Internet And E Commerce In Mauritius Marketing Essay

2.0 INTRODUCTION

This chapter presents the review the literature of online shopping, factors affecting adoption of online shopping and theories that authors discussed and developed and adopted.

“The Internet is becoming the town square for the global village of tomorrow.” ~Bill Gates

2.1 INTERNET

The internet began life as an experiment by the U.S. government in 1969, and its initial user were largely technical audience of government agencies and academic researchers and scientists. Some of them started to place personal classifieds on the internet. A major milestone in the development of internet was the introduction of the World Wide Web in the early in the early 1990s .The benefit of the internet as a strategic tool is so phenomenal that it has been a major catalyst to boost internet retailing in the 90s. Amidst the hype of E-retailing, the dot-com bubble-burst in 2000, veered this mirage toward organizations failures, such as Webvan (Ecommerce-Land, 2004).

2.2 ELECTRONIC BUSINESS

The truly revolutionary impact of the Internet Revolution is just beginning to be felt. but it is not “information” that fuels this impact. It is not “artificial intelligence.” It is not the effect of computers and data processing on decision making, policymaking, or strategy. It is something that practically no one foresaw or, indeed even talked about 10 to 15 years ago; e-commerce-that is ,the explosive emergence of the internet as a major, perhaps eventually the major, worldwide distribution channel for goods , for services, and , surprisingly, for managerial and professional jobs. This is profoundly changing economics, markets and industry structure, products and services and their flow; consumers’ segmentation, consumer value and consumer behavior; job and labor markets. But the impact may be even greater on societies and politics, and above all, on the way we see the world and ourselves in it. (Drucker 2002, pp.3-4)

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Electronic Business (e-business) presents enormous opportunities for both consumers and businesses in this business world. For example, online firm which implement e-commerce and deliver services. E-business refers to a broader definition of e-commerce, not just buying and selling of goods and services, but also servicing customers, collaborating with the business partners, conducting e-learning, and conducting electronic transactions within an organisation.

2.2.1 NATURE OF E-COMMERCE

Ecommerce (e-commerce) or electronic commerce, a subset of e-business is the purchasing, selling, and exchanging of goods and services over computer networks (such as the Internet) through which transactions or terms of sale are performed electronically. Contrary to popular belief, e-commerce is not just on the Web. In fact, e-commerce was alive and well in business to business transactions before the Web back in the 70s via EDI (Electronic Data Interchange) through VANs (Value-Added Networks).The following major types of Ecommerce transaction are listed below;

Business-to-Business (B2B)

Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

Business-to-Consumer (B2C)

Business-to-consumer (B2C) is an Internet and electronic commerce (e-commerce) model that denotes a financial transaction or online sale between a business and consumer. B2C involves a service or product exchange from a business to a consumer, whereby merchants sell products to consumers.

Business-to-Business-to-Consumer (B2B2C)

E-commerce model in which a business provides some product or service to a client business that maintain its own customers.

Consumer-to-Business (C2B)

E- Commerce model in which individuals use the internet to sell products or services to organisation or individuals who seek seller to bid on products or services they need.

Intrabusiness EC

E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organsation.

Consumer-to-Consumer (C2C)

E-commerce model in which consumers sell directly to other consumers

Business-to-Employees (B2E)

E-commerce model in which an organisation delivers services, information , or products to its individual employees through internal network.

E-learning

The online delivery of information for purpose of training or education.

Collaborative commerce

E-commerce model in which individual communicate or collaborate online.

E-Government

E-commerce that involves transactions with the government–from procurement to filing taxes to business registrations to renewing licenses. There are other categories of e-commerce out there, but they tend to be superfluous:

G2G (Government-to-Government)

G2E (Government-to-Employee)

G2B (Government-to-Business)

B2G (Business-to-Government)

G2C (Government-to-Citizen)

C2G (Citizen-to-Government)

2.3 ONLINE SHOPPING

According to the needs of this study, online shopping is the main concern and the topic that I will elaborate in more details. Online shopping may be defined as any business process that relies on automated information. Today, this mostly done with web-based technologies. The term “online shopping” was created by Lou Gerstner, CEO of IBM. Online shopping methods enables companies to link their internal and external data processing systems more efficiently and flexibly; to work more closely with suppliers and partners, and to better satisfy the needs and expectation of their customers (Chen et. Al, 2003).

Online shopping is the process consumers go through to purchase products or services over the internet. An online shop, internet shop, wed shop or online store evokes the physical likeness of buying products or services at a bricks-and-mortar retailer or in a shopping mall. It is an electronic commerce application used for business-to-business electronic commerce (B2B) or business-to-consumers electronic commerce (B2C). Online shopping is popular mainly because of its speed and ease of use. Some issues of concern can include fluctuating exchange rates for foreign currencies, local and international laws and delivery methods. (Wikipedia 2012)

With the advent of the internet shopping, manufactures saw the possibility of bypassing the stores of traditional business. Through the internet bridge which prevent the retailers’ to intercept consumers as they had been able to do, the internet prevented competitors from obtaining the full picture of what went on between competition brands and their consumers. Even more significantly, the manufacturer could now act as retailer; the consumer could visit the manufacturer’s online stores rather than patronize the real life store. As shown in figure below;

BRAND

RETAILER

WHOLESALE

R

R

R

CONSUMER

Supply Chain figure 2.1

Internet/ online shopping had also contribute to those marketing activities involved, and offered what retail had fail to deliver; no queues, no geographic barriers, low prices and unlimited selection. A consumer world had appeared. A survey conducted by AC Nielsen in 2000 posits that 15% to 20% of consumers say they prefer to shop online than real-world stores.

To succeed in this kind of online shopping, the most well known online shopping models are the so called dot.com (Porter, 2001). Dot-coms are located around the world and are pursuing a variety of opportunity at being global marketers. As online consumer reaction to changes in vital components expressed through the Web page interface design is the focus of this research. By experimentally representing Consumer concerns of online shopping within Web page interface components, the relative value of such components can be quantified both individually and in combination. Online consumers may find such components convey a fundamental marketing message about the virtual environment being visited. When the message sent is perceived positively, concerns about online shopping can be eased and the utility of such activity increased. Watson, Zinkhan, and Pitt (2000) labeled this combination of factors integrated Internet marketing, and emphasized that Web design communicated a message to the consumer that is more than the sum of its technical parts. Duncan and Moriarty (1998) argue that in the age of interactivity, the importance of communication in is greatly increased and that communication is the integrating factor that brings together numerous marketing activities.

According to an e-commerce website survey, conducted by e-commerce resource center, the midyear of 2001, there were 12% of about 6,000 online shopping website that offer full-scale online shopping services, including for example on-line catalog, electronic order and logistic services. The top-10 business types of these web site are tourism, computer-related products and online-shopping, entertainment, web board service, service business, clothing and cosmetics, food and medical products, publishing and real estate.( Internet Information Research center viewed on 21 Feb. 2012)

2.4 PRODUCT BRAND VERSUS SERVICE BRAND

Considerable discussion has arisen about how electronic commerce is changing retail marketing theory and practice (Davis et al., 2000). Brand, a traditionally topic in marketing, should gain a new perspective and investigating in understanding consumer behavior in significantly new environment.

According to Rita Clifton, CEO of Interbrand Newell and Sorrell – a leading specialist brand consultancy firm – a brand is:

“A mixture of tangible and intangible attributes, symbolized in a trademark,

which, if properly managed, creates influence and generates value”

This definition truly captures the essence of a brand, and highlights the importance of brand management. Branding is about creating ‘value’, both for customers, and for the company. This Value stems from the products and services that companies create and bring to the market, but extends further to encompass added values derived from factors such as the brand-customer relationship, the brand’s emotional benefits and its self-expressive benefits. Other common descriptions of a brand include – a ‘relationship’, a ‘reputation’, a ‘set of expectations’, and a ‘promise’. It is a company’s promise to consistently deliver a specific set of features, benefits, and services to customers.

The natural inclination in marketing is to associate branding with goods. Through product, package and logo design, marketers highlight the materiality of goods in their branding efforts. They give the brand name to the product and show the product in the advertising, often associating it with distinctive symbols, signature statements, their attributes and people (berry, 2000)

Brand development is especially crucial in services, given the inherent difficulty in differentiating a service that lacks a physical differences and the intense competition within the service sector. It is argued that service delivery through global computer networks will dramatically change the nature of service marketing (Rust, 1997). For the marketing of services, De Cheratony & Dall’Olmo Riley (1998) and Padgett & Allen (1197) suggest that the brand should be used to give attention to the way in which customers perceive the meaning of the service and, as such, develop association to the brand.

These ideas appear to transfer directly to the electronic-commerce environment (Davis et al., 2000). Taking the practical shopping mall as an example, an online retailer provides a bundle of products each with a different brand. The brand of an online retailer is different from any product the retailer sells, because the brand of an online retailer is of named after any product brand it sells and judgment of the retailer’s brand beyond the physical condition of any particular product it provides. In the specific, rather than physical condition of goods, a lot of services issues are closely related to an online retailer’s brand, such as payment, delivery and customer service.

Therefore, an online retailer’s brand is a kind of service brand. Service in nature, as well an intense complexity brought by actual environment, places the brand of an online retailer in a prominent position in marketing activities.

2.5 FACTORS AFFECTING THE ADOPTION

The major factors affecting the adoption of the Internet shopping amongst retailers are shown below, it is important to review the findings and contextualize them within the relevant literature. Furthermore, the implications of this study, both for the retail practitioners and researchers, are reviewed as are the study’s potential limitations. When interpreting the results with respect to the factors affecting Internet adoption, it is clear that all factors, other than ‘concerns’ are exerting a significant influence on the decision to adopt web-site technology.

2.5.1 Internet target segment

The ‘Internet access of the respondents target audience’ is the most highly correlated variable followed by ‘level of Internet awareness’ and ‘computer literacy’ of the responding organizations’ target audience. The ‘gender’ and ‘age’ of the existing target audience are followed in terms of significance by ‘suitability of current product range’ for Internet retailing. This factor is named the internet target segment because the contributing variables emphasized issues associated with target market and segmentation issues for Internet consumer markets.

2.5.2 Internet strategy

This factor consists of 5 significant variables, three of which have a strong strategic focus, namely ‘senior management support’, ‘management vision of the usefulness of the Internet’ and ‘company’s Internet development strategy’. Additionally, the availability of resources, in terms of both the level ‘funding’ and ‘human resources’, contributed significantly to this construct. Ultimately, this factor is named internet strategy, as all five variables relate to the organisations strategic vision and willingness to provide appropriate resources to support its implementation.

2.5.3 Internet market-place

Three of the variables, in this factor, focus strongly on issues relating to the organisation’s perception of the Internet market, namely the ‘size’ and ‘maturity’ and ‘other retailers’ on-line activities’. As the fourth variable ‘technical reliability of the Internet’ also relates to the perceived viability of the Internet market, this factor is named internet market-place.

2.5.4 Infrastructure and development capability

This factor consist of five variables: ‘company’s technological infrastructure’, company’s logistical infrastructure’, ‘web design skills’, ‘web developer’s promotional offers’ and ‘outsourcing of functions’. The factor is named infrastructure and development capability, as all five constituent variables are associated with an organisation’s readiness and ability to exploit the Internet.

2.5.5 Internet communications

This factor consists of four variables namely; ‘method of communication with customers’, ‘expanded customer services’, ‘speed of communication with customers and ‘means of collecting market research data’. These variables form a coherent group, all of which have a strong focus on the Internet’s ability to facilitate communications between the retailer and their customers.

2.5.6 Cost of Internet trading

The ‘cost of logistics to support the on-line operation’ is the most significant variable in this factor. Two additional variables, namely the ‘cost of supporting two different channels’ (direct sales via the Internet and fixed retail store operation), and the ‘cost of restructuring the organisation’, also contributed. This factor is named cost of Internet trading, given its emphasis on the cost associated with Internet retailing.

2.5.7 Internet cost opportunity

This factor also has three constituent variables, all of which are associated with the financial potential of the Internet; ‘low running costs of on-line operations’, ‘low set up costs of on-line operations’ and a ‘reduction in need for future investment in fixed location store development’. The factor is named internet cost opportunity because the underlying variables suggest that there is an opportunity to derive commercial advantage by maximizing immediate and mid-term cost saving offered by the Internet.

2.5.8 Market development opportunity

There are three variables in this factor are all associated with the Internet’s ability to foster the development of new markets; namely ‘increased access to global markets’ ‘increased access to niche consumer markets’ and ‘increased trading hours’.

2.5.9 Concerns

This factor contains only two variables; ‘media reporting of the negative aspects of the Internet’ and ‘concerns about on-line security’. Accordingly, the factor is named concerns, as both the variables are associated with negative aspects of the Internet, which have been widely reported in the literature.

2.5.10 Consumer preferences

The final factor also consists of just two variables; the ‘consumer’s perceived preference for going shopping’ and the ‘Internet’s inability to convey all of the different types of sensual information’. Consequently, this factor is named consumer preferences, because of its focus on perceptions about consumer behavior focus.

2.6 BRAND KNOWLEDGE

The importance of knowledge in memory to consumer decision-making has been well documented (Alba & Chattopadhyat, 1985). Understanding the content and structure of brand knowledge is important because they influence what comes to mind when a consumer thinks about a brand, for example, in response to marketing activity for that brand.

The first element distinguishing brand knowledge is brand awareness. It is related to the strength of the brand node or trace in memory, as reflected by consumer’s ability to identify the brand under different condition. In particular, brand name awareness related to the likelihood that a brand name will come to mind and the ease with which it does so. Brand awareness plays an important role in consumer decision making for two major reasons. First, it is important that consumers think of the brand when they think about buying related products. Raising brand awareness increases the likelihood that the brand will be in the consideration for purchase. Second, brand awareness affects consumer decision-making by influencing the formation and strength of brand association in the brand image for consumers, a brand provides a certain degree of product guarantee. Shopping around can be time and energy consuming, and consumers do not always possess enough product knowledge to ensure the best buy. Under such circumstances, consumers usually go by well-known brands, which may result in higher cost but requires less research efforts. Thus, brand image not only affects how consumers view a product but also has the benefits of lowering purchase risks (Nan & Lin, 2007). According to Keller (1993), brand image, the other dimension of brand knowledge, is defined as perceptions about a brand.

As a result, brand image is often used as an extrinsic cue to make a purchase decision (Nan & Lin, 2007). Therefore, consumers generally believe they can make satisfying purchase by choosing well-kwon brands and also lower any purchase risks by doing so.

2.7 PERCEIVED RISKS

Perceived risk, a fundamental concept in consumer behavior, implies that experience pre-purchase uncertainly as to the type and degree of expected loss resulting from the purchase and use of a product (Cox, 1967). In his seminal paper on risk taking, Bauer (1960) spoke about the theme that consumer behavior involves risk in the sense that any action of a consumer will produce consequences that he or she views with some amount of uncertainty. Dowling and Staelin (1994) defined risk as a consumer’s perceptions of the uncertainty and adverse consequences of engaging in an activity. Consumer behavior is motivated to reduce risk. When consumers intend to buy a product or a service, they often hesitate to make the final decision because they cannot be sure that all of their buying goals will be accomplished with the purchase (Sangruang, 2006). Donthu and Garcia (1999) found internet shoppers are more less risk averse than internet non-shoppers. Perceived risk is usually measured as multidimensional construct; physical loss, financial loss, psychological loss, time loss, performance risk and social risk (Rosulius, 1971, Jacoby & Kaplan, 1972, Guilherme et al., 2006). Perceived risk theories has been applied in different consumer behavior contexts, bit only recently has attention turned to using perceived risk in explaining consumer reluctance to the use the internet for a variety of purchasing tasks. Perceived risk on purchase intention is assumed their paper, with the focus turning to issue of how perceived risk may be affected once the store has been selected, to other elements of buying situation. An experiment was constructed in which consumers respond to four hypothetical, online purchase situations, varying in term of product type(service and good)and decision involvement (low or high). The main focus is an investigation of risk perceived by internet purchaser, which may influence indirectly through attitude scope of their purchase intentions and repeat use of this particular channel for shopping (Sangruang, 2006).

Perceived risk theory itself, in its simplest form, is easy to understand. Knowledge of the risks consumers face and the ways to reduce them can certainly help marketers when developing their marketing strategies. Main types of perceived risk involved are shown in table below;

RISK TYPE

DEFINITION

1.Financial risk

The risk that the product will not be worth the financial price.

2.Physical risk

The risk to the buyer’s or other’s safety in using product.

3.Psychological risk

The risk that the product will lower the consumer’s self image.

4.Social risk

The risk that a product choice may result in embarrassment before one’s friends/family/work group.

5.Function risk

The risk that the product will not perform as expected.

6.Time risk(non-monetary)

The risk of time spent preparing shopping lists, traveling, and looking for information, shopping and waiting for product delivery.

TABLE 1: TYPES OF PERCEIVED RISKS

Adapted: Jacoby and Kaplan (1972)

A consumer’s perception of the overall negativity of a course of action based upon as assessment of possible negative and likelihood that those outcomes will occur. As a result, operational definitions for types of perceived risk and impact of various factors as shown in table below;

TABLE 2: Definition of Risk Components

RISK COMPONENTS

OPERATING DEFINITION

1.Financial risk

The likelihood of suffering a financial loss due to hidden costs, maintenance costs or lack of warranty in case o faults.

2.Performance risk

The chance of the item failing to meet the performance requirements originally intended of the purchase.

3.Physical risk

The probability of the purchase resulting in physical harm or injury.

4.Psychological risk

The chance of the specific purchase being inconsistent with the personal or self-image of the consumer.

5.Social risk

The likelihood of the purchase resulting in others thinking of the consumer less favorably (external psychological risk).

6.Convinience risk

The probability of the purchase resulting in lost time in term of delivery, fitting or customization or in repair/down time.

7. Overall risk

The likelihood that purchase of the item will result in general dissatisfaction of the consumer.

Adapted: Peter and Tarpey (1975) and Jacoby and Kaplan (1972)

2.7.1 PERCEIVED CHARACTERISTICS OF THE WEB AS A

SHOPPING CHANNEL

As e-sales channel, the internet deals with both information system and marketing activities. Therefore, both online features (such as information) and offline features (such as delivery) of an online store influence consumer’s e-shopping behavior (Ahn et al., 2004). Further, e-stores, traditional stores, and other shopping channels compete with each other to survive. Consumer’s adoptions of online-shopping are highly dependent on its superiority to other shopping channels and its perceived drawbacks. (Xinyu. Et al., 2005)

2.7.2 TRUST

Trust is essentially another way of formulating some of the risk factors, specifically those related to “individual” uncertainly regarding the motives, intentions, and probable actions of others on whom they depend” ( Kramer, 1999:571).The trustworthiness of the Internet vendor, combined with previous experience (which is part of the propensity to trust variable) were the two direct antecedents of trust while higher technical awareness led to the perception of higher trustworthiness of the Internet vendor. Connolly and Bannister (2008) concluded that the difference in findings of the two studies indicates that the Cheung and Lee model is not culture independent, and they call for further research into global factors influencing consumer trust in Internet shopping.

Figure 2.2 Trust in Internet Shopping, Cheung and Lee (2000) Model

The latest trend in consumer trust research is a shifting towards exploring trust in virtual communities and social networks, as the new environment for e-commerce (Rayport, 2009; Wu and Tsang, 2008). Wu and Tsang (2008) adapted the McKnight et al. (2002) trust building model to measure trust in virtual communities. The outcomes of their research support the hypothesis that trust in websites, has a behavioural influence on the intention of members to visit them.

2.7.3 TECHNOLOGY ACCEPTANCE MODEL (TAM)

One of the most influential adoption models is, Technology Acceptance Model (TAM) by Davis, Bagozzi and Warshaw (1989), which is illustrated in Figure 2.3 below. The model was originally developed to predict technology systems usage in the workplace. TAM was developed on the basis of the much studied Theory of Reasoned Action by Fishbein and Ajzen (Davis et al., 1989). TAM proposes that the beliefs of perceived usefulness and perceived ease of use are fundamental in forming an attitude towards an information system, which in turn forms a behavioral intention, followed by actual system use (Davis et al., 1989). Other factors such as demographics, personal traits and technology attributes were suggested to be included in a group of external variables which affect attitudes only through the mediating TAM variables of perceived usefulness and perceived ease of use (Davis et al., 1989).

Figure 2.3 Technology Acceptance Model (TAM) MModel

Source: Davis, F., Bagozzi, R. and Warshaw, P.(1989) User Acceptance of Computer Technology: A Comparison of Two Theoretical Models, Management Science, 35(8), pp.982-1003.

TAM has been researched in different technology contexts and its extensive testing to date has proven that it is a scientifically robust model (Gefen, Karahanna and Straub, 2003). The adaptability of TAM to different contexts was a justification to adapt it. Findings show that the position of TAM which states that system usage is predicted by perceived ease of use and perceived usefulness (Curran and Meuter, 2005; Gefen et al., 2003). TAM was specifically tailored to understand the adoption of computer-based technologies on the job or in the workplace.TAM with minor modification to assess to the acceptance of Online Shopping.

Attitude towards online shopping is one’s evaluation about the consequences of performing a behavior whereas intention to shop online is the likelihood that a consumer actually buys online (Chen et al., 2002). It is believe that consumer attitude will affect intention to shop online and eventually whether a transaction is made (Bobbitt and Dabholkar, 2001; Davis, 1993).

2.8 VENDOR AND PROODUCT CHARACTERISTICS

Vendors and consumers constitute two basic actor of a product exchange system. Vendors have the potential to influence consumer’s online-shopping behavior (swaminathan et al., 1999); for example, well-known vendor name may help relieve consumers with respect to perceived risk and establish trust with them, and hence motivate consumers to shop in this online-store. It is important to identify what products are more suitable to purchase online, since product characteristics will affect consumer’s choice among e-store, traditional stores and other shopping options.

2.8.1 ONLINE CONSUMERS CHARACTERISTICS

Between the two basic actors of product exchange, the retailers’ role is apparent; here we note that consumers’ purchasing behavior is expected to be influenced by their own personal characteristics. Consumers with different characteristics may react to e-shopping in different ways; for example, those unfamiliar with computers and the internet will not think e-shopping is an alternative. Empirically, previous studies have found that e-shopping behavior is affected by a variety of personal characteristics, such as their orientations, personality, experiences, demographics, and social and psychological characteristics.

2.9 INTERNET AND E-COMMERCE IN MAURITIUS

Yet only the fittest survived and since then, E-retailing has carried its legacy in the name of Amazon or Tesco; and has evolved into a fruitful business opportunity worldwide. Nielsen’s research (2008a) found that more than 85% of the world’s on-line population has engaged in internet purchasing in 2008, boosting by 40% the usage rate during the past 2 years.

Since the inception of the 24/7 culture in Mauritius and the government’s aim to turn Mauritius into a Cyber-island (Goering, 2006), Information and Communication Technology (ICT) has become the fifth pillar of the economy (Allafrica.com, 2008) and E-retailing appears to hold some potential. A good definition of E-retailing is propounded by Harris and Dennis (2002, cited Dennis et al. 2004, p.2), as the selling of goods and services through the Internet or other electronic medium to consumers for personal or household use. Mauritius is not so technology-fusty nowadays. It bears some of the emerging local E-commerce examples in term of lepoint.mu or tantebazar.com. The promotion of myjob.mu might even sound familiar to any Mauritian. Online Business to Consumer (B2C) opportunities are increasing worldwide and Mauritian consumers might be engulfed in the E-retailing waves. Marketers must try to identify and anticipate this potential need through in-depth research on E-consumer behavior. E-retailing will permit consumers to shop 24/7, with a considerable saving on time-consuming things (for example traffic jam). Shopping will be simple, accessible and quick to sustain customer’s interest in this business (Hadjiphanis and Christou. 2006, p.4).