Consumers Attitude toward Online Shopping on Luxury Brand - Research Paper Example

| ID Table of Contents Introduction 3 1 ment of the Problem 3 2 The Aim and Objectives 3 3 Rationales 3 2.Literature Review 4 3. Research Methods 7 3.1 Interviews 8 3.2 Survey 8 3.2.1. Questionnaire design..........................................................................................8 4. Findings 9 4.1 Interviews..............................................................................................................10 4.2 Survey....................................................................................................................10 5. Discussion and Analysis 12 5.1 Interviews….……………………………….……………………………………12 5.2. Survey…………………………………………………………………………...13 6. Conclusions and Recommendations 14 References 15 Appendix 1 17 1. Introduction 1.1 Statement of the Problem Despite the popularity of the web and social media as the new and powerful means for advertising and promotion strategies, there is an opinion that it is not the right place for a luxury market because of the risk of ruining the reputation of brand (Balwani 2009). The experts believe that this opinion is a huge misconception and state that luxury brands should build a presence online. There have been carried out significant number of studies researching the advertising strategies of luxury brands, the relationship between Internet and consumer’s shopping behaviour as well as relationship between the social media and consumer’s behaviour (Kamal, Chu & Pedram 2013). However, there is still a lack of understanding regarding the attitudes of consumers towards online shopping of luxury brands. 1.2 The Aim and Objectives This research is an investigation into customers’ attitudes towards online shopping on luxury brands. The objectives of this research are: A discussion of current social media practices used by luxury brands to attract potential buyers; Identification of potential attitudes of customers towards online shopping on luxury brands. 1.3 Rationales The purpose of this research is to explore what attitudes do customers have towards the online shopping activity undertaken by the luxury brands. This research might be helpful to: Marketing and sales (and other) specialists involved to the luxury sector Marketing and sales specialists working in the luxury sector may find some interesting aspects of the consumer’s attitudes and behaviours towards online shopping of luxury brands. 2. Literature Review The Luxury Market The market of luxury goods has a huge potential for robust growth. While Europe remains the largest region for luxury brands, Asia Pacific region (especially China) show significant growth, replacing the Americas to the third largest luxury market (PR Newswire, 2011). In order to discuss and analyze the literature available already on the researched topic, it is necessary to provide a definition and brief overview of the luxury market. There are many definitions of the luxury brands; however there is lack of consensus regarding it (Hudders, Pandelaere and Vyncke, 2013). Luxury brands are perceived as the brands that can be characterized by exclusivity, scarcity, craftsmanshift, sophistication, comfort, uniqueness, refinement, excellent quality, rarity, aesthetics, durability, handicraft, elegance and premium price (Hudders, Pandelaere and Vyncke, 2013). However, Hudders, Pandelaere and Vyncke (2013) reinforce that sometimes these criteria are not met by the luxury brands even though they are referred to this category. Functional Theories of Attitude Towards the Luxury Brands The World English Dictionary provides several definitions and common interpretations of the word “attitude” among which the following description is given “the way a person views something or tends to behave towards it, often in an evaluative way” (Dictionary.com n.d., n.p.). This definition is quite clear and simple for understanding and will be applied in this research. Therefore, for exploring the consumer’s attitudes towards the online shopping on luxury brands there will be explored the way a consumer views online shopping of luxury brands and how he tends to behave towards it. The theories of attitude towards the luxury brands, discussed in the literature, are usually driven by two functions: the social-adjustive and the value-expressive functions (Seung-A 2012). Social-adjustive function implies self-presentation attitude, whereas an individual’s motivation towards buying the luxury brands is based on the desire to gain social recognition in specific environment and to demonstrate a particular social status. Value-expressive function attitude toward luxury brand implies self-expression attitude, where consumer’s motivation to purchase is based on the desire to express himself/herself and to communicate the unique identities or values of the luxury item to others (Seung-A 2012). These functional theories of attitude towards luxury brands provides an insight for further research, as implies that consumers of luxury brands might purchase the luxury brands for two different reasons: to show off and to express themselves. In May 2013, Urban Land Institute has carried out a research on shopping attitudes among the modern generation, the so called Millennials – “those born from 1980 thru 2000, a span of 20years” (Miller & Washington 2014, 302). According to the results of this research, 91% made online purchases during the first half of the year, while 45% spent more than hour per day surfing retail-oriented websites. Taking into consideration the tendency that more households and younger Millennials tend to be have an annual income higher than $100,000 (Miller & Washington 2014), it is possible to suggest that the target audience of the luxury brands tend to spend much more time online and prefers shopping online. The new generation is using Internet not just for shopping purposes, but also for researching goods and services, comparing prices, showing off their purchases to peers, discussing new trends and sharing the information (Miller & Washington 2014). Social Media and Ecommerce in the Luxury Sector Luxury brands launch online shops more actively in order to be capable to engage with their target audiences. With the globalisation and travel development, luxury brands are empowered to target not just specific country or region, but the whole globe. By introducing online service, luxury brands enable their potential consumers to purchase the desired item and to order delivery of this item to the country or city where there the physical store of the specific luxury brand is not opened. In addition to offering online shopping options, luxury houses use social media to engage with their target audience (PR Newswire 2011). Facebook, Twitter, YouTube, Cyworld, Happy Network – all are the names of the social media outlets that are globally used by the online community (Kamal, Chu & Pedram 2013). These platforms are widely used not only by its users but also by online advertisers who tend to establish and build long-term relationships with their target audiences through the online channels (Kamal, Chu & Pedram 2013). The experts explain that advertisers and marketers of luxury brands increasingly use social media platforms, e-commerce and mobile marketing as the instruments for engaging with potential consumers and e-commerce purposes (Kamal, Chu & Pedram 2013; Warc 2012). According to the survey of luxury brands and retailers, carried out by Drapers, 97.1% of luxury brands were active on Twitter, 94.3% on Facebook, 57.1% on Pinterest, 37.1% - on Instagram and Google+ (Warc 2012). By using social platforms the majority of operators in the luxury segment were aiming to build brand awareness (97,1%), while almost half of them focused on sales (45,7%) luxury (Warc 2012). Another research carried out by McKinsey also has shown that ecommerce plays an increasingly stronger role in shaping the prospects of the luxury market, where the market share of the industry was forecasted to grow from 3% in 2009 up to 5% in 2011 (Warc.com 2011). Popularity of the social media among potential luxury brand consumers indicates that individuals carry out their own research online, even though they may finally buy the chosen item via traditional offline stores (Seung-A 2012). This widespread phenomenon is known to be “Research Online and Purchase Offline” (ROPO) (Seung-A 2012). While this approach implies that the final purchase will be done in the retail store, it doesn’t exclude the fact that the consumer will make a positive decision towards buying the item online. Luxury Buyers’ Behaviour Online Pedraza (2007) has carried out a research where he has found out that Internet was the most preferred way for researching luxury brands online. Thus, for example, people earning more than $ 500,000 a year were more likely to use the web for research and shopping, whereas: 80% did research of luxury goods online; 71% purchased luxury goods online; and 62% bought luxury services online (Pedraza 2007). Another survey of more than 1600 affluent customers was carried out by the Unity Marketing in 2010. The results have shown that affluent luxury consumers tend to spend more time shopping online, namely, approximately 4.2 hours shopping online per week, whereas “heavy” users spent 9.5 hour (GCI 2010). Even though the results of these studies provide only dry numbers and percentage rates, it illustrates that luxury buyers are actively using the web for shopping purposes and therefore, their attitude towards it can be viewed as positive. The research carried out by Uyenco, Goulet and Charlton (2008) has shown that in addition to researching luxury brands and shopping online purposes, consumers seek communication with brands and luxury retailers through event invitations and email newsletters; also consumers seek communication with other Internet users about luxury goods and brands through interchanging images and product links to their friends through the social media. Customer’s Expectations While there is a gap in the literature review in relation to exploring the attitudes of customers towards shopping of luxury brands online, there are some insights on what are their expectations in relation to the discussed issue. According to one New York based digital marketing agency, “consumers expect to be wowed by every interaction, and they expect the same perfection, personal attention and level of service whether on a brands website, social media page or in-store, and whether on a tablet, smartphone or laptop” (PR Newswire US 2013, n.p.). Moreover, the heavy users of shopping online luxury brands are males under 35 as many men don’t like going to the stores for shopping. Thus, the online service enables this segment to save their time and nerves, still spending a lot of money on luxury brands. The category of consumers who tend to purchase online luxury goods value convenience, speed, and 24/7 access to merchandise and luxury brands (Danziger cited by GCI 2010). Despite the opportunities offered by the development of IT, there are some challenges that the luxury brands face while entering the online environment. The major challenge relates to the nature of the luxury concept which implies exclusivity rather than mass access. By offering luxury brands for purchase online, potential consumer may devaluate the brand assuming that now it is accessible to a broad population (Balwani 2009). 3. Research Methodology There are many different research methods that can be applicable in this type of research. However, there were identified two major research methods that are viewed as the most appropriate for achieving the primary aim and objectives identified at the beginning of the research. The first research method is telephone interview method. Interview is a qualitative research method which is used to explore the views, motivations, beliefs, attitudes and experiences of individual participants on specific matters (Gill et al., 2008). Taking into consideration that the research is devoted to investigation of consumer’s attitudes it is possible to claim that this research method would be effective research method. The second research method, chosen for this research, is web-based self-completion questionnaires. Survey through the questionnaires allows for a greater geographical coverage than telephone interview, is cheap in administering, provides greater anonymity, and enables to reduce biasing errors (Phellas, Bloch and Seale, 2011). Combined adoption of these two research methods enables the researcher to gain both quantitative and qualitative data. Interviews will provide background information for formulating questionnaire for the survey. 3.1 Interviews The research was done by interviewing 3 individuals via the telephone. The interviewees were individuals aged from 21 to 35 year old living in the UK, in different cities. The interviews lasted for maximum 15 minutes. Responses were recorded on the Dictaphone and later transferred to the computer and analyzed. The structure of the interviews was informal as the aim of the interview was to gain a general understanding of consumer’s attitude towards luxury brands, use of digital marketing by the luxury brands, and practice of online shopping of luxury brands. 3.2 Survey The research was done using survey method where 30 respondents were asked to fill in answers to the electronic questionnaires. Respondents were free to choose time suitable for the survey, as they were provided with a link for the webpage with access to the questionnaire. The structure of the questionnaire was close ended (see Appendix 1). The respondents were luxury consumers aged between 18 to 35 years. 3.2.1 Questionnaire design Questionnaire design development was primarily based on the results of the literature review. Literature review has provided background information for questions development. Questions from 1 to 3 provide general information about the sample of the survey, mainly: their location, their gender, and their age. These questions enable the researcher to assess the population of the survey and understand how well representative the sample is. Question 4 provides the researcher with the information of what is the household income of the respondents. This information is important for the study as the household income is highly correlated with the individual’s ability to purchase luxury brands. Question 5 serves as a filter question for further research as it helps to understand whether the respondents purchase luxury goods. This question is critical for research as it enables to focus only on the respondents who are purchasing luxury goods as the answers of specific category of respondents meets the research criteria. Questions 6 and 7 help to gather information about respondents’ behavior towards purchasing luxury brands, namely spend levels and spend frequency. These questions were viewed as important elements contributing to understanding the consumer’s attitude towards luxury shopping. Question 8 helps the researcher to evaluate what share of respondents perceive online shipping of luxury brands as a positive aspect in the luxury market. This information is also critical to the research as it partially provides answer to the research question related to the consumer’s attitude towards shopping online on luxury brands. Question 9 helps to differentiate those respondents who have ever purchased luxury goods online from those who have not. This information enables the researcher to identify the key drivers of purchasing luxury goods online based on the information provided by real users of this service. Understanding of key drivers of purchasing luxury goods online can give an insight for further research and analysis. Ethical issues The interview and survey both were anonymous and the researchers have promised to ensure confidentiality to the respondents participating in the research. It was important to keep confidentiality because the responses of participants contained some sensitive personal information (such as annual income of the individuals). In order to ensure confidentiality and adherence to the ethical standards, all names and contact information of the participants has been deleted. 4. Findings 4.1 Interviews The main findings of the interview with luxury fashion consumers have given an insight for development of survey questions. The interviewees were asked about their attitude towards luxury brands and experience of shopping online the luxury brands. It has been found out that all four respondents have used Internet for searching luxury items on the luxury websites and official websites of the luxury brands, while only three of the respondents have had experience of shopping luxury items online. The respondent who has shown interest in luxury brands but did not dare to buy luxury item online explained that he was afraid of the risk of online banking fraud and felt more confident of going to the offline store to buy the selected luxury product. This view has shown that there was a proportion of consumers who were not ready to take the risk of paying large sums online and lack confidence in this system. None of the respondents have confirmed the view that online shopping and e-commerce practiced by the luxury brands were undermining the exclusivity and other attributes common for the luxury brand. One of the respondents have stressed that he used to do online shopping of luxury brands quite often as he could find some exclusive items that were available online but were not available in the local offline stores. 4.2 Survey The findings of the study can be divided into several key categories, including: demographics and personal information about survey participants; respondent’s preference to purchase luxury goods; spend levels on luxury goods; spend frequency on luxury goods; attitude towards shopping online on luxury brands; practice of shopping online on luxury brands; drivers of purchasing luxury goods online. Demographics of the sample The findings of the survey have shown that out of 30 respondents: 27 respondents lived in the UK, and 3 respondents lived outside the UK; 12 were males and 18 were females; 4 respondents were aged between 18-22; 11 respondents were aged between 23-27; 15 respondents were aged 28-35. 5 respondents had household income £40,000 or below; 16 respondents had household income between £40,000 to 100,000; and 9 respondents had household income above £100, 000. Respondent’s preference to purchase luxury goods Out of 30 respondents who have filled in the questionnaire, 22 responded that they purchased luxury brands, while 8 stated that they did not. These 8 respondents who have stated that they did not purchase luxury goods were asked to stop filling the survey at the question number 5. Spend levels on luxury goods Out of 22 respondents who stated that they purchased luxury goods: 4 spent up to £1000 per year on luxury goods; 12 respondents spent between £1000 - 3000 on luxury goods per year; 6 respondents spent more than £3000 on luxury goods per year. Spend frequency on luxury goods On the question how frequently respondents purchase luxury goods, there were given the following responses: None of the respondents purchased luxury goods twice a week; 4 respondents did luxury purchases once a month; 18 respondents did purchases several times per year. Attitude towards shopping online on luxury brands 20 respondents out of 22 in total have claimed that they have positive attitude towards online shopping on luxury brands, while 2 have stated that they don’t care implying that they have neither positive nor negative attitude. Practice of shopping online on luxury brands Out of 22 respondents in total, 17 have confirmed that they had practice of purchasing luxury goods online, while the rest 5 respondents have stated that they never purchased luxury goods online. These 5 respondents were kindly asked to stop filling in the questionnaire on the question #9. Drivers of purchasing luxury goods online Out of 17 respondents left for answering the last question regarding the drivers for making purchases of luxury brands online, 9 respondents have preferred comfort; 4 respondents have chosen time saving as the major driver 3 have chosen non-availability of desired luxury item in the local store/city 1 respondent claimed that emotional stimuli was the key driver of purchasing the desired luxury item online. 5. Discussion and Analysis 5.1. Interview Interview as a research method has given an insight for the development of survey questionnaire. However, it was interesting to find out that one of the respondents had felt fear towards purchasing expensive luxury brands online due to the increased concerns of online banking frauds. The response of this interviewee (who was the youngest one in the group - 20 years old), indicated that attitude and consumer’s behaviour towards online shopping of luxury brands depends also on certain stereotypes and misconceptions. This theme is the subject for further research and investigation. Another important finding was discovered when one of the respondents informed that he used to do online shopping of luxury brands quite often as he could find some exclusive items that were available online but were not available in the local offline stores or in the city where he lived. This finding is also a subject to a different research, whereas research population should be chosen from smaller cities and even can be from less developed countries, where accessibility to luxury stores is limited. 5.2. Survey The survey results have shown that sample chosen for the research represented the target audience of the luxury brands and therefore the findings of the study might be helpful marketing and sales, as well to other specialists operating in the luxury market. The proportion of women was higher than the proportion of men and indicates on the fact that female participants were more actively involved in the luxury market. However, the share of males of 40% balances sample population and enables to obtain more objective views. According to the study results, 13% of respondents were aged between 18-22, 37% - aged between 23-27; and 50% - 28-35. The age category between 18 to 35 has been identified in the literature review as one of the major target audiences of luxury brands and therefore, the findings should be viewed as relevant to the study. By the household income criteria 17% of respondents had £40,000 or below; 30% of respondents had between £40,000 to 100,000; and 53% of respondents had household income above £100, 000. The share of respondents having high household income also is indicating that sample might provide good insight in relation to luxury brands and consumers’ attitude towards purchase practices. The survey results have shown that 73% of respondents purchased luxury brands. Further, these 73% were converted into 100% as the rest of respondents were asked to quit the survey. More than half (54%) of respondents prefer to spend between £1000 - 3000 on luxury goods per year; while only 27% of respondents prefer to spend more than £3000 on luxury goods per year. While nobody preferred to purchase luxury goods twice a week, only 18% of respondents preferred to purchase luxury brands once a month, while the rest of more than 80% did purchases several times per year. The major findings related to the research issue has shown that 91% of respondents had positive attitude towards online shopping on luxury brands, while the rest stated that they did not care. It is important to note here that none of respondents have reflected negative opinion towards the researched issue. Thus, it is possible to suggest that all of the respondents have had positive or neutral online shopping experience while purchasing luxury brands, and none of the respondents views this practice as something that undermines exclusivity and other attributes relevant to the luxury brands. Also, it was interesting to find out that nearly half of respondents (53%) who have practiced online purchase of luxury brands valued comfort as the major factor that was driving their decision towards online shopping. 23% of respondents were driven by the time saving factor, while 17% of respondents have chosen non-availability of desired luxury item in the local store/city. Taking into consideration the literature research findings discussed at the beginning of the research it is possible to suggest that the time factor is correlated with the gender. The survey has shown that 4 out of 3 respondents who selected time saving as the major driver were males. 6. Conclusions and Recommendations The research has investigated the customer’s attitudes towards online shopping on luxury brands. There has been provided literature overview of the current social media practices and its popularity and usage among the potential and existing buyers of the luxury brands. Also, there has been carried out a research identifying the attitudes of customers towards online shopping on luxury brands. The interview research has revealed that some potential luxury buyers had felt fear towards purchasing expensive luxury brands online due to the increased concerns of online banking frauds. Another important finding was the fact that online shopping is a great opportunity for this having money but having no access to the offline store. Both these findings are the subject to a different research and investigation. The survey results have shown that 91% of respondents had positive attitude towards online shopping on luxury brands, while the rest stated that they did not care. It is important to note here that none of respondents have reflected negative opinion towards the researched issue. Thus, it is possible to suggest that all of the respondents have had positive or neutral online shopping experience while purchasing luxury brands, and none of the respondents views this practice as something that undermines exclusivity and other attributes relevant to the luxury brands. Also, it was interesting to find out that nearly half of respondents valued comfort as the major factor that was driving their decision towards online shopping. These findings could be utilized by researchers and marketing specialists for further investigation and discussion. Also, it might be helpful to take into consideration some of the findings for improving online advertising strategies of the luxury brand. References Balwani, Samir 2009, Understanding Luxury Brands and Social Media, Mashable. Available at http://mashable.com/2009/07/02/luxury-brands/. Dictionary.com, (n.d.). The definition of attitude. [online] Available at: http://dictionary.reference.com/browse/attitude [Accessed 21 Jul. 2014]. GCI, 2010, “Best luxury consumers may never visit store, Business Insights: Essentials, 2010, 9, p. 6. Gill, P., Stewart, K., Treasure, E. and Chadwick, B. (2008). Methods of data collection in qualitative research: interviews and focus groups. Br Dent J, [online] 204(6), pp.291-295. Available at: http://dx.doi.org/10.1038/bdj.2008.192 [Accessed 21 Jul. 2014]. Kamal, S., Chu, S. and Pedram, M. 2013, “Materialism, attitudes, and social media usage and their impact on purchase intention of luxury fashion goods among American and Arab young generations”. Journal of Interactive Advertising, 13(1), pp.27-40. Miller, Richard K., and Kelli Washington. 2014. "PART VIII: GENERATIONAL FOCUS: 55. MILLENNIAL CONSUMERS." Consumer Behavior 302-307. Small Business Reference Center, EBSCOhost (accessed July 21, 2014). Pedraza, M. 2007, “Internet habits of the wealthy”. Admap, (481). PR, N 2013, PM Digital Releases 4th Annual Trend Report: 2013 Luxury Brands Online, PR Newswire US, 25 September, Regional Business News, EBSCOhost, viewed 20 July 2014. PR, N 2011, Global Luxury Retailing: Market Size, Brand Strategies and Competitor Performance, PR Newswire US, 29 November, Regional Business News, EBSCOhost, viewed 21 July 2014. Phellas, C., Bloch, A. and Seale, C. (2011). Structured Methods: Interviews, Questionnaires and Observation. 1st ed. Chapter 11 Seung-A, A. 2012, "The potential of social media for luxury brand management", Marketing Intelligence & Planning, vol. 30, no. 7, pp. 687-699. Uyenco, B., Goulet, O. and Charlton, A. (2008). Quality insights to solve a luxury problem - marketing to affluent consumers in the digital age. ESOMAR: Worldwide Multi Media Measurement (WM3). Warc, 2012, “Digital attracts luxury groups in UK: News from warc.com”. [online] Warc.com. Available at: http://www.warc.com/ [Accessed 20 Jul. 2014]. Warc.com, 2011, “Luxury brands must adapt: News from warc.com”. [online] Available at: http://www.warc.com/ Appendix 1 Questionnaire We are completing a research project aiming to explore the consumer’s attitudes towards online shopping practice adopted by the luxury brands. Please, fill in the answers to the questions offered below. 1. Do you live in the UK or outside the UK? A. Yes B. No 2. Your sex: A. male B. female 3 Your age: A. 18-22 B. 23-27 C. 28-35 4. Your household income: A. up to £40, 000 B. £40,000 to 100,000 C. Above £100, 000 5 Do you purchase luxury goods? A. Yes B. No (if the answer is No, please, stop here) 6 How much do you spend on luxury goods per year? A. Up to £1000 B. £1000-3000 C. £3000 and more 7 How often do you purchase luxury goods? A Twice a month B. Once a month C. Several times per year 8. Do you perceive online shopping of luxury brands as a positive aspect in the luxury market? A Yes B. No C. Don’t care 9. Have you ever purchased luxury goods online? A. Yes B. No (if the answer is No, please, stop here) 10. What was the most important driver for you while purchasing luxury goods online? A. Comfort B. Time C. Not available in the local store/city D. Emotional stimuli Read More