Drivers of Internet Shopping

Mohamed Khalifa and Moez Limayem

The two distinct forms of e-commerce—business-to-business (B2B) and business-to-consumer (B2C)—have emerged as an important way of doing business that will surelygrow in years to come. According to some recent forecasts, total Web sales will reach1.4 trillion dollars in 2004. Most of the growth, however, is expected to be in B2B, withprojected B2C barely constituting 21% of Web sales in 2004 [3]. With the exception ofsoftware, hardware, travel services, and a few other niche areas, shopping on the Internetis far from universal, even among people who spend long hours online. While B2C hasnot yet attained widespread acceptance in the overall scheme of e-commerce, the poten-tial is definitely there. Indeed, there is substantial room for the growth of B2C once themajor obstacles are overcome.

Although some of the hurdles to the growth of B2C e-commerce have been dis-cussed in the literature, we still lack a good understanding of consumer behavior onthe Internet and how new technologies challenge the traditional assumptions under-lying conventional theories and models. Butler and Peppard [1], for example, explainthe failure of IBM-sponsored Web shopping malls on a lack of understanding of thetrue nature of consumer behavior on the Internet. A critical understanding of thisbehavior in cyberspace, as in the physical world, cannot be achieved without a goodappreciation of the factors affecting the purchase decision. If cybermarketers knowhow consumers make these decisions, they can adjust their marketing strategies to fitthis new way of selling so that they can convert potential customers to real ones andretain them. Similarly, Web site designers, who are faced with the difficult questionof how to design pages to make them not only popular but also effective in increas-ing sales, can benefit from such an understanding.

In this research we applied well-established behavioral theories to explain Inter-net consumer behavior. We then conducted a longitudinal survey study to identifykey factors influencing purchasing on the Web and to examine their relative impor-tance. The results of this study enhance our understanding of consumer behavior onthe Web and lead to valuable implications for marketers and managers on how to

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Mohamed Khalifa (iskhal@cityu.edu.hk) is an associate professor and director of the Asia Centre forElectronic Business at City University of Hong Kong.Moez Limayem (ismoez@cityu.edu.hk) is an associate professor and coordinator of the BBA ElectronicCommerce Program in the Information Systems Department at City University of Hong Kong.

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© 2003 ACM

develop effective strategies to win the battles of cyber competition. The findings ofthis study should also help Web designers in their difficult task of designing sites thatmust compete with millions of other sites on the Web.

Explaining Internet Consumer Behavior Studies that investigated consumers’ perceptions of obstacles hindering the developmentof Internet shopping have reported several concerns, for example, security, trust, band-width, legal framework. These concerns, however, will soon become irrelevant. Therapid development of e-commerce technology will alleviate the security and bandwidthproblems. Several governments have realized the strategic importance of e-commerceand are rapidly developing appropriate legal frameworks. Perceptions will also change asmore and more people adopt Internet shopping. As these concerns are being addressed,other factors, such as the convenience of the entire shopping cycle (ordering, payment,delivery, and support), product quality and variety, and customer service, become moresalient. Although most of these factors have been discussed in the e-commerce literature,their effects and their relative importance are still not well understood. This lack ofunderstanding is causing a wide confusion regarding what is really happening, howmuch potential there is, and what companies should be doing to take advantage ofInternet shopping.

This study sheds light on Internet consumer behavior through the application andempirical testing of a comprehensive behavioral model. Based on a thorough literaturereview and focus group meetings with 177 Internet consumers, we identified importantfactors affecting the adoption of Internet shopping and the level of its use. The elicita-tion of these factors was based on a well-accepted behavioral model proposed by Trian-dis [4]. According to this model, behavior is preceded by intentions and is affected byfacilitating conditions. Intentions are in turn determined by social influences, attitudetowards the behavior, and perceived consequences of the behavior among other factors.Seven perceived consequences were identified as particularly influential. The partici-pants in the focus groups perceived that their Internet shopping behavior was motivatedby cheaper prices, convenience, saving time, improved customer service, and their abil-ity to do comparative shopping. They also thought that they would shop on the Inter-net more frequently if they did not have concerns regarding risks of security breach andprivacy violation. On the social side, the influences of the family, media, and friendswere perceived to be important. The participants also identified five conditions for facil-itating Internet shopping. These included transaction efficiency, navigation efficiency,product description, site accessibility, and Web page loading speed.

Internet Shopping SurveysFollowing the elicitation of the beliefs of Internet shoppers regarding the various fac-tors affecting their intentions and behavior, we conducted a longitudinal study con-sisting of two online surveys. The first survey was aimed at assessing the intentions ofInternet shoppers regarding their future behavior (shopping frequency) and exploringthe determinants of these intentions, such as attitude, perceived consequences, andsocial influences. A total of 6110 consumers were chosen randomly from 4 Internet-based directories and were solicited by email to complete the first online question-naire. The respondents were told that they would be asked to answer a secondquestionnaire in three months and that, in order to match the first questionnaire with

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the second one, they had to specify the last five digits of their phone number. Thismethod allowed us to keep the survey anonymous while enabling us to match theanswers of the two questionnaires to the same individual. A total of 1410 respondedto the first survey. The second survey, on the other hand, focused on investigating theeffects of intentions (assessed in the first survey) and facilitating conditions on actualInternet shopping behavior. Only 705 of those who responded in the first roundanswered the second questionnaire. Table 1 describes the demographic profile of therespondents.

Results and DiscussionThe analysis of the data was done in a holistic manner using Partial Least Squares (PLS),a procedure that tests both the structural model (hypothesized relationships between fac-tors) and the measurement models (items measuring each factor) simultaneously (see[2]). The results of the analysis are presented in Figure 1. The significant effects (signif-icant path coefficients for constructs and weights for measurements items, as indicatedby t-statistics) are indicated with solid lines with the most important ones (highest coef-ficients & weights) in double lines. Both intentions and facilitating conditions are foundto affect Internet shopping behavior (that is, frequency of shopping) significantly. Facil-itating conditions, however, have a more important effect. It is not enough to form anintention to shop online; such an intention will not translate into action if the appro-priate conditions are not present. All facilitating conditions, identified through the lit-

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Category

Percentage (%)

Age Less than 20 years

20 – 35 years 35 – 50 years

Greater than 50 years Missing values

10 49

23 16

2

Education

Bachelor Master Ph.D.

Others Missing values

37

18 10 32

3

Annual Income

Less than 20,000 USD 20,000 – 35,000 USD 35,000 – 50,000 USD

Greater than 20,000 USD Missing values

27

24 21 19

9

Number of Purchases within 3 Months

None 1 – 5 purchase(s) 5 – 10 purchases

10 – 15 purchases 15 – 20 purchases

Over 20 purchases Missing values

26

36 16

6

2 8

6

Table 1. Demographics.

erature review and the belief-elicitation process, are significant. These findings highlightthe importance of transaction efficiency, product description, navigation efficiency,Web-page loading speed, and site accessibility in assisting the Internet consumers to acton their intentions.

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Attitude

Intention to shop online

Social

Influences

Facilitating

Conditions

Actual Internet

Shopping Perceived

Consequences

Family

Friends

Media

Transaction

Efficiency

Product

Description

Site

Accessibility

Navigation

Efficiency

Web Page

Loading Speed

Saving

Time

Security

Breach

Cheaper

Prices Privacy

Violation Improved

Customer

Service

Comparative

Shopping

Most important effects Significant effects

Insignificant effects

Convenience

Figure 1. Significance and relative importance of Internet shopping factors.

Although all significant, two out of the five facilitating conditions emerged as themost important ones, specifically, site accessibility and transaction efficiency. Toenhance the accessibility of an Internet shop, one has to make sure that the site isalways up and running (available) and that it can be easily located. Choosing theappropriate domain name, registering the site with important search engines andoptimizing its ranking, reminding visitors to bookmark the site address, and estab-lishing a presence in popular cybermalls are all techniques that can enhance the acces-sibility of Internet shops. Improving the transaction efficiency, on the other hand,requires the optimization of the cycle times associated with product identification andselection, ordering, delivery, and after-sale service. While some aspects of transactionefficiency are associated with the user-interface design (for example, number of clicksrequired), others are associated with the reengineering of the order taking and fulfill-ment processes.

Although not as important as accessibility and transaction efficiency, the other facil-itating conditions—product description, navigation efficiency, and Web page loadingspeed—are nevertheless significant and should not be neglected. To improve loadingspeed, the literature provides a number of guidelines for Web designers, such as keepinggraphics simple and meaningful, limiting the use of unnecessary animation and multi-media plug-in requirements, using thumbnails, providing a “text-only” option, continu-ously monitoring the server and the Internet routes, and allowing text to load first,followed by graphics. To improve navigation efficiency, Web designers should carefullythink of their online store layout. Some online stores keep a similar layout to that of thephysical stores with which customers are already familiar. Other useful guidelines fornavigation design include creating intuitive/meaningful hyperlinks and labeling themproperly, providing a site map, and developing an effective search engine. It is importantto note that navigation efficiency affects transaction efficiency (discussed previously), animportant facilitating condition of online shopping. Finally, providing a good productdescription is a significant facilitating condition that can minimize an important draw-back of online shopping: the inability of the customer to physically feel and examine theproduct. Enhancing the information content of the product is often cited in the litera-ture as one of the critical success factors of online shopping. While in a physical storecustomers may complain about information shortage, in an online store they may beoverwhelmed by information. The main challenges of Web designers are therefore todecide on the appropriate amount of information, to organize it, and to present it prop-erly.

The results also indicate that the intentions of Internet consumers are significantlyaffected by the perceived consequences of online shopping, the consumers’ attitudestowards it, and social influences. Perceived consequences of online shopping, however,have the most important effect. Out of the hypothesized seven consequences, five areperceived to matter. The insignificant two are privacy violation and convenience. Sur-prisingly, our respondents did not give much importance to the convenience (anywhereand anytime) and privacy factors in forming their intention to shop on the Internet.Instead, they were enticed by cheaper prices, saving time, improved customer service,and the ability to do comparative shopping while they were discouraged by security con-cerns. There is a clear indication that security remains a big hurdle for the growth ofB2C despite the important improvements in the technical solutions. Therefore, Inter-net retailers should work on their consumers’ perceptions in addition to implementing

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effective security measures. The results also indicated that the possibility of saving timeis an important perceived consequence of online shopping. This is a confirmation of thesignificance of transaction efficiency and represents an important guideline for Webdesigners. Improved customer service is also found to be a significant perceived conse-quence of online shopping. Preferably, customer service and support should cover pre-purchase interactions, purchase, and post-purchase activities. According to theliterature, one of the main advantages of Internet shopping is the improvement of infor-mation content, customization, and speed of customer service. In addition to improv-ing customer satisfaction, online support can also reduce the operational costs ofbusinesses. For example, adding a frequently asked questions (FAQ) section about thecompany and its products/services can significantly reduce customer requests and canalleviate the burden on call centers. Another perceived consequence that is found to besignificant in this study is comparative shopping. Supporting the search-and-compari-son activities of shopping helps the consumer to make a more informed decision.Finally, out of all perceived consequences, cheaper prices emerge as having the mostimportant influence on intention formation. The bottom line for Internet consumers issaving money. This is an important factor for Internet retailers to take into considera-tion in formulating their business strategies in general and their marketing strategies inparticular.

Other significant factors affecting intention formation for online shopping aresocial influences. The literature indicates that individuals use the Internet more fre-quently if they have a more socially supportive environment, including friends andrelatives who are also Internet users. Our results indicate that online shoppers are sig-nificantly influenced by family members and the media rather than by friends. Whatis new in this study is that the media turned out to have the most important socialinfluence on forming intentions to shop online. These days, one can hardly read anewspaper or watch TV without coming across some e-commerce news or commer-cials. The media can therefore play a very important role in the development of B2C.Although online advertising presents several advantages, it is not supposed to com-pletely replace, but rather supplement, the traditional advertising channels. Theimportance of media influence indicated by the results of our study implies thatonline businesses should promote their sites in the media—radio, TV, newspapers,and trade journals.

ConclusionThe purpose of this study was to gain a better understanding of online consumerbehavior through an investigation of factors affecting online shopping intentions andbehavior. This was done based on a well-established behavioral model. Couplingbelief elicitation through focus groups with a review of prior research allowed us toobtain a salient set of measures that resulted in interesting practical implications forWeb designers and marketers about the critical drivers of facilitating conditions,social factors, and perceived consequences of online shopping. The use of a longitu-dinal approach for data collection provided a causal understanding of the factorsaffecting online shopping intentions and behavior. Nevertheless, this study, like allothers, is not without limitations. It is important to recognize that online shoppingbehavior was self-reported and was assessed only once, three months from the timeintentions were measured. Moreover, we did not evaluate the breadth of this behav-

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ior (that is, the variety of products bought) or its change over time. We realize that itis important for businesses to sell, but what is probably more important is to retaintheir customers for repeated purchases. Future research should use a wider variety ofmeasures of online shopping and track the shopping behavior over a longer period oftime.

References1. Butler, P. and Peppard, J. Consumer purchasing on the Internet: Processes and prospects.European Management Journal 16, 5 (Oct. 1998), 600–610.

2. Chin, W. W. The Partial Least Squares Approach for Structural Equation Modeling. LawrenceErlbaum Associates, 1998.

3. ePayments Resource Center. Electronic transactions statistics, 1999; www.epaynews.com/statistics/.

4. Triandis, C. H. Values, attitudes and interpersonal behavior. Nebraska Symposium on Moti-vation (1979). Beliefs, Attitudes and Values, University of Nebraska Press, Lincoln, NE, 1980.

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