Factors That Affect Online Shopping Decision Making Marketing Essay

Online shopping is the procedure that consumers directly buy goods and services from sell or services from a seller in real time, without an intermediary service such as supplier, through using the network for internet. Online retailing are similar as online shop, e-shop, e-store, internet shop, and web-shop, and web store, online store buying product or services at a shopping center. This marketing strategies is one of the process is called business to consumer (B2C) online shopping. The largest online retailing corporations such as E-bay and Amazon .com are one of the famous online businesses located in US based. At the moments, the internet based electronic commerce environment enables consumers to search for information and purchase products or services through direct interaction with the online store. That is, consumers’ purchases are mainly based on cyberspace appearance such as pictures, image, quality information, and video clips of the product, not on the actual experience (Lohse and Spiller, 1998; Kolesar and Galbraith, 2000). Shopping depends, to a great extent, on user interfaces and how people interact with computers (Hoque and Lohse, 1999; Griffith et a., 2001). Moreover, the characteristics of information presentation, navigation, order fulfillment in an interactive shopping medium are considered a more important factor in building electronic commerce trust than in the traditional retailing (Alba et al., 1997; Reynolds, 2000).

In the literature on electronic commerce, there have been active on research on consumers’ shopping experience and their evaluation based on perception about the online shopping website (Jarvenpaa and Todd, 1997; Szymanski and Hise, 2000; Griffith et al., 2001). This line of research considers consumers’ information processing style, shopping patterns, storefront preferences, and related areas for insight into developing more attractive, user friendly, and successful internet stores. However, few studies provide empirical validation of consumer behaviors in the web based online shopping context. We adapt the theory of user information satisfaction and consumer purchase behaviour.

We investigated how the content and presentation product and services information affect consumers’ willingness to patronize an online store. Finally, we identify and discuss several factors affecting consumers’ purchase behavior as well as their perception and satisfaction.

Besides that, businesses with the most experience and success in using e-commerce are beginning to realize that the key determinants of success or failure are not merely website presence and low price but also include the electronic service quality (e-service quality) (Yang, 2001; Zeithaml, 2002). Santos (2003) defined e-service quality as overall customer assessment and judgment of e-service delivery in the virtual marketplace. Service quality is an elusive and abstract construct that is difficult to explain and measure (Cronin and Taylor, 1992).

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The SERVQUAL model first developed by Parasuraman et al. (1988) has been widely tested as a means of measuring customer perceptions of service quality. The SERVQUAL model contains five dimensions: namely tangibles, reliability, responsiveness, assurance, and empathy. Research is required on the influence of e-services on all customer responses such as perceived service quality, customer satisfaction, and purchase intentions (Parasuraman and Grewal, 2000; Jeong et al., 2003). Understanding the determinants of service quality, customer satisfaction, and purchase intentions for online shopping are important for both marketing researchers and online stores managers. Moreover, previous studies have revealed that service quality in online environments is an important determinant of the effectiveness of e-commerce (Yang, 2001; Janda et al., 2002).

Background of Research and Research Question

In the recent year, online shopping is famous way whereby online shoppers using advanced technology such as internet directly purchase the goods and services they want from a seller without intermediary market. Online shopping provides variety goods and convenience. Customer can buy anything they want around the world through the internet.

In general, shopping has always targeted to middle class and upper class women. Nowadays, shopping has evolved with the growth of technology. Thus, online shopping becomes favourable for everyone if they able access with has a computer, a bank account and a debit card.

Many studies discuss about factors influences online shopping. Most of those studies have tended to measure variables of influence consumer purchase intention which included social, cultural, personal, psychology, and so on. However, compare with traditional shopping, the studies found that online shopper restrict with social, cultural environment, and psychological factors.

In order to achieve the objective of research, this study addresses the following research questions:

What factors are those affect consumers’ online shopping decision making?

Research Objective

To determine whether trust affects online shopping decision making.

To determine whether personal involvement affects online shopping decision making.

To determine whether website design affects online shopping decision making.

To determine whether website quality affects online shopping decision making.

To determine whether website security affects online shopping decision making.

Significance and Justifications for the Study

Nowadays, there are more and more people prefer online shopping especially teenagers. This study is conducted on the student’s decision making when purchased online. This study can provide some useful guidelines and tips to consumer who like to online shopping. Besides that, the study is also provides some potential guidelines to online sellers about consumer behaviors in the Web-based online shopping context. Consumer-purchased online are mainly based on the cyberspace appearance such as pictures, images, quality information, and video clips of the product, not on the actual experience (Lohse and Spiller, 1998; Kolesar and Galbraith, 2000). Decision making is the stage before consumers commit to online transaction or purchasing, and sometimes considered to be a behavioral stage. The study based on decision making of online shopping is becomes important because student more intend to buy things through internet. After a few successful transactions, a consumer starts to feel safe with the service provider or supplier (Ravald and Gronroos, 1996). When the consumers trust the online website, they know that this online seller is able to fulfill their needs and wants. Finally, they become committed to the specific website.

The study is tending to offer the factors and important ways for consumer on how to purchase things through internet wisely. On the other hands, this study is also provides some useful ways to online seller about consumer buying behavior. The distributor should identify his potential consumers and continuously try to understand them better than his competitors (Chetochine, 1992; Hallerman, 1994), which ultimately may favors the buyer’s attitude towards the online website. Understanding the characteristics of potential online consumers can help businesses to target potential markets accurately.

Amichai-Hamburger (2002) indicated that the personality of Internet users plays an important role in their online behavior. This study can provide inputs for government to educate the young generations on spending their money wisely and effectively by considering the different aspects when they purchased online. Students and consumers should think twice and making decision from different aspect such as website quality when they purchased online.

Research Scope

The study was conducted in Multimedia University Melaka. The target population of the study was 100 students from MMU students. Set of question will be designed and those participants were asked to answer on their monthly allowance, gender, and other relevant factors that they will consider when they make decision to do online shopping. Each participants is required to answer from the aspects of personal involvement, trust, website design, website quality, and website security while they making decision in online shopping.

1.6 Operational Definition

Key Terms

Definitions

Sources

Online Shopping Decision Making

Online shopping decision-making includes information seeking, comparison of alternatives, and choice making.

(Na Li and Ping Zhang, 2002)

Personal Characteristic – Trust

Trust is characterised in terms of the expectations and willingness of the trusting party in a transaction, the risks associated with acting on such expectations, and the contextual factors that either enhance or inhibit the development and maintenance of trust.

(Lee and Turban, 2001)

Website Design

In the Internet market, retailers’ websites have become a valuable channel for selling and interacting with customers, and an important medium for communicating with the general public as well as potential consumers.

(Hoque and Lohse 1999; Jarvenpaa and Todd 1996/97)

E-Service Quality

The e-service quality represents the trust cue that conveys the trustworthiness of the site and the system to customers.

(Corritore et al., 2003)

Product / Personal Involvement

Individual motivation regarding an object where that motivational state is activated by the relevance or importance of the object in question.

(Koufaris, 2002)

1.8 Organisational of Research

The research report is covered in five chapters. The chapter one in this study is included introduction, background of the study and research question, research objective, significance and justifications for the study, research scope, and operational definition.

Chapter two is comprised the introduction, journal analysis consists of dependent variable (online shopping decision making), personal characteristic (trust), personal involvement, website design, e-service quality, and e-service security which stated the findings of previous researchers. In addition, this study also show that the relationship between trust and online shopping decision making, the relationship between personal involvement and online shopping decision making, the relationship between web site design and online shopping decision making, the relationship between website quality and online shopping decision making, and the relationship between website security and online shopping decision making as well as the summary.

Furthermore, chapter three is comprised the introduction (theoretical frameworks, hypothesis development), research design, research instrument and sampling method, data collection method (literature review, questionnaire survey for quantitative data), data analysis method (what is the software to be used, frequency analysis, reliability analysis, quantitative analysis, mean analysis, Pearson correlation coefficient, and multiple regression analysis).

Next, chapter four is the results from the analysis that has matched with the hypothesis of study. This study is included introduction, descriptive statistics, reliability analysis, mean analysis, and multiple regression analysis.

Lastly, for chapter five is the summarization of research findings, which consists introduction, research findings, knowledge implications, managerial implications, limitations of the study, recommendations for the study, and conclusion.

Chapter2 Literature Review

2.1 Introduction

This chapter will cover the literature review of online shopping decision-making which is the dependent variable of our study. Our literature review will include the independent variables which are trust, personal involvement, website design, website quality, and website security. Besides, we will discuss about the relationship between dependent variable and independent variables.

2.2 Dependent Variable: Online Shopping Decision Making

Advances in internet technologies have grown tremendously over the years. Not surprisingly, one application of these Internet technologies that has grown right along with them is that of online shopping.

Xu, Y. and Paulins, V. A. (2005) found that more than half of college students in their study mentioned credit card security and return policy concerns. Limited social activities were also noted when shopping online for apparel products. About 30% of the participants were concerned about merchandise quality and customer service support. While about half of the respondents thought shopping online was convenient, only about 20% considered online item price as lower than that of items sold in traditional stores. About 50% of the respondents agreed that online shopping can offer more merchandise options than traditional shopping.

Other than these, Koufaris (2002) introduces the theory of Flow based on the theoretical frame TAM, and performs an empirical research on 300 consumers from certain online purchasing website. The results show that the pleasure and the utility of online purchasing have a great effect on the purchasing intention of consumers (Koufaris, 2002). Form the sequence of influences online shopping, web site design is rank 14th on the influencing factors of online consumers’ purchasing behaviours. And result shows that influence the online shopping is 0.012209.

On the other hand, shopping at an online store is like shopping through a paper catalogue because both involve mail delivery of the purchases and in both cases customers cannot touch or smell the items (Spiller and Lohse, 1997). This study provides empirical validation of consumers behaviors in the web based online shopping context .We adopt the theory of user consumer purchase behavior to explain the consumers respond to online shopping services. Consumers tend to engage in relational behaviors to achieve greater efficiency in their decision making, to reduce information processing, to achieve more cognitive consistency in their decision, and to reduce the perceived risks associated with future choices (Sheth and Parvatiyar, 1995). After a few successful transactions, a consumers starts feel safe with the services provider or supplier (Ravald and Gronroos, 1996). When consumers trust a company, they know that this company is able to fulfil their needs and wants and eventually, they become committed to the company.

The online shopping environment enables consumers to reduce their decision -making efforts by providing vast selection, information screening, reliability, and product comparison (Alba et al., 1997). Since online shoppers mainly interact with the web-based computer system and cannot physically touch or feel actual products, they make decisions mainly with information provided electronically by the online store. Thus, consumers may reduce the cost of information search and the effort in making purchasing decisions since the Internet provides screened and comparison information for alternatives. The discussion about the critical factors in consumer purchase behavior in an electronic commerce environment needs to be focused on the availability of information (Wolfinbarger and Gilly, 2001).The availability of information but also convenience and personalization for retaining customers. It depends on the degree to which information can be employed by consumers to predict their probable satisfaction with subsequent purchases. Consequently, the success of online stores will be determined by the ability to tailor their information to meet the consumers’ needs. But, several factors determine the predictive value of the information with no one type of information to be uniformly valued by all consumers (Kolesar and Galbraith, 2000).

Finally, although the consumers may receive a tangible good at the end of the online transaction, the benefits to the consumers are not in purchased good, which could have been obtained through alternative channels (Kolesar and Galbraith, 2000). Instead, the unique benefits to the consumer are in the performance of the online shopping transaction itself such as saved time, increased convenience and reduced risk of dissatisfaction (Wolfinbarger and Gilly, 2001). Thus customer service and promotion are also critical in designing an online store (Jarvenpaa and Todd, 1997; Lohse and Spiller, 1998).

2.3 Journal Analyse

2.3.1 Personal characteristic-Trust

Worchel (1979) has classified trust into three categories based on the perspectives of personality theorists, sociologists and economists, as well as social psychologists. Trust is an expectation of the occurrence of an event or a relationship (Deutsch, 1960). The decision to trust is a personal decision dependent on the individual’s expectation of the outcome (Zand, 1972). Trust is characterised in terms of the expectations and willingness of the trusting party in a transaction, the risks associated with acting on such expectations, and the contextual factors that either enhance or inhibit the development and maintenance of trust (Lee and Turban, 2001).

Next to satisfaction of customer, trust has been brought forward as a precondition for patronage behavior (Pavlou, 2003) and the development of long-term customer relationships (Doney and Cannon, 1997; Papadopoulou et al., 2001; Singh and Sirdeshmukh, 2000). The role of trust could be even more important in an e-commerce setting, since e-customers do not deal directly with the company, or its staff (Papadopoulou et al., 2001; Urban et al.2000).

Besides, the trust concept has been studied in a number of disciplines, and various definitions have been proposed (Lewicki et al., 1998). Trust is consistently related to the vulnerability of the trust or (Bigley and Pearce, 1998; Singh and Sirdeshmukh, 2000), because without vulnerability of the trust or upon the trustee, trust becomes irrelevant. Trust also has been found to be important for building and maintaining long-term relationships (e.g. Geyskens et al., 1996; Rousseau et al., 1998; SinghandSirdeshmukh, 2000).

Moreover, trust appears to be especially important for creating loyalty when the perceived level of risk is high (Anderson and Srinivasan, 2003). E-trust is expected to affect customers’ willingness to purchase online (Reichheld and Schefter, 2000). According to Corritore et al. (2003), risk is sparsely studied in the online literature. The need for trust presupposes inherent risks in taking the action and, therefore the effects of different types of risk on e-trust need further investigation.

Trust is vital to online settings (Collier and Bienstock, 2006; Gefen and Straub, 2003) and trust has been identified as a key factor in online shopping (Gefen et al., 2003b; Gefen and Straub, 2003; Grabner-Kraeuter, 2002; Pavlou, 2003). More specifically trust is a key enabler in relations between geographically dispersed people in the virtual community (Gefen et al., 2003b; McKnight and Chervany, 2001; Swan and Nolan, 1985).

2.3.2 Personal Involvement

The concept of personal involvement was first proposed by Zaichkowsky (1985, 1994) as “individual perceptions of the relevance of an object based on inherent needs, values and interests (p.342). Koufaris (2002) used the term “product involvement” as a substitute for personal involvement and proposed the following as its generally accepted definition: “individual motivation regarding an object where that motivational state is activated by the relevance or importance of the object in question (p.211)”. The same method was employed by Chaudhuri (2000) and Wang et al. (2006), both using the term “product involvement” to indicate the same concept. Chaudhuri (2000) identified a correlation between information search and product involvement. That is, consumers with high product involvement also have high levels of intention to collect related information online.

Personal values provide the motivation that ultimately determines an individual’s online shopping behavior. These personal values do this by providing motivation to seek certain type’s benefits by assessing certain types of attributes. The consumer’s assessment of these attributes affects shopping behavior such as re-patronage. Besides that, Shim, Eastlick, Lotz, and Warrington (2001) found that individuals who frequently search for information online have high acceptance of online shopping. Similarly, Koufaris (2002) indicated that individuals with higher product involvement have more positive shopping experiences and greater interest in specific products.

Last but not least, Wang et al. (2006) identified consumer product involvement as one of the determinants of online financial service purchases. Thus, we hypothesized that: H1: High levels of product involvement positively affect user attitudes toward online shopping.

2.3.3 Website- website design

Web design elements are defined as the features, components, and information used in developing e-commerce websites, which may influence customers purchase behavior through the reinforcement of their positive beliefs.In the Internet market, retailer’s websites have become a valuable channel for selling and interacting with customers, and an important medium for communicating with the general public as well as potential consumers (Hoque and Lohse 1999; Jarvenpaa and Todd 1996/97). Moreover, Gwo-Guang Lee and Hsiu-Fen Lin (2005) noted that although web site design had only a minor effect on online shopping, its importance should not be underestimated. Online stores should pay careful attention to this aspect. In particularly, web site design should be readable, and the user interface should be visually appealing and tidy, allowing customers to use the web site easily.

A company’s website design and content reflect its business strategy as well as its operational policies, such as pricing and service. Hence, design of a company’s website can have a critical impact on the firm’s success in the Internet market. Since the ultimate goal of an e-commerce website is the customer’s purchase action, insight into how a website’s design impacts potential customers’ purchase behavior could be of great value. Web design elements that provide facilitating resources, such as product customization or facilities for payment, may reduce the mental efforts and increase the customer’s sense of control and power regarding the availability of resources, thus reinforcing the behavior intention (Taylor and Todd 1995; Triandis 1977).

The connection between web elements and beliefs provides us with a theoretical foundation in that web design elements could be grouped into five categories, as promotion, service, informational interpersonal influence, self-efficacy, and resource facilitation (Alba et al. 1997; Jarvenpaa and Todd 1996/97; Keeney 1999; Lohse and Spiller 1998).Web site design quality is crucial for online stores (Than and Grandon, 2002). Web site design describes the appeal that user interface design presents to customers (Kim and Lee, 2002). The influence of web site design on e-service performance has been studied extensively. For instance, Cho and Park (2001) conducted an empirical research of a sample of 435 internet users to examine the e-commerce user-consumer satisfaction index (ECUSI) for internet shopping. They found that the customer satisfaction is assessed using the quality of web site design.

A recent empirical study found that web site design factors are strong predictors of customer quality judgments, satisfaction, and loyalty for internet retailers (Wolfinbarger and Gilly, 2003).From the angle of website technology, Swami Nathan studies the factors that influence consumers’ online purchasing based on characteristics of consumers, and results show that the competitive price and the quick cancel of orders are the key for consumers’ online purchasing (Swami Nathan. E. Lepkowska – White & B.P Rao, 1999). The rapid explosion of e-commerce and the growth of online sales have changed consumers purchasing behavior (Bellman et al. 1999). In the Internet market, retailer’s websites have become a valuable channel for selling and interacting with customers, and an important medium for communicating with the general public as well as potential consumers (Hoque and Lohse 1999; Jarvenpaa and Todd 1996/97). Based on the TAM model, Lin & Lu (2001) performs an empirical study on 139 online consumers, from the angle of website quality affecting consumers’ online purchasing intention, and results show that the quality of website influences the effects of TAM model’s main variables PEOU and PU on the purchasing attitudes and intentions (Lin, Chuan-chuan J & Lu H., 2000).

2.3.4 Website- website quality

E-service quality is commonly defined as how well a delivered service level matches customer expectations. In another study, Song &Zahedi (2001) tested the model using lab experiments. The experimental design was a full factorial combination of five web design categories (promotion, service, self-efficacy, resource facilitation and informational interpersonal influence). They created 32 different websites that contained different combinations of web design features in particular category of web design elements could be present or absent from a website. For example, website number 2 contained web design elements for promotion, service, informational interpersonal influence, and self-efficacy, but lacked the web design elements for resource facilitation. Most experienced and successful online vendors are beginning to realise that the key determinants of success or failure are not merely a web presence or low price but rather delivering a high quality electronic service (e-service) (Zeithaml et al., 2000).

The e-service quality represents the trust cue that conveys the trustworthiness of the site and the system to customers (Corritore et al., 2003). According to Bart et al. (2005), the dimensions of e-service quality can be considered as website-related determinants of trust. In response, a number of studies have developed scales for measuring online service quality in a variety of industry and product settings (Francis, 2009; Loiacono et al., 2007; Parasuraman et al., 2005; Wolfinbarger and Gilly, 2003; Yoo and Donthu, 2001; Zeithaml et al., 2000).Research over the past two decades has indicated that e-service quality will influences consumption decisions, but only recently these findings have been applied in the online setting (Yang and Jun, 2002; Wolfinbarger and Gilly, 2003). The concept of e-service quality was first introduced by Parasuraman, Zeithaml and Berry (1985, 1988) whereby researchers measured e-service quality (SERVQUAL) in five (5) phases: i) tangibility, ii) reliability, iii) responsiveness, iv) assurance and v) empathy. Three major quality constructs that are critical to web site success in e-commerce: information quality, system quality, and service quality (Liu and Arnett, 2000). Lai, Chen and Lin (2007) suggested that when customers perceive better quality service website, such as special treatment benefits, they will have greater online satisfaction. Hence, the satisfaction of the consumer on the particular website will influence the customers’ purchase intention.

2.3.5 Website-website security

The internet based electronic commerce environment enables consumers to search for information and purchase products or services through direct transaction with the online store. That is, consumers purchase are mainly based on the cyberspace appearance such as pictures, image, quality information, and video clip of the product, not on the actual experience (Lohse and Spiller,1998;Kolesar and Galbraith,2000).Shooping at an online store is like shooping through a paper catalog because both involve mail delivery of the purchases and in both cases customers cannot touch or smell the items (Spiller and Lohse,1997).This study provides empirical validation of consumers behaviors in the web based online shopping context .We adopt the theory of user consumer purchase behavior to explain the consumers respond to online shopping services. Consumers tend to engage in relational behaviors to achieve greater efficiency in their decision making, to reduce information processing, to achieve more cognitive consistency in their decision, and to reduce the perceived risks associated with future choices (Sheth and Parvatiyar, 1995).After a few successful transactions, a consumers starts to feel safe with the services provider or supplier (Ravald and Gronroos, 1996).

When consumers trust a company, they know that this company is able to fulfill their needs and wants and eventually, they become committed to the company. The online shopping environment enables consumers to reduce their decision -making efforts by providing vast selection, information screening, reliability, and product comparison (Alba et al.,1997).Since the Internet provides screened and comparison information for alternatives, consumers may reduce the cost of information search and the effort in making purchasing decisions .However, since online shoppers mainly interact with the Web-based computer system and cannot physically touch or feel actual products , they make decisions mainly with information provided electronically by the online store. Thus, the discussion about the critical factors in consumer purchase behavior in an electronic commerce environment needs to be focused on the availability of information (Wolfinbarger and Gilly,2001).The availability of information but also convenience and personalization for retaining customers. It depends on the degree to which information can be employed by consumers to predict their probable satisfaction with subsequent purchases. Consequently, the success of online stores will be determined by the ability to tailor their information to meet the consumers’ needs. But, several factors determine the predictive value of the information with no one type of information to be uniformly valued by all consumers (Kolesar and Galbraith, 2000). The basic requirement for inducing a consumer to become a customer of an online store and increasing his/her switching cost is to reduce the cost of information to consumers (Bakos,1991,1997).Although the consumers may receive a tangible good at the end of the of the online transaction , the benefits to the consumers are not in purchased good, which could have been obtained through alternative channels (Kolesar and Galbraith,200).Instead , the unique benefits to the consumer are in the performance of the online shopping transaction itself such as saved time, increased convenience and reduced risk of dissatisfaction (Wolfinbarger and Gilly,2001) .Thus customer service and promotion are also critical in designing an online store (Jarvenpaa and Todd,1997;Lohse and Spiller,1998)

2.4 The relationship between independent variable and dependent variable.

2.4.1 Relationship between trust and online shopping

Trust is vital for online shopping because trust in a shopping website can affect attitude toward, and willingness to engage in, online shopping (Jarvenpaa et al., 2000; Lee and Turban, 2001). Besides, in an e-commerce setting, since e-customers do not dealdirectly with the company, or its staff (Papadopoulou et al., 2001; Urban et al., 2000). Various relationships have been proposed between trust, satisfaction and loyalty in an online context (Reichheld and Schefter, 2000). Moreover, trust is proposed as another important antecedent of loyalty (Reichheld et al., 2000). E-trust will therefore be defined as the degree of confidence customers have in online exchanges, or in the online exchange channel. Dispositional trust plays a particularly important role in the interaction between unfamiliar a