1. INTRODUCTION: RESEARCH AIMS AND OBJECTIVES
The project had two key questions to focus on and this acted as a guide to the research design and methodology. The two key research questions in my project were:
- What are the key consumer motivations for online shopping and how are these impacting the development of the online channel? This question is focused on the key drivers acting as make for consumers to pursue online shopping, and how these drivers were impacting the online channel as an alternative channel for making purchases.
- What are the emerging trends for online shopping, and how will the online shopping channel develop? As online shopping continues to increase, both organisations and consumers are expected to be better-placed with having a good understanding of where online shopping trends seem to be directed at.
1.1 Consumer motivations
The project sought to understand the consumer motivations for choosing online shopping as an alternative channel or, for some consumers, their main channel for shopping particular items. This part of the project was based on determining what consumers have stated as their key motivation factors through secondary research. This was supported by primary research by surveying and interviewing consumers on their motivational factors. The objective was to list out the key motivational factors consumers have for online shopping.
1.2 Emerging trends for online shopping
In addition to understanding consumer motivation, this project also sought, as an objective, to understand the emerging trends in online shopping, and establish a viewpoint on where the online channel was expected to move to. Similar for consumer motivations, this part of the project was based on a combination of primary and secondary research.
1.3 Foundation for research project
There was a strong foundation for pursuing this project as it aimed to provide a greater understanding of the consumer and the motivations behind online shopping. As the importance of the online channel becomes increasingly greater for organisations, there is greater need for determining the consumers’ key drivers in choosing this as an alternative channel for shopping. The project results impact both consumers and organisations. For consumers, this gave them a venue for stating their preferences and key requirements to continue using the online channel which could lead to improvements on the online shopping experience. For organisations, this project provided an understanding of the current situation and also the emerging trends based on competitive dynamics, in order to be able to provide the consumers their requirements.
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This project was also important for me as the student as it gave me an opportunity to develop the knowledge and pursue the analysis of a critical management issue which was becoming a greater value add channel for a large number of organisations. The project, I believe, has led to new insights and a confirmation of consumers’ key motivations to online shopping. I believe this contributes to the growing knowledge on the online shopping experience of consumers.
2. LITERATURE REVIEW
In this section, research works relating to consumer motivations for online shopping and related issues are critically evaluated. This research project was pursued with a ‘qualitative research’ approach as the focus was on consumer motivations, which, while it could have been developed with quantitative metrics, seemed to translate better into a qualitative focus. The objective was more focused on going in greater depth across the key consumer motivations instead of tallying figures in terms of which factors consumers felt were their key motivations. The qualitative aspect of the research project was pursued through surveys and in-depth questionnaires.
The primary data collected through the surveys and in-depth interviews were highly subjective as these were the results of consumers’ opinions and viewpoints. In this instance, it seemed best to pursue a rational approach to analysing the data results and the resulting interpretation. The interpretation of the research results was critical in this research project as there were no specific correct answers being pursued rather the collective view point and key motivating factors were being identified. Overall, the approach pursued for this research project was an ‘interpretive qualitative research’ approached which seemed to fit best the requirements of the project.
Even at the end of the last century, online shopping was already starting to catch people’s attention, and was slowly attracting consumers to use it as a channel, primarily because of it’s ease in completing purchases (i.e. not needing to step out of the home) and also in providing information as, even then, some sites already provided extensive information (Gay 1999, Gehrt et al 2007). But we are well into the first decade of the 21st century, and since then times have changed and certainly, consumers’ motivations, as evidenced in this literature review and the results of the research project, have changed.
The use of the online channel for shopping varies greatly by country with the UK and the US ranking high up in the list with greatest ratio of online shoppers among Internet users, in addition to also having a large penetration of users for Internet access (Bhatti 2006). In the UK, Internet access among households has increased from 34% in 2000 to 54% in 2004, while Internet access for adults increased from 40% in 2000 to 64% in 2005 (Datamonitor 2006).
2.2 Consumer motivations
In a research on consumer motivations for online retail shopping conducted a few years ago, some of the consumer motivations cited were interest in use of a new technology, ease of navigation and use, and convenience of online shopping (Childers et al 2001). While the research mentioned looked at consumer motivations, the research was only a subset of what could be learned from consumer behaviour as the study focused on only a few possible factors of online shopping activity. Also, the research is dated considering the advancements in technology over the past few years and the changes that have occurred in the online channel and the resulting consumer experience. A key thing to note was that the authors highlighted then the expectations that online retail shopping would continue to increase as consumers found greater reasons for shopping online.
Linked to the increase of online shopping is the increase in access and usage of the Internet. For example, Rodgers and Sheldon (2002) researched the increasing use of the Internet and highlighted shopping as one of the key motivations for increased consumer use. In this instance, shopping was focused on as one of the factors resulting in the increased use of the Internet. In this work, the authors looked at shopping as a consumer motivation for increased consumer use but their work is interesting as the other factors they considered as increasing Internet use come into play, potentially, in increased motivation for online shopping. These include researching, communicating, and even Internet surfing.
Despite the seemingly increasing growth of online shopping and also the increased interest in consumer motivations for online shopping, there has relatively not been much research in this area. This thought is supported as well by the research of Zhang et al (2007) which stated as a premise the “online shopping environment s still representing a comparatively new, and largely unexplored, marketing channel.” The premise of Zhang is hard-hitting as it exposes a large gap in the understanding of consumers’ motivations for online shopping. However, the research does have a major limitation in that the research focused only on college students as its respondents. The research was also very focused on impulse purchasing behaviours, and not consumer motivations for online shopping, as its key issue for analysis.
Before going in detail in some of the consumer motivations discussed in research works, it should be noted that there has been considerable growth in Internet access and usage, and this has created a significant market in marketing and communications of organisations (Ko et al 2005, Tamimi et al 2005, Dadzie et al 2005). Online shopping has been growing and organisations have been focusing more on developing the online channel to capture a greater share of the wallet of the consumer.
Internet is the world’s largest network with high technology and greater controls, every day the standard of the internet is improving. In the past decades people and sales persons used to follow traditional methods for shopping and promotion of the business. Banks and thousands of businesses are using computers to share the data online and for transferring the funds using online banking. Internet is very flexible to view the information all over the world and for comparison of product prices from one to one organisation.
A first step to understanding the growth happening in online shopping is to understand what’s included in the term online shopping. It is generally accepted that it encompasses any product or service that is actually offered online, and hence does not relate only to the typical retail product that people buy but can also mean services that can be purchased online. A rather broad definition is given by Hult et al (2007) wherein online shopping can relate to any offering of service quality, product quality, or e-Business quality where the objective is the customer-based value creation for organisations. Based on this definition, we can see that the number of online shoppers has indeed increased significantly, at least in the UK, with the percentage of UK Internet users shopping online (including ordering tickets of buying goods and services) grew from 36% in 2000 to 61% in 2005 (Datamonitor 2006).
For this research project, the broad definition is reasonable as the key focus of the research is in understanding consumer motivations for online shopping in general, with no specific product or service in mind. Undoubtedly, there are a large number of ways in which to cut the issue and there would be differences in the consumer motivations for specific products in specific markets, for example.
The works cited in this section provided a good starting point in the consumer motivations to be considered. The research works also provided an indication of the increasing use of the Internet and online shopping as an activity. From the limitations cited in the research works, further research needs to be conducted on a general understanding of consumer motivations which are not limited to a few factors. The rest of this section discusses some motivating factors cited by consumers as driving their online shopping activity.
One key factor mentioned as a motivation by consumers is the 24-hour access provided or allowed by most online shopping channels. Thus, the online channel is utilised by consumers as it provides them with 24-hour access for information, customer service, and purchase opportunity (Bramall et al 2004). This essentially gives the consumer the opportunity to browse products and purchase at the consumer’s own leisure. While the research of the authors states this factor as a motivation, the focus of the research work was actually on potential trust issues in online shopping. This specific motivating factor was not analysed in comparison to other motivating factors for consumers.
One oft-mentioned reason, and an early consumer motivating factor, for shopping online is the convenience of doing so as consumers won’t need to go to the retail stores and experience the ‘hassle’ of buying products in the stores (NBC News 2007). Another article does not only highlight the convenience of shopping online but also states that shopping only also helps decision-making as a large part of the information requirements a consumer may need to make the decision are found online (Furnham 2007). Clearly, shopping convenience is expected to rank high among the consumers in terms of their motivations for pursuing online shopping. Convenience can take many forms and includes ‘all-hours’ access (i.e. the 24-hour access mentioned previous to this can be considered a subset of this motivating factor), own time and no pressure for decision-making, no requirement to ‘dress up’ and go to the retail stores, and extensive available information, largely on demand, to support the product or service.
Shopping convenience is a large factor for the US and UK consumers but this is not limited to the US or the UK markets only as even in Japan, online shopping has seen increasing growth rates, with shopping convenience as the greatest factor motivating consumers to do online shopping (Gehrt et al 2007).
Another example where convenience plays a part in online shopping is in the office as a large number of offices are seeing their office employees turn to online shopping during their breaks or in between work in the office to do their shopping which, in some ways, actually results in more productive employees as they don’t need to go to the retail stores for their shopping (Spillman 2006).
As mentioned, online shopping allows unrestricted information search unlike in retail stores where comparisons are constrained largely by time and availability of sales staff to provide information (Chiang 2005). Thus, consumers tend to pursue online shopping if their information requirements are large and can be met online, or if consumers would like to make comparisons between products and services, and across a number of stores.
The shopping convenience factor has been recognised across a number of research works, but these only tend to highlight that consumers have different meanings attached to the terminology, and may actually be referring to different sub-factors under the general term of convenience. In understanding this factor further, specific meanings were attached to and discussed in the surveys and interviews for the research.
An increasingly cited motivating factor in online shopping is the existence of greater bargains for products and services. Consumers are increasingly interested in shopping online due to the greater bargains found in the Internet as organisations pass on savings resulting from using the online channel for sales (NBC News 2007, Lii & Lee 2005). This poses a challenge for organisations though as some may not have fully understood the online channel business model, and may already be providing greater discounts to their products and services through online purchases of consumers.
Another challenge for organisations is that consumers are expected to continue increasing their online purchases but only if they receive greater bargains from sellers in their online sites versus their retail stores (Craver 2006). Thus, consumers are already building the expectations that prices online will be less that prices in retail stores. This means that part of the value for organisations in establishing their online channels has already been transferred to consumers who are expecting more competitive prices online.
If only to hammer the point of increasing consumer expectations, two factors mentioned by consumers in their increased interest in doing online shopping were free shipping of their products purchased and also everyday low pricing particularly relative to the retail stores of the sellers (Hajewski 2006).
The key limitation in the citations for ‘greater bargains’ is that these are from press articles and the approaches were not based on proper research conducted to determine the consumer motivations for online shopping. Nevertheless, this should still be accepted as a consumer motivation as this has been mentioned to be a factor based on the articles cited.
Overall online shopping site experience
This final factor discussed touches on the overall online shopping site experience which, in a way, relates to the overall customer experience in online shopping. This factor is quite specific to online shopping sites which consumers may visit but this nevertheless provides a motivation for some specific consumers and it relates to the overall online shopping site experience and having a positive satisfaction to the experience (Elliott & Speck 2005). Specifically, the authors argued that the following factors impacted on the consumer motivation to complete their online shopping transactions: ease of use of online shopping site, product information available, trust in the brand and the online shopping site, customer support, and entertainment experienced while in the site.
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The focus of the research conducted by the authors was not on online shopping specifically but rather on the attitude towards retail web sites but using the online shopping experience as an example, with an analysis of the resulting impact on the consumers. Similar to some of the other published research cited in this section, the key limitation is the set of respondents considered for the research which, in this case, consisted of undergraduate marketing students. The results are interesting and provide a good preview of what the results could be if the research is expanded to capture a greater sample of the population.
2.3 Emerging trends for online shopping
In reviewing the related literature touching on online shopping and also consumer motivations, a number of emerging trends were clearly seen. These include the following:
- Increased efforts in improving online security
- Potential for an expanded product range and ancillary businesses
- Usability of an online site as an increasing differentiator
- Management of Internet product returns
- Increasingly demanding consumers
- Increasing opportunity for organisations to develop consumer relationships
- Increasingly older market
- Greater share of ad market
Each of these trends is discussed in greater detail in this section.
Increased efforts in improving online security
Across most metrics, online shopping has shown strong growth and yet the belief is that online shopping growth rates could actually be much higher if not for security-related concerns by some consumers (Bramall et al 2004, Arnold et al 2007, O’Connell 2005, Cullen 2005). Increasing trust in e-retailing was one of the factors cited that could significantly drive much greater online shopping activity. Organisations are thus investing in ensuring greater security for their online shopping sites. ConsumerReports.org even recently developed a tool to provide consumers with a safe and enjoyable online shopping experience (Ascribe News 2005).
There are two trends to be noted in relation to the security concerns of consumers. The first, as mentioned, is that there are greater efforts placed by organisations in improving online security as breaches to their security could have considerable consequences. Online security is the ability to protect the information of the customers from unauthorised access and destruction. Most of the online business websites using the technologies to secure their online transactions which gains more customers’ faith and trust to shop online. The use of firewalls, data encryption/ decryption techniques, secure socket layer (SSL), digital certificates, electronic signatures is making online transactions secure. Many governments over the world implemented regulations and law to support the people who want to make transactions online. The European Union adopted the directive on data protection in 1998, which limits any dissemination of personal data. Security and privacy are the most important factors in peoples’ decisions to purchase online, so the sophisticated technology to secure online transactions is the main factor of customers motivations to shop online.
The second trend is that a complementary approach to improving reputation for managing online security risks is paramount. In support of this, where there are great concerns for risk, it has been established that utilising expert endorsers, as opposed to celebrity endorsers or even non-celebrity non-expert endorsers, can actually help in bringing consumers over their risk concerns (Biswas et al 2006).
Potential for an expanded product range and ancillary businesses
Another trend is that organisations are increasingly seeing potential for an expanded product range and ancillary businesses. For example, in recent months, Kohl’s, a US department store chain, has offered products online which were not normally found in their department stores and these included higher-priced items such as leather chairs, high-end home entertainment centres, and flat screen televisions (Hajewski 2007).
This trend is not without its implications for organisation. In the Kohl’s example, one problem with the expanded product range as done by Kohl’s was that Kohl’s did not offer everything they had online in their retail stores. This is a concern as some consumers utilise the online site for their ‘window shopping’ before moving to the retail stores to try on and purchase the items (Dodes 2006). The article states that more than 80% of online shoppers research products online first before sometimes going to the stores to see the products firsthand. Given that not all products are available in the stores, it would be prudent for online sites to be clear about which products are available in the stores and which products are not.
In terms of ancillary businesses, the increase in online usage and online shopping has even spawned related business such as businesses which monitor traffic into organisations’ websites with the objective of increasing an organisation’s online sales (Newman 2007). Another ancillary business opportunity is from online shopping sites is as a social shopping space, such as Jellyfish.com which was recently acquired by Microsoft as it saw the growing opportunity in the business (Gallagher 2007). However, these new business are still untested as these are fairly new and would need some time before potentially growing into profitable businesses. As online shopping continues to grow, organisations will continue to seek out other opportunities that could help build the rationale for investments in establishing a highly competitive online shopping site.
Usability of online site is an increasing differentiator
While the extent of technological readiness of the consumer plays a part in determining the level of comfort in navigating through an online shopping site, the general usability of an online shopping site is an increasing differentiator and distinguishes between the different sites that consumers will utilise in online shopping (Massey et al 2007). There is a significant effect of the online marketing or advertisements on the customers to shop online and this pushing medium of marketing makes the people to shop online. The online marketing websites are designed with the facility of keyword search which brings more flexibility to online customers. Online stores are offering with much amount of choices and more information than atmosphere, so pure play sites attracting people with higher interactivity. The goal with these sites is to have it easily navigated through by consumers such that any potential barriers to keep consumers from purchasing products and services are effectively taken out of the equation. Online promotions are very important to investigate the future trends of the online shopping. Customer relationship management is the most important function in any organization to promote their marketing strategies and to maintain good customer relationship. It is very important to consider the attitudes, behaviour and experiences of the customers to make the online promotions.
An example of an initiative moving into the direction of overall ease of usability is the recent transaction involving Abazias.com and Google wherein Abzias.com partnered with Google for their shopping checkout process which is considered fast and very convenient (M2 Presswire 2007). The challenge for organisations is to continue making their online shopping sites easier to use. And to support the point, some online shopping sites now provide potential live help from customer service if particular requirements are needed in order to limit the number of lost purchases resulting from consumers abandoning their purchases (Prince 2005). Overall, the design of the website and the ease of use have a large impact on the online shopping site’s performance (Auger 2005).
Management of Internet product returns
Another emerging trend is the establishment of clear guidelines in the management of Internet product returns, which then addresses a key concern or questions by some consumers. Internet product returns has been one of the key factors limiting part of the online shopping growth as the uncertainty surrounding how returns of defective or unwanted products impacted on the overall cost and inconvenience for the consumer. Organisations which are able to state clearly their policies on Internet product returns, and which provide a seamless process for allowing consumers to make returns for products bought online are at an advantage versus other organisations which have a perception of ‘being difficult’ to coordinate with in processing Internet product returns (Mollenkopf et al 2007).
Increasingly demanding consumers
As the development of the online shopping channel continues, we are now seeing increasingly demanding consumers. This is shown in an example using the UK supermarket sector. In this sector, online shopping is still considered a poor offering by the UK supermarkets as none of the top five supermarket chains passed a service test conducted by a consumer affairs staff of a newspaper (Prunn 2006). Their failures were from their product offering to the product substitutes provided. The key good news for the UK and supermarkets thought was that the websites were generally easy to use for online shopping. Also, the delivery drivers were helpful and friendly.
In contrast, in the US, online shopping offering for the supermarkets is a competitive offering with various supermarkets increasingly providing greater online shopping offerings for their consumers including chef-prepared, fresh-food delivery service (Food Institute Report 2006). Thus, the US supermarkets are able to provide the US consumers with their ‘demands’ from US supermarkets. UK supermarkets will need to focus on improving their offering in order to capture the consumer wallet for shopping deliveries.
Finally, an approach to cater to the demanding consumers is to provide channels for consumers to give their reviews, and to act on the comments of consumers which have been seen to provide a good way of increasing the online site’s business (Spors 2006).
Increasing opportunity for organisations to develop consumer relationships
The online shopping channel provides organisations with an additional channel to develop consumer relationships. Organisations which are able to effectively capture value from their online shopping offering are the organisations which are able to “collect and analyse data on consumer patterns, interpret customer behaviour, respond with timely and effective customised communications, and deliver product and service value to consumers” (Kennedy 2006).
The game is not new to most organisations. The only difference is that there is a new channel to consider for the consumer relationships. In order to be competitive, organisations should be able to learn from their interactions with the consumers, and develop the channel into one that consumers will find value from. With the growth of the online shopping channel, more organisations will invest in ensuring that consumer information is managed properly to be leveraged by the organisation in capturing value from the interactions.
Increasingly older market
At least in the US, the trend is that the “older internet users market comprises the fastest-growing demographic group in the US Internet market” and are, aside from large and growing, generally financially secure (Iyer & Eastman 2006). While a research has not been found to state a similar point for the UK, it is possible that this is the case as well given the increasingly older society with a lower proportion of younger people in the country. What does this mean for the online shopping channel? If this is truly the trend, then the investments that organisations will place in developing their online shopping channels will be geared towards an older generation, from site design to products and services to site technology used.
This potential trend has large implications on various organisations that can benefit from this research work. Thus, a greater understanding of the key trends is important in order to allow the organisations to plan and invest properly in their online shopping channels.
Greater share of ad market
Finally, another trend worth noting is the increasing share of the ad market by the online channel. With the growth of the online shopping consumer market, the ad share of this channel (the Internet) is expected to grow as well from about 5-8% to up to one-fifth of total ad budgets over the next three years (Ong 2005). As examples, US auto firms spent ~14% of their total advertising budget for online advertising in 2005 while Procter & Gamble was planning to shift ~5% of its television advertising budget for online advertising and marketing programs (Datamonitor 2006). The greater share of the ad market by the online channel has implications for organisations across two key points. First is that there needs to be a decision on the amount of the ad budget that will be allotted to the online channel. After deciding on the first point, the second key point is that it is imperative for organisations to understand the business model of the online channel, and that the organisations have a plan in ensuring their investments will eventually generate good returns, if not doing so already.
2.4 Framework of Analysis
As mentioned, this literature review was used for building a preliminary understanding of the key motivations of consumers in online shopping activity and also in determining the emerging trends in the online channel. From the literature review in this section, the following framework of analysis was utilised in the surveys and interviews.
The consumer motivating factors mentioned in the literature review was utilised in both the surveys and interviews to prompt respondents and to test the factors. The structure of the factors in the ‘for prompt’ section of the surveys and the interviews followed this listing:
- 24-hour access – Respondents were asked if this was one of the factors they considered as a key motivation for online shopping.
- Shopping convenience – While this was included as a factor in the ‘for prompt’ section of the surveys and interviews, greater depth was pursued in understanding what the consumer may consider as shopping convenience in relation to online shopping.
- Greater bargains – This was tested to determine if consumers truly saw this factor as an expectation already, and if not having this factor would impact on their use of the online channel for shopping.
- Overall online shopping site experience – This factor was analysed in the context of the overall consumer experience, and was assessed of the importance versus the other factors mentioned by consumers as their key motivating factors for online shopping.
For emerging trends, not all the possible trends were included in th
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