Consumer Behavior in the New World of the Internet - Essay Example

Consumer behavior in the new world of the internet A rising trend in the 21st century is the tendency of more and more consumers to look to the internet to make new purchases. There are several hypothesized reasons for this growing trend, including the ability to experience nearly instant gratification of the urge to purchase with little more than a point and click. Other possible theories regarding why more consumers are turning to the internet include the ability to conduct further and easier research on a particular product, more extensive price comparisons among products and suppliers and the availability of 24 hour shopping at the immediate convenience of the consumer. Despite some lingering negative issues, the number of people shopping online continues to grow as more and more people become familiar with the process and the convenience of being able to shop for just about any item they want – from homes to house wares and everything in between – at any time of the day or night that works best for them and regardless of whether what they’re wearing (or not wearing) is presentable to the public to be found at the local shopping center. While there remain certain products that consumers prefer to purchase at retail ‘brick and mortar’ outlets and several issues concerning taxes, security and information mining to be overcome, the concept of purchasing online is definitely a growing trend worth investigating. From the retailer’s perspective, the theories and fundamentals of shopping remains much the same in the online environment as it does in the brick and mortar environment. However, there are some significant factors to take into consideration in order to continue attracting and retaining customers who frequently have many more options online than offline in which to purchase their goods. To begin with, the internet provides an immediate benefit in efficient time consumption as the consumer can, with a few clicks of his mouse, compare prices, investigate product information and receive previous customer recommendations. This greater flexibility was noted in the literature as early as 1997 (Alba et al) when internet sales, still in their infancy, amounted to less than half of all retail sales in the country. According to Ruthkowski (2000, cited in Changchit et al, 2005), in response to growing trends in consumer behavior that continue to turn to the internet as a source of not only information, but shopping venues, the number of available hosts on the internet, denoting the range of shopping venues, has risen from 1.7 million in 1993 to more than 110 million in 2001. This ease and variety of options has created a world in which the needs and desires of the consumer have taken on a new importance to retailers desiring to succeed. Officially, the definition of online shopping indicates it is a computer activity in which consumers are able to connect through their computers with retailers’ digital storefronts by means of a network (Haubl & Trifts, 2000). In a study cited by James McGuire (2005), it was determined that internet sales continue to grow, reaching $65 billion in 2004 which represented an increase of 26 percent over 2003. However, there have been several stumbling blocks in helping the industry to grow in popularity among consumers. Many potential customers do not complete the checkout process, perhaps because they do not have the tactile experiences – being able to touch and feel the product – or perhaps because of other concerns related specifically to the online experience (Han & Noh, 2000). The most successful sites, such as eBay offering online auctions or Amazon offering traditional shopping cart type interfaces, share several key components identified by an independent study as being the most important to potential online customers (Wolfinbarger & Gilly, 2001). These components tend to support the goal-oriented shopping habits of online shoppers by providing incentives that appeal to this type of shopper, such as the money-saving qualities of free shipping, no taxes and discounts on products while providing pictures of the products to be sure they are getting what they want at a glance backed up by an easy means of returning unsatisfactory products (Changchit et al, 2005). Sears, with its long-held reputation of catalog shopping in the US, has also made a successful transition to the internet, ensuring its site remains attractive to visitors, including plenty of photographs of the products offered and streamlining its purchasing process through streamlined software that allows customers to place orders, tracks orders and assists in the shipment of orders (Dolbeck, 2004). The growing online automobile market similarly combines brick and mortar with online purchasing by allowing consumers to buy their cars online and pick them up at the dealership. The theory that online shopping is being led by predominantly goal-oriented shoppers is supported by the concept that these types of shoppers share several key characteristics relating to the availability of information that can be satisfied more readily within the online environment than the brick-and-mortar storefront. Most shoppers classified as goal-oriented are shopping for a particular item or purpose and haven’t much time for such activities as driving from store to store or performing thorough comparison shopping, activities that are facilitated extensively in the online environment (Childers et al, 2001). In a study by Srinivasan (et al, 2002), it was found that the wide selection available on the internet as compared to the individual physical store was a tremendous motivation to many shoppers for making their purchases online. Brynjolfsson (et al, 2003) confirmed this impression by reporting that Amazon.com was able to offer 23 times the number of book titles that were available in the average Barnes and Noble brick-and-mortar superstore. More than simply selection, however, consumers reported in other studies, such as in Chen and Dubinsky’s 2003 study, that relevant information relating to the products was another significant motivation to shop online. This was further assisted by widespread use of online recommendation tools (Hauble & Trifts, 2000). Overriding all of these features is the goal-oriented shopper’s desire to be in control of their shopping experience, regardless of the amount of time they have available in which to make their purchases (Francis & White, 2004). A consistent question throughout the literature relating to consumer behavior in deciding whether or not to purchase online remains the issue of price. Is price a significant factor in driving more shoppers to online rather than brick-and-mortar stores? Bakos (1997) theorized that the numerous search and product comparison functions available online contribute to shoppers’ ability to compare prices and thus create a more competitive and lower priced market. This assumption is based upon the theory that easily accessible price comparisons increase consumers’ price sensitivity when it comes to common products and lowers the demand for unique items that can be readily available online (Lynch & Ariely, 2000). These theories are supported by Ancarani and Shanker (2002) who discovered online prices were generally lower than offline prices, but offset by further studies (Clemons et al, 2002) that showed when additional fees such as shipping and handling or insurance were included, offline retailers had the lower prices. While some consumers undoubtedly perceive this difference in price, many may continue to shop online because of the flexibility and convenience or for other factors than price. Donthu and Garcia (1999) argued that online shoppers did not base their decision to shop online solely on the question of cost savings but instead had a number of contributing factors determining whether to purchase online or on-site. As has been discovered by such sites as Amazon, Ebay, Sears and several automobile online sellers, there are few substitutes for the ability to touch and feel an object before it is purchased, leading to one of the main reasons consumers choose not to shop online (Zeithaml et al, 2000). Shoppers cannot be fully aware of what they are purchasing online even when photos are provided. While they have the instant gratification of seeing the purchase complete page after completing the ordering forms online, and can usually see the deduction made from their bank account overnight, consumers must often wait at least a week before their product is delivered to them to discover whether the product meets their expectations (Francis & White, 2004). In addition, online shoppers who have questions regarding a product or purchase may not be able to find the assistance they require as online counterparts to the sales assistant have not yet been introduced (Francis & White, 2004), just as they find it more difficult to use the shopping experience as a means of interacting with family and friends (Nicholson et al, 2002). In addition to these issues regarding online buying behavior, there is an increasing problem of consumers overly indulging in impulse buying on the always-available internet. While impulse buying isn’t unique to the online experience, it is difficult to escape the mall when it sits in a computer within your own home and available 24 hours a day. Online purchasing is not often as straight-forward as one might think. Even though an item is offered at less-than-retail value, there are often hidden costs such as shipping and handling, shipping insurance or bank transfer fees to take into account. In addition, having the computer always handy means buying can take place at any location, such as a party, when the buyer is in any condition, such as after they’ve had a few drinks of an evening. “While logging on to go shopping after a libation or two is far less dangerous than drinking and driving, there is the potential for reckless spending” (Dunleavey, 2006), especially when inhibitions are relaxed and so many items beckon. These problems are increased when one becomes involved in auction buying, as bidding wars can frequently get out of hand, ending up with the purchaser paying far more than an item is worth simply as a matter of ‘winning’ the bid. “When shopping for bargains at an online auction site, it is just as important to know the products you’re bidding on. For example, a collector of model trucks wouldnt make a purchase based on a picture alone. An informed buyer would also want to know the manufacturer, scale, whether the model is plastic or die cast, and possibly the model’s series number and production year” (Chucala, 2004). Despite the increasing numbers of online shoppers and the relative ease shoppers encounter as they enter an online retailer site, there are several negative factors not directly related to the consumer that nevertheless affect consumer behavior when determining whether to make an online purchase. One of the primary dangers being confronted is the issue of identity theft and information mining being conducted on reputable as well as questionable sites (Wolfinbarger & Gilly, 2003). Until these issues had received some attention, buyers were recommended to make online purchases using more traditional modes of payment rather than through credit cards or online bank transfers. In more recent years, however, numerous security sites and software has been developed designed to assist retail clients build consumer confidence in making the more convenient credit card purchases over the internet, displaying small padlocks as a sign of trust or requiring specific security codes prior to accepting a payment through shopping cart technology (Wolfinbarger & Gilly, 2003). While it has become infinitely safer to make purchases online, shoppers are still cautioned to use care when entering personal information and in choosing retailers. While numerous systems have been put in place in an attempt to protect consumers from the ever-increasing sophistication of credit card fraud online, Matthew Richards (2006) reported that credit card not present (CNP) fraud combined with similar procedures by phone and mail numbers are overall on the rise. This indicates that while safeguards are in place, they are not yet effective enough to completely prevent this type of crime. “But to keep things in perspective, bear in mind that the value of online transactions is increasing at a faster rate than the amount stolen through CNP fraud – which suggests that internet retailers and shoppers are managing to keep an increasing proportion of their transactions out of the fraudsters’ hands” (Richards, 2006). Part of the reason this type of crime remains prevalent is due to the increased security systems available for vehicles make auto theft less attractive and falling prices on consumer goods such as electronics coupled with the rapidly growing market for online purchasing and the ease of setting up fraudulent ‘alternative’ sites for purchasing. While there are many theories regarding why consumers do, or don’t, decide to make their purchases online, it is clear that there are no hard and fast rules relating to the specific consumer type that will purchase online. Studies indicate that a growing number of goal-oriented shoppers tend to turn to online sources for their purchasing needs, but studies have yet to prove a single qualifying reason for this. Contributing factors encouraging online shoppers are the ease of use, the availability of information and the perception of lower prices overall, yet these are balanced by concerns of identity theft, credit card fraud, delay in delivery and the lack of tactile interaction with products. It is undeniable, however, that the trend of internet purchasers is growing and retailers will increasingly need to know the major trends in consumer behavior online if they intend to remain within this highly competitive market. 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