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While product performance risk, and trust & security have a significant impact to consumers' online shopping behaviour, the study finds that the remaining ...
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Campus Gotland
Author: Hashim Shahzad
Subject: Master Thesis Business Administration
Program: Master of International Management
Semester: Spring 2015
Supervisors: Fredrik Sjöstrand & Jenny Helin
I would like to thank many people that have contributed this research. Without them, it would not have been possible to achieve this research project.
First of all, I would like to thank my supervisor Fredrik Sjöstrand & Jenny Helin for guiding me through my research project. They provided me valuable suggestions and feedbacks.
Then, I would like to express my gratitude to my fellow students and especially (Dominique Kuehn) for their valuable feedbacks during seminar sessions.
Most of all, I would like to thank my family and friends for their unconditional support and understanding during the research process.
Last but not least I would like to thank all the respondents who participated in research survey.
The online shopping is growing every day. There are many benefits of online shopping like time saving, access from everywhere, convenience, availability 24 hours a day, variety of products, various options available to compare products and brands. Beside the benefits of online shopping consumer feel different type of perceived risk factors and psychological factors are involved in online shopping. The perceived risk could be financial loss, product performance risk, delivery risk and psychological factors like trust & security and website design. These perceived risk and psychological factors also determents the consumers’ behavior towards online shopping. Thus, this study focuses on the online shopping factors effecting consumer’s behavior towards online shopping. There are many perceived risk and psychological factors involved in online shopping. The purpose of this study is to identify those risk and psychological factors in Sweden’s context and also know who online shoppers are in terms of demographically. To achieve the study purpose and find out the answer of study question a detailed and most recent literature reviewed. The author of this study adopted quantitative method and distributed questionnaire survey among Uppsala University’s students and general public visiting University’s library. A population of 100 respondents has been chosen to collect the empirical data. After literature reviewed and analysing the empirical data, the results of the study revealed that the website design is the most influential factor when respondents shop online. The rest factors like trust & security, and product performance risk also have significant effect on consumers’ behavior towards online shopping. Financial risk and delivery risk have no significant influence on consumers’ attitude towards online shopping.
Despite the rapid growth in online shopping and its benefits that are discussed above, Kim, Lee & Kim (2004) mentioned consumers’ search at online store does not lead to a complete purchase or transaction of their actual needs. According to Moshref et al. (2012) before purchasing a product or service on the internet, consumer predicts different types of perceived risk like financial risk (loss of money), product risk (quality of product as seen on the website), and non-delivery risk (if the product remains undelivered). The psychological factors like trust, security, and the factor of technological acceptance related to website design. Iconaru et al. (2013) stated, in online shopping a perceived risk appears from when customers feel uncertainty and fear of financial loss, poor product quality, non-delivery concerns, the breaching of trust and misusing of personal information.
Many researchers argued that online shopping perceived risk that had negatively impacted consumer’s behavior while purchasing on the internet (Martin and Camarero, 2009; Liu et al. 2013; Mieres et al. 2006), reduced the consumer’s intention to purchase online other goods as well (D’Alessandro et al. 2012). Swinyard & Smith (2003) concluded, that more than 70% online non-shoppers does not buy online due to risk of financial losses if they shop from online e-retailers. Forsythe et al. (2006) argued, that perceived risk play an important role to determent consumers’ online shopping behavior and predict consumers’ intention to shop online in future.
Iconaru et al. (2013) mentioned that because of the manipulation of trust and compromising over personal data to third party, consumers feel unsafe which leads to lowering consumer’s trust over the security of e-retailer. Lee & Turban (2001) argued that trust is an important factor to influence consumer’s intention to shop online. Srinivasan (2004) cited that the success of ecommerce is based on two factors: trust and security. Furthermore, he mentioned that earning consumer’s trust in e-commerce is a lengthy process of time and e-retailers can try to provide secure methods to protect consumer’s personal data. Adnan (2014) stated that approximately 82% of consumers does not use poorly structured web store. On account of this reason, the consumer leaves the e-retail store without completing the purchase or transaction. Yörük et al. (2011) recommended that online retailers should design their website more conveniently, safely, and reliably to convert online visitors to online shoppers.
Prior studies identified several online factors that ranged from three to six factors that affect consumer’s online shopping behavior (Moshref et al. 2012). Iconaru et al. (2013) cited that different studies (Crespo and Bosque, 2008; Shin, 2008) concluded different impacts of online
factors varying from significant to insignificant effects to influence consumer’s intention in online shopping. In addition to online shopping context, external online factors are also important. These include the perceived risk (financial risk, product performance risk, and delivery risk) and psychological factors (trust and security, and website design). These external factors also determine consumer’s attitude towards online shopping. This research will identify the effects of different external online factors in Sweden’s online shopping context. Although these factors are well researched by previous researchers, the issue is that different studies explored these external online factors in different online shopping contexts and did not cover all contexts. Therefore, it is needed to validate the findings of previous researches in the field of online shopping behavior. This study will provide an in depth understanding of major external online factors in Sweden’s online shopping context. Therefore, the aim of this paper is to answer the following research question.
What external online factors (financial risk, product risk, non-delivery risk, and psychological factors like, website design, trust and security) have more significant effect consumers’ attitudes towards online shopping?
The main purpose of this study is to identify the external online factors which influence consumer’s behavior towards online shopping in Sweden’s context. Thereby, the study will only identify five external online factors. Besides the identification of online factors, it is also important to know how much effect of these factors on consumers’ online shopping behavior.
To achieve the study objectives, the study is divided into six chapters.
The first chapter covers the introduction and problem formulation, providing a general view of online shopping behavior and problem formulation along with the study question. This chapter also provides the purpose of this study.
Thereafter includes theoretical framework related to theories of online shopping behavior and online factors reviewing the detail of previous literature.
The next chapter illustrates the research philosophy, the research approach, the research strategy, data collection, sampling, sample size, questionnaire design, reliability & validity, and data analysis. The fourth chapter is about study findings which will provide the results of
Kumar & Dange (2014) mentioned that there are two components of perceived risk that are involved in online shopping which are uncertainty and the significance of the consequences of particular purchase. Uncertainty is related to the possible outcomes of positive or negative behavior and undesired results of these consequences. Uncertainty is also linked with the possible loss of money while making a financial transaction for a particular product on the internet (Kumar & Dange, 2014). Financial transactions on the internet are linked to various risk factors (Adnan, 2014). Furthermore, Adnan (2014) mentioned that the customers perceive different risk factors before transferring money to online merchant. These factors could be financial loss, security and privacy. Naiyi (2004) claimed that different dimensions of perceived risk such as e-retailer source risk, purchasing process & time loss risk, delivery risk, financial risk, product performance risk, asymmetric information risk, and privacy risk regarding online shopping intentions have negatively impacted consumer’s online shopping behavior.
It is mentioned above about the selection of five online factors that have been chosen after reading the relevant literature in the field of consumer’s behavior in online shopping. These factors are further described in the following section.
A recent study was conducted by Kumar & Dange (2014) where the aim have been to analyze different dimensions of perceived risk that influence the consumer’s online shopping behavior. The results of study revealed that online shopping perceives risk in regards to financial risk, time risk, social risk, and security risk as they influenced more online consumer’s attitude towards online shopping. On the other hand, the same two online buying risk factors are financial risk, and security risk that have influenced on non-online shoppers. Furthermore, their study has found two additional barriers of psychological risk and physical risk among non- buyer.
Another recent study was conducted by Babar et al. (2014); they used a Technology Acceptance Model to examine the different factors influence customers’ intention to shop online. This study has investigated the influence of usefulness, ease of use, financial risk, and attitude towards online shopping. The findings indicate that financial risk have a negative impact on the attitude towards online shopping where the reason states that consumer have a fear of financial loss and security concern over the internet shopping. Gozukara et al. (2014)
research claimed that the perception of risk played a vital role to build the relationship between purchase intentions and hedonic motivations. Furthermore, the study concluded that perceived risk had a negative impact on consumer’s intention toward utilitarian motivation. In contrast, the perceived risk had no negative impact on influencing consumer’s intention toward hedonic motivation.
In this study ‘’Perceived risk in apparel online shopping’’ Almousa (2011) investigated the impact of perceived risk dimensions in apparel online shopping. Based on the information of an online survey and collected empirical data from 300 respondents, the study revealed perceived risk dimensions which did not have the same impact on apparel online shopping behavior. Significantly, performance risk, and time have broader impact than privacy and social risk in contrast financial risk and psychological risk have no significant influence on consumers’ online shopping behavior.
Samadi & Nejadi (2009) conducted a study and found the effect of perceived risk level among online shoppers and store buyers. In this study, the relationship was measured among past positive shopping experiences, perceived risk, and future intention to purchase within online shopping environment. The findings of study indicated that online shopper perceived higher risk in contrast to store buyers. They found that financial risk, physical risk, convenience risk, and functional risk had more significantly affected consumer’s behavior in online shopping environment. Among them, financial risk had a negative effect to influence consumer’s intention to shop online. Consumer had a fear to lose money over the internet shopping. Further study indicated that high perceived risk led to minimize intention to shop online in future as compared to less perceived risk that lead to higher intentions to buy online.
Masoud (2013) conducted a study on Jordan’s online consumers. The aim of this study has been to examine the perceived risk (financial, product, time, delivery, and information security) on online purchasing behavior in Jordan. The study conducted a survey of 395 online buyers and customers to investigate the hypothesis of research. He selected the customers that had previous experience of online shopping, and the study chose the most popular online stores in Jordan. The study result showed that four perceived risk (financial, product, delivery and information) had negatively affected online purchasing behavior. Moreover, the study indicated that there was no significant effect of time and social risk on online purchasing among Jordanian consumers.
According to Koyuncu & Bhattacharya (2004), many customers had less intention to shop online because of the involvement of delivery risk. The result of the study found that individuals who buy online once a week or make several online purchases in a month had negative impact of product delivery risk, in contrast to those who do online shopping less than once a month - they had a positive impact of product delivery.
According to Ariff et al. (2013), psychological factor like trust related to the extent of the protection a website provides and keeps customer’s personal information safe. Furthermore, Ariff et al. (2013) mentioned that trust and security had an important and positive affect on consumer’s attitude in online shopping. Yörük et al. (2011) conducted a study among Turkey and Romanian consumers’ online shopping behavior and found that in online shopping environment, trust and security factors were the major obstacles for consumers not to shop online. They preferred to go around markets to shop products through physical inspections especially Turkey’s consumer are more socialized and enjoy to go to bazaars and spend hours in the shopping malls.
Roman (2007) argued that the security factor indicates consumer’s belief regarding online shopping as well as the security of consumer’s financial information which should not be compromised or shared with a third party in online shopping context. Ahuja et al. (2007) research claimed that the trust and security are main obstacles for consumers not to shop online. According to Elliott & Speck (2005), trust is an important factor and broadly affects the online shopping attitude due to online advertisement and online site that takes time to download webpages related to consumer’s concern towards online security which may steal personal information.
Monsuwe´ et al. (2004) research claimed that the breach of consumer’s trust leads to negative attitude toward online shopping. On the other hand, keeping consumer’s personal information safe and secure leads to more positive attitude toward online shopping. Thus, the trust was an important psychological factor which affects the intentions of consumer to shop online. A study by Grabner-Kraeuter (2002) identified two dimensions of trust related issues: ‘’System dependent uncertainty and Transaction-specific uncertainty’’ in online shopping environment, the study used economic model of trust and concluded that the trust is more important and basic factor for the reduction of uncertainty and complexity of financial transactions and relationship.
Suwunniponth (2014) examined the factors that driven consumers’ intention in online shopping. The nature of the study was qualitative and quantitative. He determined the different online factors like website design, perceived ease of use, perceived usefulness, and trust influence consumers’ intentions to shop online. The data was collected through questionnaire and in depth interviews. It was collected in the form of a questionnaire through 350 experienced online consumers in Bangkok, Thailand and then descriptive analysis and path analysis were used to scrutinize the data. The study revealed that the website perceived ease of use and usefulness. The trust had significant influence on the consumers’ intention to shop online. The results found that the website had significant effect on the consumer’s online shopping attitude and online consumer prefers to have a user friendly website in online shopping environment. The study concluded technology acceptance factors and trust that had significant relationship with intentions towards different products and services and also towards intended behavior to shop.
Adnan (2014) aimed to investigate the influence of different dimensions of perceived risk, perceived advantages, psychological factors, hedonic motivations, and website design on online shopping behavior. The study distributed 100 questionnaires to online buyers in Pakistan. The research found that perceived advantages and psychological factors had a positive influence on the consumers’ intentions to shop online while perceived risk had a negative impact on the consumers’ attitude toward online shopping. Other factors like website design and hedonic motivations had not any significant impact on the consumers’ intentions to shop online. Hassan & Abdullah (2010) tried to determine the influence of independent variables website design, trust, internet knowledge, and online advertising consumer’s online shopping behavior. He used a questionnaire survey and it was filled in by online customers and test the hypothesis. The result of the study indicated four independent (website design, trust, internet knowledge, and online advertising) variables where online shopping had a positive correlation. Furthermore, the research claimed that website quality had significant impact on online shopping. The research suggested that the design of websites should be easy to use, convenient, time saving, easy to load webpage, simple navigation. The comfort of using a web page will increase the probability of revisiting increase.
Osman, et al. (2010) investigated the online consumer behavior towards online shopping and used convenience sampling method. The study adopted self-constructed questionnaire and was distributed among 100 undergraduates of University Putra Malaysia. The study examined the
Nagra & Gopal (2013) found in a study that gender, age, income had a significant impact on consumers' online shopping behavior while profession had not a significant impact. Previous studies have shown that people of different age with different income categories had different attitude towards online shopping (Richa, 2012).
According to a study by Richa (2012), ‘’ the impact of Demographic Factors of Consumers during online shopping behavior: A study of Consumers in India’’. The author used a questionnaire survey and distributed them in five big cities of India and the empirical data was collected from 580 respondents. The conclusion of the research showed that the different and important demographic characteristics like gender, marital status, family size, and income had positive impact on online shopping in India. Similar research done by Suki (2011) about ‘’Gender, Age, and Education: Do they really moderate online music acceptance?’’. An empirical survey was conducted to test the hypothesis of study and 200 questionnaires were distributed among early adopter of music listeners. The study results showed young people aged 25 or more and male with good education were strongly affected by perceived playfulness and the ease of use towards online shopping of music.
The following conceptual model is developed on the basis of prior researches presented into the literature review regarding external online shopping factors. The purpose of conceptual model is to examine the online shopping behavior of Uppsala University students and people visiting University’s library at Gotland campus. This model examined the relationship between independent and dependent online shopping factors. Based on the presented literature, the independent factors are perceived risk (financial risk, product performance risk, and non- delivery risk), psychological factors (trust and security), and website design factor while dependent factor is consumer’s online shopping behavior.
Although this type of conceptual model is used in different prior studies to measure the consumers’ online shopping behavior, there are several independent online shopping factors which influence consumer’s online shopping behavior. It is hard to measure all online shopping factors in one model, so this research paper measures and analyzes only five independent online factors which influence consumer’s online shopping behavior. By examining these selected factors, it also reveals the limitation of this conceptual model.
Figure 1: Theoretical Model
This chapter will provide the detail methodological framework about how the data will be collected and analyzed in order to solve the research question. Thereby, the structure of the framework is inspired by Saunders et al. (2009) research onion, meaning research philosophy, research approach, research strategy, research choice and time horizon.
The ‘’term philosophy is related to the development of knowledge and the nature of that knowledge’’ (Saunders et al. 2009. p. 107). Most researches are based on certain assumptions about the nature of reality and the knowledge is developed. This research is based on assumptions of consumer’s online shopping behavior. Dealing with philosophical assumptions is a crucial step in academic research (Saunders et al. 2009). This section will provide an overview of dynamics of philosophical assumptions. Consumer’s online shopping behavior is formed by different online factors like financial risk, product performance risk, trust and security, and website design towards online shopping. Due to this fact, the consumer online shopping behavior is changed over time. Thus, the philosophy is based on subjectivism, which means “that social phenomena are created from the perceptions and consequent actions of social actors” (Saunders et al., 2009, p. 110).
As this research explores the factors which influence consumer’s online shopping behavior, this study requires quantitative research method to investigate the effect of different online factors. Therefore, a positivism epistemology is used. Positivism is “working with the
nonprobability has quota sampling, snowball sampling, purposive sampling, self-selected, and convenience sampling (Saunders, et al. 2009). Further, Saunders et al. (2009) cited that the accessibility of convenience sampling is the simple and easy way available to the researcher. This thesis uses non-probability sampling, concrete convenience sampling, even though Saunders et al. (2009) stated it is problematic as it cannot be scientifically representable and generalizes the results of study for the entire population. Saunders et al. (2009) argued that these types of problems with convenience sampling could be ignored if there is minimum difference in the population, such sample could be more structured to be used as a pilot for research. The reason to use this sampling is due to the reason that many studies have adopted this as it represents a convenient substitute for online population. Previous research indicated that online consumers are mostly educated and young consumers (Suki, 2011; Nagra & Gopal, 2013; Nagra & Gopal 2013). Since previous research indicated that online consumers are mostly educated and young consumers, convenience sampling is feasible as most respondents represent students.
A procedure which is adopted in a particular research to select a sampling method is called the sample design (Kent, 2007). The sampling method, which is used in this research, is a mixed process. This type of process means that the distribution of questionnaires has been done personally as well as through an online platform (www.kiwiksurveys.com) to the respondents.
The design of questionnaire consists of two parts. The first part of questionnaire is related to online factors that influence consumer’s behavior during online shopping. The other part of the questionnaire draws upon the consumer’s demographic characteristics. In the first part of questionnaire survey all questions are linked to factors influencing consumer’s behavior during online shopping. As it is mentioned before, different online factors influence consumer’s behavior during online shopping such as financial risk, product risk, trust and security, and website design. As can be seen from Table 1, different instruments are linked to the quantity number of questions. The questions are adopted from Swinyard & Smith (2003), Forsythe et al. (2006) and Adnan (2014). Many previous researches are also based on their questionnaires, thus their questions can be seen as reliable and trustworthy with the smallest information criterion, thus the questionnaire is based upon their research contribution. The questionnaire survey examined all factors of a conceptual model by using 16 questions.
Table 1. Adoption of questions
Instrument Creators and Years No. of Questions Adopted Financial Risk Swinyard & Smith (2003), Forsythe et al, (2006)
1-
Product Risk Swinyard & Smith (2003), Forsythe et al, (2006)
4-
Delivery Risk Forsythe et al, (2006) 7- Trust & Security Factors Swinyard & Smith (2003), Forsythe et al, (2006), Lewis (2006)
9-
Website Design Factors Hooria Adnan (2014) 13-
The data analysis tool for this study is a 1-5 point Likert scale (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=agree, 5=Strongly Agree). This data analysis tool is used to evaluate empirical data. The Likert scale is generally used for questionnaires, and is mainly used in quantitative research. The benefits of using a Likert scale tool is to create attention among respondents. According to Robson (2002), the Likert scale tool can be interesting for respondents and they usually feel comfortable while completing a scale like this. One more benefit is the convenience as Neuman (2000) recommends the actual strength of Likert scale which is the simplicity and ease of use. As mentioned before two methods were used to distribute the questionnaire, out of 100 questionnaires 16 were received completed questionnaire through online survey and rest of 84 completed questionnaires were received through distributed by hand to participants. The slight resulted distortion can be neglected as the respondents have been asked personally to answer the questionnaire online. After gathering the raw data the next step has been to input the raw data into the online survey software kwiksurveys.com and get frequencies, graphs, pie charts and tables.
The main step of the research is to draw the results of empirical data. In this part the results of the study are discussed in detail in terms of demographic factors and online factors.
The results of data will be divided into two steps. In the first step the results of demographic data will be presented like age, gender, education, and income, hereby tables and graphs will be used in order to present the demographic picture of study’s respondents.
