Online shopping: what factors are important to shoppers?

Journal of the Academy of Business and Economics, March, 2005 by Chuleeporn Changchit, Shawn J. Douthit, Benjamin Hoffmeyer

ABSTRACT

The success of online businesses relies heavily upon their ability to attract and retain customers. This study investigates which factors can lead to a more favorable online shopping experience. More specifically, the study identifies the factors perceived as important to online shoppers when making the decision to visit a website, to purchase from a website, to purchase more items, to purchase at a higher price, and to provide feedback to a website. The better an online business understands the needs of these shoppers, the higher the chance that they can attract and retain customers.

Keywords: Online Shopping, E-Commerce, Important Factors

1. INTRODUCTION

The Internet is used everyday by a wide variety of people for several functions. More and more people gravitate towards using the Internet more intensively as the accessibility of technology, the availability of information, and the ability to interact through the Internet increase and evolve. Obvious capabilities of the Internet include avenues for gathering information, purchasing a product, or rendering a service. The advance in Internet technology allows for the expansion of options beyond the traditional methods that may be more time consuming. Having to physically gather information is alleviated, and the customer is better able to efficiently use their time. For instance, instead of having to physically visit different stores to compare prices or relying on circular pamphlets in newspapers, the consumer is able to search and retrieve the needed information through the Internet. With the number of hosts on the Internet having grown from 1.7 million in 1993 to 110.0 million in 2001 (Ruthkowski, 2000), the Internet user has a wide variety to choose from to satisfy these needs.

Many brick and mortar companies have decided to enter e-commerce markets. However, the effects of e-commerce on individual business are varied based on several conditions. The companies should examine the customers' needs and preferences carefully in order to minimize any adverse consequences that might arise. Some factors to consider are the effects on products, services, skills, staffing, structure, systems, and the customer base (Piers and Aisbett, 2002; Lumpkin, Droege, and Dess, 2002). How these effects are handled will determine whether the business will effectively use e-commerce and remain a viable, going concern.

While the traditional brick-and-mortar storefront can bombard potential customers with information prior to entering a store, the situation is different for online businesses. Potential customers take a different role with their ability to be more active in determining what information is viewed. Unlike traditional brick-and-mortar storefronts that can place physical ads which cannot easily be removed from customer eyesight, the mouse and keyboard makes it relatively easy for the online consumer to pick what information is searched, kept, or discarded. This capability creates a different dynamic in the consumer-business relationship, placing more control in the consumer's hands.

As consumers gain more control, it is important that their needs be the main concern when building an online business website (Huizingh & Hoekstra, 2003). An online business must distinguish themselves from their competitors so as not to be overlooked in the large number of business choices available through the Internet. Focusing on factors that implement higher levels of customer satisfaction in the electronic commerce environment is crucial for the online business to remain competitive. Implementing strategies emphasizing customer satisfaction can increase the business' likelihood of separating themselves from their competitors, and more importantly, increase their customer retention. Steady customers, besides providing steady revenue, are necessary as it helps businesses obtain more customers through the act of referral (Kumar 2001), helping to create a steady cycle of customers. The steady cycle of customers creates a substantial reputation that helps retaining a positive relationship with customers.

2. BACKGROUND

As Internet usage rises, firms are beginning to realize the importance of better understanding their online customers. Today electronic business plays a major role in the world's economy and is expected to continue in the future. A recent Forrester Research report forecasts that online retail sales will grow from $45 billion in 2000 to 269 billion dollars in 2005 (Rohm & Swaminathan, 2002).

Online shopping is defined as a computer activity/exchange performed by a consumer via a computer-based interface, where the consumer's computer is connected to, and can interact with, a retailer's digital storefront through a network (Haubl & Trifts, 2000). The popularity of this medium of exchange has allowed the existence of a free market with intense competition. With the success of online retailers like eBay[R] and Amazon[R], combined with low start up costs, the industry has expanded rapidly. In conjunction, however, the industry has also experienced many failures. Due to the high number of failures in the dot.com industry, online businesses have begun to demand market information that allows them to focus their marketing efforts to maximize traffic and consumption. Specifically, to identify motivating factors that lead to online buying and customer retention.