping activity, suggesting that consumers must reach a certain level of comfort with the Internet before they actively engage in e-commerce; taken together, unregulated online buying tendencies, expectations about e-commerce outcomes, and self-efficacy beliefs offer a powerful socio-cognitive explanation of online buying that accounts for two-fifths of the variation in shopping behaviour’ (Eastin et al., 2002, 555). Regarding the above mentioned, Jun (2002, 28) tried to explore the interaction between the consumer’s decision (as related to the online shopping) and the service quality provided by the retail websites. He found that in order to better understand consumers' assessment of online service quality, ‘it is beneficial to investigate the key underlying dimensions perceived by both Internet purchasers and Internet non-purchasers; Internet companies should focus on such service quality dimensions as reliability, personalization, ease of use, and access; these are desired by both Internet purchasers and Internet non-purchasers, and their focus should be customized to specific requirements’. Moreover, it is stated that while ‘credibility is solely related to Internet purchasers, availability is the unique dimension related to Internet non-purchasers’. For this reason in order to retain existing customers, ‘the first priorities are high service reliability and prompt responsiveness; furthermore, Internet companies have to take measures to help potential Internet customers such as Internet non-purchasers overcome their foremost concerns: security and trust’. A rather known tool for gaining/ retaining customers is the ‘online coupon’. According to the study made by Moses (2003) a few years ago ‘online coupons were more novelty than convenience; who would order them online, then wait days for them to show up by snail-mail?’ However, it is noticed that today ‘online coupon services let shoppers print coupons themselves, while safeguards prevent coupons from being altered or copied; in this tight economy, the online-coupon redemption rate is up, to 3.1% last year from 1.1% the year before’. Moreover, it is mentioned that unlike ‘traditional coupons, each online coupon is unique, theoretically letting the manufacturer match the redeemed coupon to the shopper, who has supplied demographic data to retrieve the coupons; thus, about 10% of its 600 packaged-good-maker clients are "actively experimenting" with online coupons’. However, it should be highlighted that while online usage is growing fast, it's from a small base; the number of coupons distributed online jumped 110% last year, but is still less than 1% of the 336 billion coupons distributed; Shoppers have to download software in what can be a clumsy process, and coupon services haven't gotten around to offering Apple Macintosh-compatible technology’. A factor that can influence the consumer behaviour regarding the online shopping is the ease of use of a specific website. Ease of use implies uncluttered screens, clear organization, logical flow, and ease of navigation, in short, a web design that facilitates one's efficient and effective use of the site. Ease of use should enhance ability to process product and purchase information, reduce cost of search, permit faster search, increase likelihood of a successful search, and increase attitude toward the site. Several studies report a positive relationship between ease of use and attitude toward a web site. Ease of use also appears to increase site credibility, attitude to online shopping, intention to shop online, level of online shopping and satisfaction with online shopping (Elliott et al., 2005) Another factor that seems to have a significant influence on the consumer’s online shopping decision, is the information provided on the product advertised online. In this context, it has been found (Elliott et al., 2005) that product information includes ‘the amount, accuracy, and form of information about the products and services offered on a web site. Since e-consumers cannot examine a product, they depend on information to identify, compare, and select products; online information includes text, tables, graphs, photos, audio, and video; better product information should help online shoppers make better decisions, feel more confident about their decisions, increase satisfaction with the shopping experience, and improve attitude toward a site; product information also appears to increase attitude to online shopping, amount of online shopping, online spending, and satisfaction with online purchases’. In the same context, Kent et al. (2001, 21) found that ‘a website's trustworthiness is crucial in encouraging consumers to shop there and to repurchase products from that site’. Moreover, according to the results of the above study, there is an increased need for managers ‘to systematically develop the trustworthiness of their websites; because they engender trust in site shoppers, adding features such as customer-service guarantees, third-party certifications of a site's credibility, and former customer testimonials may be the most important improvements a site administrator can make’. Under these terms, ‘the impact of site quality on loyalty and purchase intentions depends on the particular product category and world region examined. As an example, for the low-touch product category of CD players site quality cannot explain loyalty or purchase intentions above that predicted by trust or positive affect; however, for high-touch goods, site quality was a significant predictor all but once’. These findings are in accordance with those of Robinson (2002, 47) according to whom a company ‘doesn't create a brand just for the product or service it sells, it does it for the relationship and trust that go with it’. Moreover, in his study he found that ‘brand has a lot of essence; it's not just a graphic look; brand is graphics, customer service, quality of product, and dependability of delivery; it is performance, not public relations’. Table 2 – List of Web Search Behavioural Variables (Kumar et al., 2005) From another point of view, the study of Lee et al. (2004, 554) showed that ‘dimensions of national culture affect Internet shopping rate’. In fact, the results of their study ‘reveal an interesting insight: that trust not only plays an important mediating role in affecting the relationship between culture and Internet shopping, but also that culture can affect the processes through which trust is built; another theoretical implication is that trust could be an important link bridging national-level and individual-level analyses’. Moreover, according to the above study, ‘the way individuals build trust could be affected by societal norms, values, and beliefs; for this reason the above results have pointed to a number of ‘practical implications for promoting Internet shopping through a contingency approach to building trust; first, at the national government level, macro-level policies that are designed to suit the local culture can be implemented to stimulate adoption of Internet shopping; further, Internet marketing strategies, such as the design of web pages, should be tailor-made to take into consideration the cultural differences of individual countries’. It should also be noticed that the development of loyal customers has been the main target of every marketing organization. In this context, the study of Bailey et al. (2000) referred to loyal customers as ‘customers that buy consistently over time, generally at regular prices, commonly ignoring the pleas and platitudes of competitors. Furthermore, marketers, ‘given the recent developments in data capture and management, believe they have fairly good ways of developing and measuring customer loyalty; customer satisfaction is one; a satisfied customer, at least according to research, tends to remain more loyal to the brand or the product than an unsatisfied customer’. On the other hand, behaviour is another issue. In the short term, ‘marketers can measure various forms of customer behaviour. Customer consistency (i.e., the number of times a customer buys in a certain time period) and longevity (i.e., the time period over which a customer buys the particular product or brand) are two examples’. Table 3 – Factors affecting consumer attitudes toward retail web sites (Elliott et al., 2005) III. Methodology In order for empirical evidence to be gathered regarding the specific issue, a questionnaire has been prepared including a series of questions related with the online shopping decision of both online and offline shoppers. The questionnaire has been divided into two separate sections, the first referred to general information on the participant’s general characteristics and preferences whereas the second refers to specific website attributes which can possibly influence the consumer’s online shopping decision. The questionnaire is addressed to people of a variety of ages (with a minimum age that of 18 years old) while it is also differentiated among the online shoppers and the offline ones. It should also be mentioned that the specific retail area which is used as an example is that of the clothes industry. Regarding its particular content, this includes a series of variables contained not only general information on the existed commercial market (existed brands, suppliers) but also an overview of a retail website’s attributes as can be viewed as elements of influence to the consumers’ online shopping decision (like the customer service, the value proposition, the trust/ security and the brand building). IV. Presentation and critical review of results The research on the consumers’ online shopping decisions, as conducted using the above described questionnaire produced a series of interested results regarding the factors that can influence such a decision under real terms. A first comment of the result could be related with the gender of the participants. The women that participated in the survey reached the 58% whereas men were limited to 42%. This is a rather interesting finding if taking into account the type of the specific research which can be characterized as technology connected and therefore a higher rate of male participants should be waited under normal circumstances. In the above context, the survey was also age related as the percentage of young people (aged 18-24) was significantly high (63.7%) comparing with that of the participants belonged to higher levels of age (25+). It should be mentioned, that women were not the majority only regarding the participation in the survey, but they were also proved the majority of online shoppers (with a percentage of 61.2 %) whereas as offline shoppers women also keep the majority (51.9 %). The above percentages and the differences on online shopping behaviour between the genders can be explained by the existence of difference on shopping behaviour in general among men and women. More specifically, women tend to spend more in the retail industry and particularly in the clothes area (which is the sector used in current research as an indicative measure for the consumers’ shopping decision). It is perhaps the type of this sector that can explain the superiority of women. The use of another commercial sector, like the automotive one, could possibly produce a different empirical result. A very important finding of the specific survey is that the average spending on clothes per month is not differentiated among online and offline shoppers. The above ‘equality’ can be more clearly observed in the spending area of 50 Read More