Introduction
The World Wide Web has brought about revolutionary changes to the way now people shop in their everyday lives. The online retailers make available a wide range of products and services in their virtual stores. Consumers visit these virtual shops, browse the available products, place the desired products in their shopping carts or bags, pay by punching their credit card number on the keyboard and wait for the products to be delivered at home. Online stores now sell products, ranging from clothes, shoes, jewelry and bags to kitchen utensils, electronic gadgets, calling cards, music, furniture, air tickets and so much more. The Internet has now made shopping a virtual experience for many people across the world.
Most of these online shops are interactive in nature, allowing people to play with colors, shapes and sizes of the products they are interested in. Websites now feature advertisements on all four sides of their pages. Sometimes, ads are even inserted into the text. These ads constantly bombard people with information on goods and services that they can purchase online. These ads often tempt people into buying things that they never had an intention to buy. Sometimes, factors like convenience and media influence the way people shop in their everyday lives. But there are actually a lot of other reasons that influence people’s online shopping behavior.
Internet marketing has become more popular than ever before among the producers and retailers. The big retailers of developed countries have their own websites from where they sell their products and services. These virtual stores have proved to be profitable and owners are constantly trying to revamp them by introducing web-exclusive products, offering special discounts and adding new interactive features.
Like Black Friday, the day after Thanksgiving when brick-and-mortal stores all across the US offer attractive discounts to the consumers, the Internet stores too offer a huge sale the first Monday after Thanksgiving. Known as Cyber Monday, on this day the e-retailers across the US offer massive discounts on their goods for their online shoppers. The concept of Cyber Monday was not even there before the year 2005. It’s the increasing popularity of Internet shopping which had led the retailers to set aside a day like “Black Friday” for the online shoppers community.
E-commerce is a huge area of research; therefore, the scope could be very large. However, this literature review is limited in scope, focusing primarily on why retailers and consumers opt for electronic commerce in addition to traditional commerce.
E-commerce and Marketers
At present, e-commerce is a relatively new interdisciplinary field. The most common form of e-commerce systems are essentially electronic shop fronts to allow business to sell goods and services to customers via the Internet. A human buyer does still collect and interpret information on merchants and products, make decisions about which merchants and products to investigate, negotiate the terms of transactions with these merchants, and finally place orders and make payments automatically (Nassiri-Mofakham, Nematbakhsh, Ghasem-Aghaee & Baraani-Dastjerdi, 2008).
Steinfeld and Whitten (1999), in their study on community level socio-economic impact of electronic commerce, referred to an article published in a 1997 issue of the The Economist, where it said that the Internet is affecting all businesses in similar ways, and that every industry, for example has suddenly become part of a global network where all companies are equally easy to reach. As a result of these changes, many businesses that survived mainly because they were conveniently placed, or because they provided information that was hard to find, will soon have to find some other raison d’être.
Steinfeld and Whitten (1999) in their study on community level socio-economic impact of electronic commerce stated that as electronic commerce grows, an important socio-economic side effect will be increased competition with the traditional businesses in any given local community. Their research suggests that local merchants typically go online in order to better access distant markets, but are often unprepared to cater to remote customers and hence do not fare well. They asserted that it is important to consider the health of local economies when retailers go for Internet marketing. In their study, Steinfeld and Whitten listed the social costs that might arise from online marketing. These social costs included:
1)Job losses, particularly in relatively unskilled areas already quickly disappearing in the digital economy. Sales clerks, stockpersons, and other entry level jobs offering employment options for teenagers and other unskilled workers are likely to be the hardest hit.
2)Loss of local shopping options that, even with higher prices, afforded some conveniences. Consumers may have more choice on the Web, but they also end up losing some necessary flexibility. Examples include situations where a product is needed immediately, and cannot wait even for next day delivery and more costly product returns.
3)Decreased attractiveness of local community due to the loss of boutiques or other businesses that enhanced the quality of community appearance and life.
4)Loss of locally produced goods and services that may have been tailored to particular needs and tastes of the local community.
5)Reduced tax income from business, resulting in a reduction in the ability to fund government services that enhance community life (Steinfeld & Whitten, 1999).
However, there are also scholars who think that Internet marketing is enabling the retailers to be more efficient. For example, Davenport (1993, cited in Scott, 2000) argued for disintermediation, the shedding of middlemen from a transaction process.
The argument for disintermediation stresses the advantages of streamlining processes, while lowering costs and increasing speed. It is this same disintermediation concept that has encouraged the brick-and-mortar retailers to become e-tailers. The Internet marketing is not only saving costs of operation but also increasing the speed at which a transaction takes place. Since there is no middleman, the time that used to take to process a transaction, for example, in banking, travel agency or retailing, has been reduced to a great extent. Today, it is the computer that works as a middleman between a consumer and a retailer.
According to Davenport, redundant and unnecessary steps slow down completion of a transaction and may introduce errors. He thought that “the obvious solution was to eliminate hand-offs that cause delays when documents lay idle on employees' desks, forgotten or buried under other papers. Often, the document just required a signature or minimal processing.” At the same time, Internet marketing gives the retailers a wider geographical reach. A retailer can use the Internet to reach consumers all around the world (Jarvenpaa & Tractinsky, 1999). The drive to sell to more people and in turn, make more profits, motivate retailers to sell goods online.
Mankikar (1996) in an article put emphasis on the benefits that internet can bring to people who want to sell goods online. He wrote that unlike a local distribution outlet, the Net never closes, and it's always nearby. “Despite the traffic problems, it's a handy way to get the information you need, when you need it, wherever you live or work. It's thus a boon for global commerce” (Mankikar).
The growth of e-commerce is also having a significant impact on employment opportunities in the US. According to McPhail (2006), the internet economy is growing faster than other sectors of the economy. For example, according to a 2000 University of Texas study, e-commerce now employs more workers than insurance, public utilities or the airlines.
Businesses are now also using social networking sites to promote their e-businesses. Sites like Facebook, LinkedIn, Twitter, Digg, and so on are used by businesses as a new way to reach their target audience. According to Greg Sterling, of Sterling Market Intelligence, in order to gain exposure to larger audiences, he recommends Facebook: Consider establishing or joining a network on Facebook based on your business or industry category to tap into people's affinity for the topic. By doing this, you'll cut through the clutter and clearly establish your niche, keeping the interaction focused on the specific subject matter (Klein, 2008). The online ads displayed on Facebook pages only reflect the Internet marketers attempt to reach people through social networking sites. Since sites like Facebook, MySpace, Twitter etc. are accessed by people from all over the world they are certainly big platforms for the online marketers to promote their goods and services. A click on one of these ads takes a user directly to the website of the company from where he/she can make instant purchases.
With the growth of the Internet shopping, it is becoming more and more challenging for online retailers to retain their customers because of increased competition. According to Zhou, Dai & Zhang (2007), personalization of the online shopping environment will be an important factor in attracting and retaining consumers. Consumers are now looking for ways to make their online shopping experience faster, more convenient and user-friendly. Zhou et al. stated in their study that the future online consumers would demand personalization of the information content and presentation, transactions, online help and customer services. In the future, the extent of a commercial website’s personalization feature may well determine its flow of traffic. It also can be assumed from this study that in the future the extent of a site’s interactive features would determine whether a consumer would buy goods and services from that website or not. According to Zhou et al., a pleasant and visually-appealing online shopping environment that also provides a sense of online community and interactivity may boost the exploration and impulsive shopping of experiential shoppers; and an easy and controllable online shopping environment might fit goal-oriented shoppers. Therefore, an optimal online marketing strategy is to personalize shopping environments to meet the needs and preferences of different consumers (e.g., goal-oriented or experiential, and novice or experienced).
Internet shopping is certainly on the rise. According to the U.S. Census Bureau, the total value of e-commerce in the USA has increased from $9,102m in the 4th quarter of 2000 to $31,614 in the 3rd quarter of 2008. Although people living in the first world countries are enjoying the benefits of online shopping, people in the developing or underdeveloped countries are yet to be familiar with the term. In the developed countries, more and more retailers are now selling goods and services through the Internet. The massive growth of e-commerce now requires the online retailers to act more responsibility. Protection of the personal information fed on the Internet while making online purchases is a crucial issue for most retailers. Unless and until the online retailers can earn the full confidence of the consumers in relation to privacy and personal information protection, it will be difficult for them to retain consumers in the future.
Zhou et al. suggest that the following measures, if taken by retailers, will enable them to retain their online consumers:
1. Minimization of risks with online shopping: These are perceived risks related to security of information, vendor reliability etc.
2. Providing positive online experience: Online experience during a shopping event is an important determinant of whether the online navigation will lead to a successful purchase transaction.
3. Targeting female consumers: Although women shop less online than men at present, 70% of shoppers in the traditional marketplace are women. Improving interpersonal communication by providing online forums, chat rooms, and incentives for consumers to share their experiences with their friends and by facilitating online referrals, might entice more females to shop online, as females have been shown to be more social-prone than their male counterparts (Garbarino & Strabilevitz, 2004).
In a study on brand value in virtual worlds, Barnes & Mattsson (2008) tried to find the brand value of real life brands that moved to the virtual world. It was found in their study that the move of a brand from the real life to the virtual world is not straightforward. Not all brands can survive the transition process. Barnes & Mattsson’s study showed that brands like AOL, American Apparel and Reebok had left Second Life (virtual world) because they could not compete with other retailers and service providers. Barnes & Mattsson think that it is imperative for business to understand the true nature of Second Life and that there are risks involved in ‘joining the bandwagon.’ Their study showed that surviving in the virtual world is not an easy task and that online retailers must constantly try to update their websites, products and services in order to meet the growing demands of a new generation of consumers.
Consumers and e-commerce
The World Wide Web is certainly becoming a busy marketplace for consumers across the USA. Hundreds of thousands of people visit the Internet everyday to shop for goods and services. In an article on New York Times, Miller (2008) wrote that in 2008, e-commerce spending on Cyber Monday was $846 million, up 15 percent from a year ago. For the four-day period from Black Friday through Cyber Monday spending jumped 13 percent. The term Cyber Monday was coined in 2005 by shop.org, the trade association for e-commerce companies. It’s the increasing popularity of the Internet as a marketplace that led to the coining of the concept Cyber Monday. The shopping spree associated with Cyber Monday is a reflection of the acceptance of the World Wide Web among the consumers as a place to buy goods and services.
According to Li, Kuo, & Russell (1999) electronic commerce is fundamentally changing the way consumers buy goods and services. Consumers have begun to learn how to act in an ever-changing electronic market environment. Like any diffusion of innovation, there is a learning curve for most consumers to behave in electronic commerce in a way they feel most comfortable. For some consumers, shopping and buying online have become part of their daily lives, whereas others may consider it, without taking any action yet.
In a study conducted by Li et al. (1999), it was found that online purchase behavior is often dependent on demographic factors, such as the gender, age, education and income of the buyers. It was found in their survey that while 43% of the males shopped online, only 33% of the females made online purchases. They also found that people in the 40 – 49 age group tend to shop more than people in any other age groups. This finding was certainly interesting because the general belief is that it is the young people who form the largest proportion of online consumers. The study also found that it is people with a graduate degree (59% of the people surveyed) who most frequently make online purchases. And lastly, it was seen that people in the high income brackets tend to make more online purchases than people in lower income brackets. We can infer from Li et al.’s study that income and education play important roles in determining a consumer’s online purchase behavior. Since operating a computer requires a certain level of understanding, it is very likely that people without much knowledge about the computers would rarely consider buying goods and services online. Education also has a correlation with income. It is often seen that people with high income tend to be more educated than people with modest or low income, most likely because people with high income can afford an education that people with low income often cannot. Income is therefore, one factor that often determines whether a consumer will shop online or not.
Li et al. divided shopping orientations into four categories. Those were: 1) Recreational Orientation, 2) Experiential Orientation, 3) Convenience Orientation, and 4) Economic Orientation. It was found that there is a negative relationship between experiential orientation and the frequency of online purchases. Li et al. stated that the “search-oriented” online stores have a number of limitations compared to the conventional stores. First, the way product information is presented by online stores is likely to reduce the impact of brand equity. In this study, Li et al. referred to Burke (1997), who noted that the computer typically displays a list of brand names and model numbers with information on features, flavors, sizes, and prices. Since consumers do not see the familiar product packages, the traditional brand equity communicated by the package shapes, colors and logos is lost. Besides, online shoppers are not able to gain the experience that they usually get in the conventional store, e.g., feeling the store’s atmosphere, interacting with a salesperson, and seeking sensory stimulation. Therefore, people who enjoy experiential shopping are less likely to shop online.
Consumers who make online purchases perceive the Web to have higher utilities in communication, distribution, and accessibility than those who do not make online purchases, and frequent online purchasers perceive higher utility than occasional online purchasers (Li et al., 1999). In today’s busy world, where people have less and less time in hand to spend on shopping, they look for ways that will make their shopping for goods and services easier. Online shopping is therefore, a matter of convenience for many people – it saves time.
However, a study by Khalifa & Milayem (2003) indicated that the intentions of Internet consumers are significantly affected by the perceived consequences of online shopping, the consumers’ attitudes towards it, and social influences. Out of the seven consequences hypothesized in their study, two appeared to be insignificant to the shoppers. Those were: 1) Privacy Violation, and 2) Convenience. These results are starkly different from the results found in Li et al.’s study on factors influencing a consumer’s online purchase decision. According to Li et al.’s study, convenience is an important factor behind online shopping. However, Khalifa & Milayem’s study showed that Internet shoppers are not much concerned about the “convenience” (anytime and anywhere) factor of online shopping. Privacy factors were not important to the respondents either. Cheaper prices appeared to be the most important factor behind online shopping. The study showed that most people prefer online shopping to experiential shopping as it allows them to buy goods and services at lower rates.
Khalifa & Milayem’s (2003) study also examined the influence of “facilitating conditions” on a consumer’s online shopping behavior. The facilitating conditions included: 1) Transaction Efficiency, 2) Product Description, 3) Site Accessibility, 4) Navigation Efficiency, and 5) Web Page Loading Speed. Out of these five, Transaction Efficiency and Site Accessibility appeared to be the most important facilitating conditions to the Internet shoppers surveyed. The authors of the paper suggested that Internet shops must improve their Transaction Efficiency through optimization of the cycle times associated with product identification and selection, ordering delivery, and after-sales service in order to attract more consumers. On the other hand, accessibility of an Internet shop site can be increased by making sure that the site is always up and running and that it can easily be located. Khalifa & Milayem stated that “choosing the appropriate domain name, registering the site with important search engines and optimizing its ranking, reminding visitors to bookmark the site address, and establishing a presence in popular cybermalls are all techniques that can enhance the accessibility of Internet shops.” Since the study showed that Site Accessibility and Transaction Efficiency are two significant factors behind a consumer’s online shopping behavior, the Internet shops would do well to make sure that they take measures to enhance these two features of their websites.
Khalifa & Milayem also tried to find out the importance of social influences on a consumer’s online shopping behavior. The social influences were divided into 3 categories. Those were: 1) Friends, 2) Family, and 3) Media. It was found that Media played the most important role behind a consumer’s intention to shop online. While Family was a significant influencing factor, Friends was an insignificant factor behind a consumer’s intention to shop online. In contrast, promotion of online shopping facility in mass media by the retailers and fashion houses often tempts people to visit their websites and make purchases.
In an effort to measure people’s perception of interactivity on the web in general, and to factor-analyze the results to identify whether the perceptions consist of multiple dimensions, Sohn & Lee (2005) found that out of the three components of interactivity (i.e. Control, Responsiveness and Interaction Efficacy), it was ‘perceived control’ which was closely related to personal psychological characteristics. It was found from the study that ‘perceived responsiveness’ was a component reflecting the social aspects of Internet users. According to Sohn & Lee, “an individual's social network density influences significantly his/her perception of responsiveness of the Web. That is, an individual tends to perceive the Web as more responsive when s/he maintains a dense rather than a sparse social network with others.” On the other hand, Interaction Efficacy was found to be related to need for cognition and experience with the Internet, i.e., people with higher NFC (Need for Cognition) and more experience with Web usage tended to think of interactions with others through online channels as comfortable and viable. It can be implied, therefore, that the interactive features of a website also influence whether a consumer will shop from that particular Internet store or not. The more control a user has over his or her virtual shopping bag, the more he or she will be interested in shopping from an Internet shop.
People’s ability to now make purchases online has its merits as well as demerits. While some researchers say that online shopping saves time for people, and allows them to browse more products and make a more informed buying decision, others argue that online shopping is resulting in what is called “impulsive buying behavior” among people. It means that some people make rash decisions when they are shopping online; they sometimes buy things that they do not need or even want. Kim & LaRose (2004) showed in a study that convenience is not necessarily the most important or only reason for participating in online shopping. Some shoppers might shop online because it is convenient, while others might shop online because it is new and fun.
It is the drive to try out a new form of shopping that often triggers unregulated buying behavior among consumers. In their study, Kim & LaRose showed that that the interactive features of e-commerce websites play a pivotal role in most online buying activity regardless of one’s shopping orientation. Interactive features like options to change the color, shape and size of a product, compare price, read peer reviews, and participate in chat rooms often make people purchase products that they initially did not intend to purchase. It is often contended that it is shoppers with recreational orientations who utilize interactive website features in order to derive pleasure, and that shoppers with utilitarian orientations tend to be directly led to buying behavior unmediated by the use of interactive e-commerce features.
However, Kim and LaRose’s study showed that there is a positive relationship between convenience and recreational shopping orientations. They argued that convenience orientation also led to the usage of Web features associated with unregulated buying, which is shown by the fact that convenience orientation made a significant contribution to the usage of recreational shopping features. Perhaps shoppers who visit websites with convenience orientations can be drawn into unregulated purchases through interactive features, which, in the end, feed unregulated buying. Kim & LaRose also referred to Rook & Fisher (1995), who showed in a study that credit cards enable online shoppers to avoid guilty feelings created when spending cash, while 24 hour retailing and money-back guarantees also make it easier for online shoppers to indulge their buying urges. The widespread use of credit and debit cards often leads people to make purchases online because in the Internet shops, it is not at all necessary for a consumer to have cash at hand.
In a study on predictors of online shopping, Bellman, Lohse, & Johnson (1999) observed that one important influence on a person’s decision to shop online is the amount of discretionary time he or she has. As the total number of hours worked by members of a household increases, the less time there is to search for and buy products and services in the tradaitional way that is, by visiting brick and mortar shops. The effect is even stronger if one’s spouse also works. Dual-income households seek new ways to find information and buy things that are faster and more convenient. In the past, they may have used catalogs; now they take advantage of e-commerce (Bellman, Lohse, & Johnson, 1999).
In a study on continued online shopping, Hsu, Yen, Chiu and Chang (2006) discovered that satisfaction with first purchase plays the most important role in determining whether a consumer will continue shopping online. Satisfaction with online shopping is a strong predictor of users’ continuance intention. A plausible explanation is that online shopping involves intensive confidential data, security issues and convenience concern, and thus users dissatisfied with initial use of online shopping are apt to discontinue using it (Hsu et al.). This implies that online shopping retailers not only should not only concentrate on increasing their customer base, but also maintain high-quality Web sites to increase users’ satisfaction and retain their customer base.
Conclusion and needs for additional research
Although the popularity of e-commerce is on the rise, there are still people who do not opt for online shopping. Research studies also show that it is mostly the males who shop online. It would be interesting to find out why women prefer experiential shopping to virtual shopping, and what additional features, if added to the Internet shops, would motivate them to shop from the World Wide Web.
According to researchers, the boom of e-commerce is causing loss of jobs in some industries because it is leading to disintermediation. Although news jobs are being created but they do not make up for the jobs lost. It would also be interesting and of scholarly value to find out the impact of e-commerce on the US job market. Whether the e-commerce has an impact on the nation’s unemployment rate or not would be a timely research.
In-depth studies on the relationship between age and online shopping behavior should also be interesting. Such study results would enable marketers to devise more effective market segmentation tactics. Not all products are consumed by people of all age groups, therefore, it is important for the online retailers to know whom to target when they sell goods online.
Further research is also needed in areas such as, how the color combination, font size and layout of a website affect a user navigating a particular website. Do these characteristics send a message to a user about the extent of a site’s interactivity? Do the color code, font size and layout of a website cause people to check out different features of it that is, spend more time exploring what the site has to offer? How color code, font size and design of an online ad appeal to users is also worth researching. Such studies would reveal new ways to make online advertisements more and more attractive in the future.
Although one of the research studies reveals that people with higher NFC (Need for Cognition) and more experience with the web tend to think of interactions with others through online channels as comfortable and viable, the study did not attempt to find out why such relationships exist. It will be interesting to find out why some people are at ease with online interactions and others are not. Maybe there are areas where the websites still need to develop themselves to become attractive to all kinds of people. It will be interesting and of scholarly value to find out what additional interactive features, if added to websites, would make them appealing to more and more people. The boom of new media makes the need for such a research effort time-worthy.
The boom of e-commerce in the US has resulted in unregulated buying behavior among some people. If this is true then it should be interesting to find out if the increasing trend of online shopping has a role to play in the nation’s current credit crunch.
Electronic commerce is certainly making people’s lives easier than before. But unregulated growth of e-commerce may pose security and financial threats in the future. Therefore, it is important for the online retailers to ensure that people who shop online to save time or to just enjoy shopping in a new environment, do not fall prey to virtual goons.
From the above discussion it can be concluded that people’s online shopping behavior are often influenced by factors such as, age, gender, income, education, family, exposure to media and shopping orientations. Facilitating conditions such as transaction efficiency and website accessibility also determine if consumers will shop from an online store or not. Online shopping has its merits as well as demerits. Studies show that different interactive features of websites lead some people to unregulated shopping behavior. The increasing popularity of online shopping has its threats too, especially in terms of data protection and privacy violation. In order to retain consumers in the future, the e-tailers would need to make sure that they can minimize the risks with online shopping, provide positive shopping experience and make online shopping more appealing to female consumers.
Online marketing, like online shopping has its merits as well as demerits. While Internet marketing lowers operational costs, increases speed and efficiency, it at the same time often pushes local businesses out of business and creates loss of jobs.
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