Online Shopping Behavior: Factors Influencing Customers Online Shopping Decisions
Digital Context: BS2S24
Ashleigh Jones: 17569664
Word Count excluding References: 2,256
Introduction
This literature review will look at online shopping behaviour and the factors that influence customers online shopping decisions, this review will also consider negative influences and the effects online shopping has had on in store purchases.
Malik & Guptha (2013) refers to online shopping behavior as the actions when purchasing products or services using the internet (Katawetawaraks & Wang, 2011).
Year on year there has been a growth in the number of people purchasing online and it is becoming a common practice, in 2014 there were 1.32 billion global digital buyers which has increased to 1.79 billion in 2018 and is predicted to reach 2.14 billion by 2021 (Statista, 2018).
Today, the internet plays a major role in our day to day lives with 4.2 billon people worldwide being active internet users in 2018 (Statista, 2018), the use of internet shopping has become a greatly accepted way to purchase products and services online as stated by Bourlakis (2008).
In our modern-day society Smartphones have become the hub of our daily lives according to Ofcoms 2018 Market report, it also states that smartphones are owned by 78% of the UK population and is the most favored internet-connected device.
The aim of this piece of work is to highlight factors that influence customers to buy online and their online shopping decisions, this will be done by identifying the online shopping decision-making process and analyzing the factors that influence a customer’s online shopping decisions as well as influences that discourage customers from using the online shopping.
There are several important factors that have been researched within this review which include convivence, ease of use, trust and security along with complimentary factors namely price, choice, information and returns.
Main Body
The Online Customer Decision-Making Process
To understand online shopping behaviors of customers we must first investigate the theoretical background of online shopping and highlight the customer decision-making process, this typically has five stages. Customer purchase decisions usually start with awareness which then leads to research, evaluation, decision to buy and then lastly post-purchase behavior (Cheng Lu Wang, 2011).
A customer becomes aware of a product or service through advertisements which may trigger an interest, according to Laudon and Traver (2009) before a customer makes the decision to purchase, they will require additional information and search through online channels for the information they need.
Seock and Norton (2007) believe that the research process is an important part of customer online shopping behavior, product reviews as well as customer comments influence a customers decision to buy as they look at these to decide whether the product will meet their expectations and which retailer offers the most fitting product.
Koo et al (2008) suggest that the appearance of a website such as an attractive design and well-structured page is also influential, Wells et al. (2011) agrees with this and adds that an attractive design will send a positive message to the customer about the quality of the product (Oladele et al, 2015).
Katawetawaraks & Wang (2011) sited that Laign & Lai (2002) expressed that post-purchase behavior comes into action when the purchase is complete, return and exchange policies are vital to customers at this point as if there were to be a problem or concern regarding the product after it has been purchased the customer feels at ease knowing they are able to return or exchange the item.
Influencing Factors
Convenience and Ease of Use
The convenience of online shopping impacts the consumers willingness to buy online, online shopping is more accessible to some customers compared to store as it can be accessed around the clock (Wang et al., 2005).
Customers favor online shopping because they can shop outside the normal store times, this suites people with day time jobs or a busy lifestyle, others choose to shop online for a hassle-free experience avoiding crowds and ques within stores. Online channels are also used to avoid face to face confrontations with any sales persons as some customers feel uncomfortable with this and that they are being pressured into a purchase (Goldsmith and Flynn, 2005).
It is perceived by customers that shopping online offers them more value for money as they feel they can find the same product for a better price than if they bought it in a store (Horky and Collier, 2016). Online offers a wider range of products and services are on offer, this gives the customer the opportunity to compare prices from different online retailers to find the lowest price (Prasad & Aryasri, 2009).
Consumers also look for online services as well as products, a number of companies offer 24-hour customer service online including webchat therefore making it easy for customers to ask questions in regard to their purchase after business hours (Khatibi, 2003).
Online shopping can be accessed at any time of the day and in any location, this makes the shopping process more enjoyable for the customer as they do not have to venture to an actual store and be delayed by traffic, find a place to park or enter a crowded store which Prasad (2009) believes motivates people to shop online.
When using the internet to purchase a product or service customers expect websites to have minimal errors and websites that provide adequate information will increase the trust of potential buyers as stated in several studies (Beldad et al, 2010). Jones and Leonard (2008) disagree with this and believe that graphic and design features are more important, an aesthetic design is key, the design is defined through colours, animation, fonts, shapes and language (Li & Yeh, 2010).
Research conducted by Swinyard (2003) into on-line non-shoppers and online shoppers concluded that on-line shoppers are educated young individuals, wealthy, are computer literate, use a computer, access the internet and enjoy the excitement of online shopping.
However, research by Donthu and Garcia (1999) suggested that the online shoppers were older than non-shoppers, this was then contradicted (Brady, 2000) who indicated that the demographics of on-line shoppers was more fitting to average customer, the majority of online shoppers were generally younger than on-line non-shoppers.
Trust and Security
Customers prefer to purchase products from a seller or brand that they trust or are familiar with, according to Chiu et al (2010) the customer will make a decision about the retailer by first looking at the properties and size of the company before analysing the security and design.
Comegys (2009) suggested that the online decision-making process is affected by external factors, one of which is risk.
There is a perceived financial risk by customers that by purchasing online they may incur a loss of some kind; financial risk is defined as the cost in monetary terms of the purchase and any long term maintenance that may be required (Stone, 1993).
The main concern or risk factor for customers is that online sellers may misuse their information mainly credit card details as this is the most likely method of payment this is where security contributes to the decision-making process. Lim & Dubinsky (2004) states that in order to protect their information when making payments online customers will pay attention to sellers details and research their credibility.
In addition to this Maignan & Lukas (1997) agrees that a growing concern for online consumers is credit card fraud, as they fear financial loss during online transactions. An element of uncertainty during online shopping will increase the influence of trust when choosing which internet selling to purchase from.
On the other hand Yolo (2015) contradicts the views of Lim & Dubinsky (2004) and Maignan & Lukas (1997) and believes that online payment systems play a major role in encouraging customers to purchase online this is a result of the development over the last decade, systems have developed and reached a high level of security, privacy, confidentiality and efficiency characters (Yang, 2017).
Hoffman et al (1999) determines that by obtaining an assurance certificate from a trusted third-party customer would be persuaded to purchase from an e-retailer, the certificate shows that the e-retailer complies with specific standards and, as a result, can be trusted by the consumer.
Third-party assurance seals are designed to inform the consumer of the e-retailers trustworthiness and act as a means to guarantee the protection of the consumers private information (Kovar et al, 2000). However, Moores (2003) states assurance seals alone would not satisfy a customer to purchase as the seals are an extrinsic property of e-retailers.
When shopping online a customer takes a risk by not being able to examine a product before purchasing, customers will look at information provided by internet sellers to help with their decision to purchase. Customers will put weight on this information and use this when making a purchase (Keency, 1999),
Linking with customers reliance on information provided online Cui et al (2012) indicates that online reviews have become influential in marketing and now feature on many websites. Reviews from customers about their experience whether it be the process or product are thought to be more persuasive as they are independent and not written by the company or brand and therefore making them more credible (Willemsen et al, 2012) (Maslowska, 2017).
The credibility of reviews is not always known, Chatterjee (2001) highlights that even though it is stated within online forums that customer comments are not edited some do receive payment for referrals or purchases and get advertising income from the establishment.
In previous years the number of items being returned has increased due to the fact that customers cannot view or examine the product before purchase (Wang & Qu, 2017). E-retailers that offer a liberal returns policy gain a competitive advantage which is the view of Fornell & Wernerfelt (1987) who also believe that by offering such returns policies will improve customer loyalty, this view is based on the earliest research and the traditional purchasing environment.
More recent research has identified that in the current purchasing environment there are now three elements of returns between a business and customer these are efforts, return time limit and cost, these are factors are considered by customers when purchasing a product (Wang & Qu, 2017).
Research carried out by Chu & Gerstner (1998) shows that the most effective returns policy is no questions asked policy, under the policy Return of Goods without Reasons the supplier refund policy includes the customer will be given a full or partial refund.
Conclusions
From completing this review, it is clear that there are many good and bad influences in regard to online shopping which positively and negatively influence a customer’s behavior and decision making.
The positive influences that encourage a customer to shop online are feasible, with a wide range of products and services available online (Prasad & Aryasri, 2009) and the ability to purchase items required at any time or place and have them delivered at an appropriate time is extremely convenient, this is a strong influential factor for online shopping.
A reoccurring factor within the research conducted for this report is the matter of trust (Chiu et al, 2010), trust somehow relates to each factor whether it be directly or indirectly. To complete a purchase a customer must trust who they are buying from in every aspect, which is understandable as if there is an element of doubt then the customer will not have a positive experience which may prevent them purchasing online again.
A major discouraging factor contributing to the customers decision to buy online is the issue of security, the risk element of financial loss is a concern of customers which discourages them from purchasing online, the threat of information being misused and the possibility of fraud is too greater risk for some to dismiss as stated by Maignan & Lukas (1997).
In my opinion the risk regarding financial loss is concerning, the possibility of a customers information being misused and leading to fraud would deter me from purchasing a product or service online. On the other hand, if the correct research is carried out into a seller’s policies and guarantees to ensure they are in place this could reduce the risk when purchasing items online.
From conducting this literature review it is clear that an area that warrants further research is the use of reviews. Catterjee (2001) states that customer who have a positive experience will tell 3 people compared to customers with negative experience who tell 11 others, this establishes that negative word of mouth generated from reviews spreads faster.
There is minimal information on how customers use reviews and recommendations and if they subsequently have any influence on the customer decision making process.
Another area for further research I would suggest would be the influence of delivery options on the customer decision making process, there are many different delivery options available online for example same day, next day, allocated time and days and delivery subscriptions with a one-off annual payment. It would be beneficial to investigate how customers view these options and if this is a factor which would persuade them to buy from a particular retailer and why.
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