An investigation of factors influencing e-commerce.
Abstract:
With continuous growth in retail sales revenue, e-commerce represent a vital growing portion of commercial sales. Clearly an increasing number of consumers are electing to shop online than in the past. This shift could be attributed to many factors that include availability of more products and services, more secure shopping, and easy to use web sites. This alternative shopping avenue is an attractive outlet for consumers today, with added convenience and unlimited options at their fingertips on the World Wide Web. This paper investigates factors that influence the growth of e-commerce identifying how browsers become buyers in cyberspace as changes in perceptions due to privacy, security, retailer reliability and experiences with e-commerce takes place. Moreover, we will address how generational attitudes are impacting marketers in attracting and retaining consumers online. As the internet becomes more prevalent through the use of mobile devices, the typical online shopper is becoming more technologically advanced and confident when making purchasing decisions. Marketers must create a memorable experience that consumers will choose repeatedly over competitors, thus turning browsers into buyers.

Keywords: E-commerce, E-commerce growth, E-commerce growth factors

Article Type:
Report
Subject:
World Wide Web
Electronic commerce
Author:
Mamaghani, Farrokh
Pub Date:
06/01/2011
Publication:
Name: Journal of Academy of Business and Economics Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business; Business, general; Economics; Government Copyright: COPYRIGHT 2011 International Academy of Business and Economics ISSN: 1542-8710
Issue:
Date: June, 2011 Source Volume: 11 Source Issue: 4
Topic:
Computer Subject: Electronic commerce; World Wide Web
Accession Number:
272484669
Full Text:
1. INTRODUCTION

The recent reports show that e-commerce has continued to evolve since 2001. The basis for the steady increase in e-commerce sales will be discussed later throughout the paper. The retail sector accounts for 78% of all e-commerce (Winters, Davie, Detlefsen, 2010). The Internet's evolution has been astonishing. Currently, the Internet is primarily a source of communication, information, and entertainment, but increasingly it is becoming a potential vehicle for commercial transactions. There is also the growing ease of accessibility to the Internet with wireless connections and mobile devices, anytime, anywhere.

Table 1 shows the strong continuous growth of e-commerce. The data indicate strong presence of e-commerce "percent changes from the same quarter a year ago" in U.S retail sales. The percent change in e-commerce retail sales is well above total retail sales showing the future direction and growth potential of e-commerce.

2. FACTORS INFLUENCING ONLINE PURCHASING BEHAVIOR

Studies indicate that people shop online for the convenience factor- being able to shop at any time of day virtually anywhere in which the Internet could be accessed. According to Rox (Rox, 2007). the following are the top reasons people shop online:

1. It's always open

2. To save time and multitask

3. Easier to comparison shop and search for low prices

4. Easy to find what you're looking for

5. Additional product information and feedback is available for research

6. Don't have to fight the crowds or weather

According to a Nielsen Online Service online shopping's primary appeal is its convenience. The ability to shop anytime during the day was reported as the top reason people chose to shop online (81%), followed by saving time (77%), and the ability to comparison shop (61%) and find things easily (56%) (Rox 2007). Two of the lower ranked reasons for shopping online were low prices (46%) and low shipping costs (24%) (Bausch, McGiboney, 2007).

The graph below is another indicator of how retail e-commerce sales, as a percent of total quarterly retail sales, has steadily increased from 2001 to 2010. The steady growth shows e-commerce's strong future prevalence in the retail sector.

[GRAPHIC OMITTED]

An aspect that may go unnoticed when determining factors that may influence online shopping behavior is generational differences. Generation differences in attitudes and ideas can impact purchasing behavior. Generation Y (those born between 1976 and 1994) were raised in a media-saturated and brand-conscious world (Lester, Forman, Loyd, 2006). The Internet is their most preferred medium of choice, and they are able to use it with ease. Generation Y will switch their loyalty in an instant to marketers who can manage to get ahead of the style curve. Their market savvyness and minimal susceptibility to brand images leaves marketers faced with a difficult challenge when attempting to appeal to this group. Consumers place high expectations on vendors when making a purchase. Vendors must be superior to other vendors in alternative shopping modes in order to be noticed and contacted by customers. Characteristics important in electronic transactions include (i) Reliability, (ii) Convenience in terms of services offered, and (iii) Perceived price competitiveness and easy access of information offered by Web vendors in comparison to alternative shopping modes.

Reliability refers to a "willingness to rely on an exchange partner in whom one has confidence." If an e-tailer is perceived as honest, consistent, competent, fair, responsible and helpful, people will feel more confident in participating in electronic commerce. The perceived convenience of shopping includes time, space and effort saved by a consumer and ease of placing and cancelling orders, returns and refunds and timely delivery of orders (Swaminathan, Lepkowska-White, Rao, 2006). Perceived price competitiveness refers to the ease of obtaining price comparisons, which increases competition across suppliers. The endless source of information on the Web can enhance the experience with detailed product information and reviews (Swaminathan, Lepkowska-White, Rao, 2006).

3. FACTORS DETERRING ONLINE PURCHASING BEHAVIOR

On the contrary, the Internet represents a unique selling medium that does not allow consumers to use their senses during their purchasing. Sense of touch is one of the primary reasons why apparel sales on the Internet are comparatively slow (Pendle, Stiles, 2008). According to the NPD Group, some 85% of shoppers were deterred from purchasing clothing online in 2007 because they could not try the product on (Pendle, Stiles, 2008). There are several issues that make it difficult for the online retailer to sell products. They include:

* Consumers are reluctant to exchange personal information, such as credit card details, and email addresses with retailers

* Consumer loyalty is hard to earn and retain

* Online return policies are often not consumer-centric and deter buyers

* The costs associated with customer acquisition are often high and without guaranteed retention

According to Pendle and Stiles, the following are factors contribute to lost online sales revenue, which was estimated to be over US $3 billion in 2007 (Pendle, Stiles, 2008).

3.1. Personal information exchange

While US consumers find shopping online convenient, they do not like using their credit card to make online purchases. "According to the Pew Internet & American Life Projects' survey conducted in September 2007, 78% of respondents felt shopping online was convenient; 68% felt shopping online saved then time; and 75% did not like using their personal credit card online" (Pendle, Stiles, 2008).

3.2. Customer Loyalty

Online sales (in particular online sales of apparel) have expanded considerably since 2005. A recent study conducted by iMarketing News revealed that during 2006, consumers making online apparel purchases predominately bought from specialty stores (Pendle, Stiles, 2008). Conversely, overall consumer loyalty is said to be decreasing with 61% of consumers showing brand loyalty in 2005, and only 46% in 2006 (Pendle, Stiles, 2008).

3.3. Online returns policies

According to a May 2007 article in the New York Times, consumers return as much as 30% of merchandise purchased online. This amounted to almost US $7 billion for e-tailers in 2007, and this percentage is expected to increase in the future unless online shopping is to become more effective (Pendle, Stiles, 2008). It is important that any online business has a customer-centric return policy in place that encourages buying with confidence rather than deterring would-be buyers.

Online retailers continue to search for ways to improve customer's experiences with their sites. 3D tools and other innovative technologies are available to make the shoppers' experience more rewarding and enjoyable and even give them more of a realistic feel for shopping (Pendle, Stiles, 2008). Two of the biggest problems faced by consumers are that images are only two-dimensional, and that often sizing charts are ineffective. Online businesses need to improve their websites' capabilities and allow consumers to view more than one garment, for example viewing a blouse and a skirt together as a consumer would in a bricks-and-mortar store if the consumer wanted to buy an outfit. Some e-tailers offer a 360 degree viewing and zoom technology which helps with purchasing decisions, however, a great deal more is needed to improve the overall consumer experience online.

4. SECURITY AND PRIVACY CONCERNS

A consumer survey on e-commerce shows that concern for privacy is the leading concern of e-commerce. Research indicates that the intent to purchase rather than merely browsing online increases in direct association with a sense of security and comfort (Swaminathan, Lepkowska-White, Rao, 2006). While security is a concern, privacy is the overriding issue with consumers. The security dimension assesses the degree to which the consumer believes that the site is safe regarding payment methods such as financial risk that refers to the uncertainty of incurring monetary losses while interacting on a website (Roman, 2007). The privacy dimension, on the other hand, is very similar to the concept of information risk in which uncertainty is associated with providing personal information on a website and the risk of such information being exposed. Luckily for online retailers, convenience overrides concerns of privacy (Swaminathan, Lepkowska-White, Rao, 2006).

Consumers must have trust and confidence in the e-tailer to feel comfortable sharing personal information over the Web. Many consumer concerns regarding the inherent safety of financial transactions online have been resolved through the development of sophisticated encryption programs. Still, many consumers require additional assurance that their information will be protected. Security concerns include, retailer disclosures, information risk, product risk, familiarity with the retailer and the product

The above security concerns cause consumers to be hesitant and cautious of online transactions due to privacy concerns regarding use of information, anonymity, the perception of direct marketing, privacy laws, and control over their personal information. "Online retailers have to make concerted efforts to allay these fears by offering clear guidelines to consumers on their online security and privacy policies, limits of consumer liability in the case of fraudulent transactions, and offer alternate payment mechanisms through toll-free phone numbers, customer representatives, etc." (Swaminathan, Lepkowska-White, Rao, 2006).

5. FACTORS INFLUENCING E-COMMERCE

Retailers will be expected to satisfy shoppers better if they can understand and address their motivations. Studies reveal a paradigm shift in Americans shopping behavior, demanding an innovative and engaging experience in-store and online. While products are no longer the differentiator among retailers, they must take steps to stand out by focusing on the overall quality of the experience (Chang, Yuan, Hsu, 2010). By creating a process that involves consumers in the design and development of a product, a company can ensure that the product meets the consumers' needs, and allows for a sense of ownership among the customers, thus leading to customer loyalty (Chang, Yuan, Hsu, 2010). E-tailers can continue to evolve and expand their customer base by continuing to develop creative experiences with online purchasing. Social networking is quickly growing, especially among the female demographic. Traditional e-commerce lacks the social aspect that a trip to the local mall fulfills (Chang, Yuan, Hsu, 2010).

According to Creating the Experience Economy in E-Commerce, customization and personalization are key attributes to ensuring a positive experience. "The more personalization a business manages to create, the more the customer will be prepared to spend." (Chang, Yuan, Hsu, 2010). This can include personalization of the website, product suggestions, and even customized products which create a sense of ownership among customers and lead to intense customer loyalty. There are several such examples of this, including (i)Customizing sneakers on Nike.com, (ii) Designing house interiors on e-interior design services, (iii) Contributing to Youtube being a part in the global community, and (iv) Online gaming.

Companies that focus on the customer's experience are offering a platform that allows people to immerse themselves through their positive experiences with their brand (Chang, Yuan, Hsu, 2010). Social networking sites such as Facebook and Twitter allow for a sense of community and personalization as well- an experience that people enjoy. Many companies are using these social networking sites to gain awareness and reach.

An E-study conducted by BizRate Research found that free shipping without conditions is one of the biggest draws to pull browsers in to become buyers (Rox, 2007). This study also found the three-quarters of businesses offer periodic free shipping with conditions, free shipping upgrades, or discounted shipping throughout the year. Another way to increase the draw of online shopping is to offer online-only sales and promotions. The major draw will continue to be the convenience aspect, which will keep consumers coming back for more.

6. FUTURE OF E-COMMERCE

Recent studies have shown that the majority of online shopping is done by men, who tend to have a more favorable perception of online shopping (a quick alternative to physically going to the store). E-tailers can begin to develop what is known as "social e-shopping" to gain a competitive advantage within the female market. A case study in the UK revealed that young women who enjoyed the social aspect of the traditional shopping malls- interactions with friends, socializing, feedback, etc, lack this fulfillment when using e-commerce sites (Dennis, Morgan, Wright, Jayawardhena, 2010). When the women used a site that was more social-network orientated, their level of satisfaction, enjoyment, and attitudes towards buying on-line increased. The social e-shopping sites allow for customers to create groups, lists, style-files and meet people (shopping friends) while shopping multiple sites at once (Dennis, Morgan, Wright, Jayawardhena, 2010).

For decades, retailers and researchers understood that shopping is not just for obtaining tangible products, but also about the experience and entertainment. Two types of shoppers exist Utilitarian and Hedonic. Utilitarian shoppers can be characterized as those who shop with a purpose, while hedonic shoppers view shopping as an outlet to fulfill their emotional and social needs. A recent study revealed that young women both utilitarian and hedonic shoppers preferred the social e-shopping site to the traditional e-shopping (Dennis, Morgan, Wright, Jayawardhena, 2010). The study demonstrated the potential edge that competitors can gain through this new concept of incorporating social aspects in their websites, attracting more young women to purchase and use their sites over traditional e-commerce sites.

The future of social e-shopping has vast potential in today's world. E-tailers may be able to improve the usefulness of their e-shopping websites by incorporating image interactivity systems allowing customers to visualize themselves wearing clothes or trying on make-up with virtual mirrors collaborating with websites such as My Virtual Model and EZface. Social e-shopping can be publicized through virtual marketing, blogs, Facebook, Twitter, etc. The ease of use of social e-shopping can be improved by systems to ensure a single log-on and payment account for all participating retailers, verses having to log on separate to each individual store. A survey from the National Retail Federation, concludes that online shoppers have traditionally been bargain hunters focused primarily on price and free shipping, but today's online shopper has "deeper pockets and greater technological sophistication" (Dealerscope, 2011). "Today's online shopper will spend 24.6% more than average adults ($858.49 for online shoppers vs. $688.87 for all adults), and this group is apt to make non-gift purchases for themselves (61.4% of online shoppers vs. 57.1% of adults)" (Dealerscope, 2011).

7. CONCLUSION

Internet retail sales represent a vital and steadily growing portion of commercial sales. As online shopping becomes safer and more secure, this alternative shopping avenue is becoming increasingly attractive for consumers today- especially with added convenience and unlimited options at their fingertips on the World Wide Web with the use of mobile devices.

Privacy, security, and retailer reliability will remain a concern to consumers; the level of these concerns is what can be improved upon as time goes on. Creating a memorable experience online will help e-commerce sites attract more shoppers online and retain them with the low loyalty that exists. Customization is proven to enhance customers experience as the future of e-shopping, social e-shopping, will be attractive to those that prefer the emotional aspects that come with traditional shopping and a well-rounded shopping experience. Marketers must focus on creating a memorable experience for the consumer in addition to addressing and minimizing privacy concerns in order to turn browsers into buyers in cyber space.

REFERENCES:

Bausch, S., McGiboney, M. Convenience, Not Price, Drives Online Holiday Shopping, According to Nielsen Online Pre-Holiday Survey. November 20, 2007. http://www.nielsenonline.com/pr/pr_071120.pdf

Chang, W., Yuan, S., Hsu, C. Creating the Experience Economy in E-Commerce. July 1, 2010. http://cacm.acm.org/magazines/2010/7/95069-creating-the -experience-economy-in-e-commerce/

Dealerscope. New Online Tools And Featuers Drive Sales. 1 Jan. 2011: ABI/INFORM Global, ProQuest. http://libdb.sjfc.edu:2500/login?url=http://proquest.umi.com/ pqdweb?did=2246907621&sid=14 &Fmt=3&cli entId=4463&RQT=309&VName=PQD

Dennis, C., Morgan, A., Wright, L., Jayawardhena, C. The Influences of Social E-shopping in Enhancing Young Women's Online Shopping Behaviour. Westburn Publishers Ltd. Journal of Customer Behaviour, Volume 9, Issue 2, Summer 2010, pp. 151-174.

Lester, D., Forman, A., Loyd, D. Internet Shopping and Buying Behavior of College Students. Services Marketing Quarterly, Volume 27, Issue 2 January 2006, pp123 -138.

Pendle, F., Stiles, R. Global market review of online apparel retailing--forecasts to 2014: 2008 edition: The difficulties and considerations of online selling. Just--Style : Global market review of online apparel retailing. 1 July 2008. ABI/INFORM Global, ProQuest. http://libdb.sjfc.edu:2500/login?url=http://proquest.umi.com/ pqdweb?did=1521889641&sid=11 &Fmt=3&cli entId=4463&RQT=309&VName=PQD

Roman, Sergio. The Ethics of Online Retailing: A Scale Development and Validation from the Consumers' Perspective. Journal of Business Ethics 72.2 (2007): 131-148. ABI/INFORM Global, ProQuest. http://libdb.sjfc.edu:2500/login?url=http://proquest.umi.com/ pqdweb?did=1239584061&sid=7& Fmt=6&clie ntId=4463&RQT=309&VName=PQD

Rox, H. Top Reasons People Shop Online May Surprise You, Nov. 26 2007. http://www.associatedcontent.com/article/459412/ top_reasons_people_shop_online_may.html?c at=3

Swaminathan, V., Lepkowska-White, E., Rao, B. Browsers or Buyers in Cyberspace? An Investigation of Factors Influencing Electronic Exchange. June 23, 2006 http://onlinelibrary.wiley.com/doi/10.1111/j.1083-6101.1999.tb00335.x/ abstract

Winters, T., Detlefsen, R., Davie, W. US Census Bureau News. November 17, 2010. http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf

Farrokh Mamaghani, St. John Fisher College, Rochester, New York, USA
Table 1. Estimated Quarterly U.S. Retail Sales: Total
and E-commerce (1) (Estimates are based on data from the
Monthly Retail Trade Survey and administrative records.)

                           Retail Sales      E-commerce
                      (millions of dollars)     as a
                                             Percent of
      Quarter          Total    E-commerce     Total

Adjusted
3rd quarter 2010(p)   978,731     41,525        4.2
2nd quarter 2010(r)   971,384     39,941        4.1
1st quarter 2010      960,469     38,719        4.0
4th quarter 2009      940,708     38,141        4.1
3rd quarter 2009(r)   923,211     36,540        4.0

Not Adjusted
3rd quarter 2010(p)   980,226     38,843        4.0
2nd quarter 2010(r)   989,229     37,385        3.8
1st quarter 2010      896,741     36,680        4.1
4th quarter 20O9      985,649     45,199        4.6
3rd quarter 2009      926,265     34,031        3.7

                                                Percent Change
                          Percent Change       From Same Quarter
                        From Prior Quarter        A Year Ago

      Quarter          Total    E-commerce    Total    E-commerce

Adjusted
3rd quarter 2010(p)     0.8        4.0         6.0        13.6
2nd quarter 2010(r)     1.1        3.2         7.5        14.7
1st quarter 2010        2.1        1.5         6.3        14.3
4th quarter 2009        1.9        4.4         2.1        14.6
3rd quarter 2009(r)     2.1         49        -7.8        1.6

Not Adjusted
3rd quarter 2010(p)    -0.9        3.9         5.8        14.1
2nd quarter 2010(r)    10.3        1.9         7.6        14.1
1st quarter 2010       -9.0       -13.8        6.8        14.2
4th quarter 20O9        6.4        32.8        2.0        15.0
3rd quarter 2009        0.7        3.9        -8.0        1.6

(p) Preliminary estimate. (r) Revised estimate.
Gale Copyright:
Copyright 2011 Gale, Cengage Learning. All rights reserved.