INFLUENCE OF DELIVERY CHARGES AND TIME ON ONLINE … · Snapdeal are some of the online website e...

INFLUENCE OF DELIVERY CHARGES AND TIME ON ONLINE PURCHASE DECISION

1E. Noble Kennedy and. 2Gautam Kumar Kundu

1,2VITBS, Vellore Institute of Technology, Vellore -14

ABSTRACT

Purpose - The purpose of the article to examine the influence of Delivery Charge (DC) and Delivery Time (DT) in online Purchase Decision (PD). There are many key factors that influence online purchase decision, this article helps to know about the delivery charge and delivery time of supply chain services and its influence of online purchases.

Methodology – The research method used in this study were collected through convenience sampling, overall 122 valid responses of 200 samples distributed survey were collected. Smart PLS used to test the hypothesis.

Findings – It is found that Delivery Charge and Delivery Time positively significant and influence the PD of online shopping. The two variables were prioritized Delivery Charge influence more than the Delivery Time.

Practical Implications – Customers major expectations through online purchase on just in time delivery of products and free shipping, in which customers generally prefers free delivery charge option and short time shipping products for the purchase of online products until or unless there is a need for delivery charge products. The influences of the supply chain service of the online products, allowing the customer to search for the alternative products with free shipping and just in time delivery. This study analyzes the managerial implication by working on delivery cost cutting and short time deliveries to the consumers maintain relationship by developing trust on the online purchase that increase repeated sales and promote to grow in business.

Keywords – Delivery charge, delivery time, online purchase decision, online shopping

1. INTRODUCTION

Online purchase is the electronic web based commercial buying of products, allow the customers to buy goods or service through internet browsing. Due to the technology development and the trust built up by the e-retailers, online allows consumer increase purchases through websites day by day (Mathew, 2015). In recent years the e-commercial websites are also been increasing among those Amazon, eBay, Flipchart, Home shop 18, Jabong, Myntra, Paytm, Shopclues, and Snapdeal are some of the online website e-retailers in India. This article discusses the main activity of online purchase – DC and DT. The disadvantage of online purchase is the delay in providing the product and applying charges for the delivery of products (Kuriachan, 2014). This majorly influences the PD of the consumers, which allows the consumer to search for alternative or similar products in online websites. The upcoming generations learns technology quickly, this helps in the growth of online purchases as well as the expectation for the online products are also increasing (Kuriachan, 2014). The findings will help the consumers as well as the e-retailers to focus to grab the products flooding with influencing factors and also fill up the loop holes.

International Journal of Pure and Applied MathematicsVolume 118 No. 18 2018, 4393-4404ISSN: 1311-8080 (printed version); ISSN: 1314-3395 (on-line version)url: http://www.ijpam.euSpecial Issue ijpam.eu

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1.1. Influencing factors for online products purchase

Key Factors Descriptions Authors

Product Availability

Consumers during the online search of desire products, they expect the availability of the product and if they find the right product they are attached to the product and the website which influence them to initiate PD, and when the product is not available this impact the visit of the consumers to the online purchases.

(Steinhart et al., 2013)

Lower Price Consumers easily influenced by the lower price products, which allows repetitive customer buying

(Kotler & Armstrong, 2013)

Promotions

It‟s the tool of e-retailers increasing the PD of the consumer providing discounts, coupons, refund offers and policies, reward points, free trials, and cross promotions

(Kotler & Armstrong, 2013)

Comparison

The major advantages of the online purchases are comparison between the products as well as comparison between e -retailers. This allows consumers to know more about the products quality, price, availability, offers and DT to the consumers, which saves time and money

(Szymanski et al., 2000)

Customer service

Policies and regulations with frequently asked questions helps the consumer to know how to approach e-retailers, customer care facility helps to understand the queries

(Park et al., 2003)

Perceived ease of use

Consumer understanding the worthy and the trust over the pre-payment personally believe on e-retailers, easy of browse and user friendly

(Davis, 1989; Ramayah & Ignatius, 2005)

Attitude

Positive and the negative attitude due to online purchase experience, word of mouth, and assumptions building, and trust allows positive or negative attitude towards online purchase

(Bubeck & Cesa-Bianchi, 2012)

Time Saving

Consumer can buy products anywhere through online, which helps consumers to save travel time, anytime shopping, and 24 hours accessibility

(Saito et al., 2003)

1.2. The role of supply chain in online purchase

In online shopping three kind of business process are practiced such as Business to business (B2B), Business to consumers (B2C), and Consumer to consumer (C2C). Majority of online purchase are (B2C) through e-retailer webpages. To deliver the product from manufacturer to the consumer, supply chain activity plays major role in the supply of goods to the consumers to their door steps (Flint et al., 2014). The supply chain management begins working right from the receiving of orders and leads step by step process to reach the consumers as quick as possible. The online retailers and supply chain management through practice take strategic decision making using analyzing of right mode of supply chain for the different places (Ekinci & Baykasoglu, 2016).

The warehouse management in the supply chain collects all the products provide by the manufacture and stored in the warehouse for the quick distribution through planning and controlling (Faber et al., 2013), after receiving of orders the selection process of products by the

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inventory management or the warehouse management to identify for the next level of packaging and labeling of the buyers address and attaches the invoice along with the product‟s package. Once the products are ready for the shipping, logistics arrangements in respective of distance the mode of transport (Truck, Aircraft, and Train) planned for the delivery of products are planned (Xing et al., 2010). Online sellers have their own policies for the return or replacement of products, which carry out by the reverse logistics picking up returned products from the customers point. This process includes inventory management – packagers – warehouse management – distributors – forward/reverse logistics (Prajogo et al., 2016).

2. LITERATURE REVIEW

The study of supply chain service one of the important aspects of online purchase (Ha & Stoel, 2012). The innovation and development in the online commercial business due to logistics service and the supply chain management practice providing the best service output, bringing online products to the consumer‟s door steps. Literature support on online purchases increases as there are more focus towards e-commerce business as the demand increase due to increase of online users side by side, which faces new problems and trying to give the best solution to gain the business.

2.1. Price and price discount of the products in the online purchases

The boom of e-commerce business in the recent years, literally due to price discount provided by the e-retailers to the online products (Gehrt et al., 2012). When compare to offline retail product prices, the prices of online products were very low and it is the key factor that drives more online purchases. The first benefit of price discounts of the way of attracting the customers. Pricing the product determines the profit and sales of the products, the price strategy reflect the demand and backlog of the products on the online purchase. Pricing the products include strategy of competitive pricing and discount pricings (Xing et al., 2010). Discounts can be listed as promotion discount, multiple order discount, repetitive purchase discount provided with reward points, and sometimes unsold products discount. Consumers need to be aware about the discounts provided in the online purchases such as, providing low quality products at low cost, and duplicate branded products at low cost. Price discount let all backlog products out of warehouse, which was not sold for long time (Petrescu, 2011). Price discount attract consumers in low financial status, this kind of purchase satisfy the consumers.

2.2. Online products and services ratings

Star rating represents the quality of the product or the quality of service provided depends upon the number of stars that are rated. These ratings are rated during the online purchases or used consumers rating after consuming experiences of the online products (Gehrt et al., 2012), low rating for poor quality products and high rating for good quality. Generally consumers prefer to view star ratings to know the quality of the products (Tsang & Prendergast, 2009), and depends on which star had highest numbers of counts with total number of consumers rated. Stars reflect the situation and the performance of the products, increase confidence among the consumers (Li et al., 2014). Ratings project the worth of the product in quick glance for the consumer.

2.3. Purchased reviews of the online products

Used consumers record their writings of positive or negative experience as well as the suggestions over consuming products, which helps in the awareness to know the overall performance of the products and services. Online reviews not only alert the consumer it also allow the manufacturers as well as e-retailers to meet the customer‟s needs (Li et al., 2014). Even in review the count of the respondents are noticeable, if the positive reviews are more than the negative review, consumers accept the majority. Reviews bring credits to the business, by addressing the reviews e-commerce business gains consumers trust which directly proportional to the increase in sales of the products (Monsuwé et al., 2004). Positive reviews allow the consumers to shortlist the products for online purchases, whereas the negative reviews allow removing the products from the list, and further reviews drive the consumers towards the decision process (Tsang & Prendergast, 2009).


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2.4. Banking Services

The online purchases provide multiple mode of payment option, which includes banking services. Debit card, Credit card, Net banking are the services provided by the banking services, which allows consumers use part payment or the full payment through online transaction (Jorge & Maldonado, 2016). This allow banking sector to involve more to provided banking services, performance of the banks are measured with number of transaction made and exchange of values of the banks which increase customer bank engagement (Khan et al., 2016). Banks use this opportunity to provide more offers during the online purchases to attract consumers to uses their banking services to avail the offers for the purchases of products (Malhotra & Singh, 2010), which in turn increase the bank investment.

2.5. Logistics Service

The supply chain management updates analyzing the data of millions deliveries handled by Logistics services (Hu et al., 2016). Huge data analysis lets the supply chain to create new models and techniques to quickly address what customer wants through Logistics services. Expanding the best location of warehouse and optimize more efficiently to store products. Supply chain management uses every science and technology for the best logistics innovating new practices (Flint et al., 2014). Right from receiving dispatched products, logistics check complex operations in vast spaces during standard check list such as by avoiding damage on loading and off-loading, providing best material, avoid multiple scan bar codes, special handling equipment care products, unconditional products are allotted for the supervision. Long distance logistics uses multimode transports, planning suitable for saving time and cut down expenses are the main focus of logistics in supply chain. The logistics service is one of the key factors that influence the online purchase through customer satisfaction (Xing et al., 2011).

3. OBJECTIVE To examine the influence of „Delivery Charge‟ and „Delivery Time‟ on online Purchase

Decision.

To examine the priority between „Delivery Charge‟ and „Delivery Time‟ that highly influences the Purchase Decision.

4. CONCEPTUAL MODEL AND HYPOTHESES

Figure 1. Conceptual frame work – Online purchase delivery service

4.1. Delivery Charge (DC)

Delivery Charge are the cost of services used to transport goods from seller to buyer place. Consumers buy products from the retail shops or e-retailers, are totally depends upon the comparison of the cost of the product and its availability. E-retailers add DT cost to the consumers from the marginal price, as it cost depend upon the distance it covers the consumers delivery point. E-retailers majorly use their own logistics service or sometime agreed with the


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third party logistics, for the home delivery of goods to the consumers. Logistics service uses all the three mode of transport depend on the business needs. Majorly e-retailers use aircraft and truck for the transportation of domestic home deliveries. Some e-retailers deduct their DC cost along the competitive price, whereas the long distance deliveries add up separate DC cost to the products which are more expensive. (Fang & Ng, 2011) says that consumer like lower price products, consumers do not prefer DC as it increase the cost double the prize of the products. Higher price products purchasing consumers prefer the e-retailers to bear the cost of delivery as they pay huge amount to buy products. (Day & Gattorna, 1991) Due to technology development, reduction in the expenses by avoiding unwanted travelling improves score for free deliveries. Free shipping allows the consumer to browse easy online, and increase sales (Petrescu, 2011). Due to this transaction cost consumer search for relevant products or service information‟s before buying the products. This gives more information and time to compare similar products using key factors, selecting of product that suits the consumer budget, how soon the product get delivered, method of payments, and the usefulness of the products, this comparison and information lead the consumer to think on product that do not increase the cost of the product and search for free delivery product in online increases. According to (Meng & Rong, 2015) online consumer searching for similar or alternate product to avoid shipping fee or sometimes cancel the orders when fee increases, and retailers outlet charges are relevant to DC of online purchase. Delivery cost sometime increase the price of low cost product, which influence customer to buy products in retail stores. Hence hypothesis was developed assuming there is an influence of DC in the decision making during the purchase of products.

H1 – Delivery Charge has positive influence on online Purchase Decision.

4.2. Delivery Time (DT)

Delivery Time is the time taken from the order of the product to the delivery of the product to the consumers. Consumers always expect very soon shipment delivery as it provokes the curiosity of purchasing (Kerner, 1976). E-retailers through supply chain practices, aim to process delivery of the goods to the customers, as soon as possible in the estimated time of delivery (ETD), this is one of the key factor which drives the success of online purchases. To meet the customers demand logistics service proves the ability of the business to provide on time delivery. Delivering products on ETD increase customer trust (Monsuwé et al., 2004), which paves way for more online purchases, this helps to gain more repetitive consumers. On maintaining and increasing the customers, directly proportional in increase of purchases and more profit to the business. Online business satisfactions are proved through the logistics service and on time delivery initiate repetitive purchases and this also helps in resource efficiency to the business (Iyer et al., 2004).

H2 Delivery Time has positive influence on online Purchase Decision.

5. RESEARCH METHODOLOGY

Sampling

Research respondents were selected through convenience sampling and collected data from IT employees, friends, colleagues, and some of post graduate students across different disciplines those had online purchase experience. The data collected from people are aged 18 to 40 years and are typically in the career development process. People from 23 to 30 are more frequent online visitors with personalization, means that they are early earning adopters and heavy users of technology. Therefore, the profile of IT employees, friends and colleagues sample is in some ways closer to that of the online consumer population than is the profile of the general population more broadly.

5.1. Survey Instrument - The survey instrument questionnaire consist of two sections, section for demographic profiles are included in the first section, and the second section includes items for variable questions DC, DT, and PD. PD items were adopted from (Wason et al., 2016). All measured with a five-point Likert scale with 1 representing “strongly disagree” and 5 representing “strongly agree”. A total of 200 questionnaires were distributed to people among whom 122 responded. From 200 questionnaire distributed among which included for the study are completed 61%. The sample had 83 male (68%) and 69 female (32%), among which 32% from


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age group of 18 to 24, (50%) from age group of 25 to 29, (8 %) from age group of 30 to 35, and (8%) from age group of 36 to 42. Among all the respondent, 82 (67%) are employed and remaining where students 40 (33%). Most of the measurement items related on the same study of online purchase, this study include DC and DT as separate variable and to know its influence and examined in pre-survey test is conducted to refine and validate the measurement before collecting full sample, the result showed that the proposed measurement were appropriate.

5.2. Data Analysis

The objective of the study to propose the supply chain service DC and DT influence the purchase decision of the online purchases. Smart PLS is used in this article to test the conceptual model, since the sample size is small and to find data are normally distributed.

Figure 2. PLS measurement model

5.2.1. The result and interpretation:

R2

the coefficient of determination value of Figure 2, shows that the influence of “Delivery Charge” and “Delivery Time” towards “Purchase Decision” of online purchase is 0.579, which is 57.9% variance on online “Purchase Decision”.

If the path coefficient less than 0.1 it is not significant. The path coefficient of DC and PD is 0.456 which is more than the value of 0.1, shows that the relationship between DC and PD is statistically significant. The path coefficient of DT and PD is 0.356, shows that the relationship of DT and PD is statistically significant.

The outer model loading in PLS is used to find the correlation of latent variable and the respective items are shown in table1.

The reliability test using PLS are two types, “Indicator reliability” and “Internal consistency reliability”.

Indicator reliability is the square of outer loading of each items to its latent variable. As per (Hulland, 1999) the square of each loading items should be higher than 0.70 for adopted items, for exploratory it should be more than 0.4 for the acceptance of outer loading items. Table 1, shows that the indicator reliability are more than 0.6 which is acceptable measurement of items.

Internal consistency reliability are composite reliability considered as reliability indicator of variable of PLS report. According to (Bagozzi & Yi, 1988) the composite reliability value of variables should be 0.7 or higher for adopted variables, for exploratory research it


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should be 0.6 or higher. Table 2 shows that the composite reliability value are higher than 0.7 which is acceptable of variables.

Validity test using PLS are two types, “Convergent Validity” and “Discriminant Validity”. Convergent validity are the average variance extracted (AVE) value of PLS report, which

shows in table3, that the variables converge and are above 0.7. According to (Bagozzi & Yi, 1988) the AVE number should be 0.5 or higher.

Discriminate validity are the square root of AVE value of latent variables. The square root of AVE value should be greater than the correlation value of latent variables. Table 4 shows that the corresponding latent variable value are higher than the dissimilar variables and are well established.

DC DT PD Indicator Reliability

DC1 0.913 0.834

DC2 0.937 0.878

DC3 0.901 0.812

DC4 0.861 0.742

DT1 0.847 0.718

DT2 0.807 0.651

DT3 0.835 0.698

DT4 0.836 0.699

DT5 0.880 0.774

PD1 0.947 0.896

PD2 0.950 0.903

PD3 0.950 0.902

PLS - Outer Loading

Table 1. PLS outer loading and Indicator reliability report.

Composite Reliability Cronbachs Alpha

DC 0.947 0.925

DT 0.924 0.897

PD 0.964 0.945

RELIABLITY

Table 2. Internal consistency reliability

AVE

DC 0.8165

DT 0.7079

PD 0.9002

VALIDITY - CONVERGENT VALIDITY

Table 3. Convergent validity


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DC DT PD

DC 0.904 0 0

DT 0.751 0.841 0

PD 0.724 0.698 0.949

VALIDITY - DISCRIMINATE VALIDITY

Table 4. Discriminate validity

5.2.2. Bootstrapping structural path significant

To find the significance of variables using T- statistics is bootstrapping. Table 5 shows the result of bootstrapping model of figure 3, and the relationship of DC to PD and DT to PD. If the T- statistical value is higher than 1.96, the relationship between one variable to the other is positive and significant with 95% confidence level. If the T- statistical value is higher than 2.57, the relationship between one variable to the other is positive and significant with 99% confidence level.

Figure 3. PLS SEM Bootstrapping model

Original Sample (O) T Statistics (|O/STERR|)

DC -> PD 0.4563 3.7432

DT -> PD 0.3557 2.9167

Showing the path coefficients along with their bootstrap values, ‘T’ values

Table 5. Bootstrapping value SEM

The result shows that the relationship between DC and PD is 3.7432, which is >2.57 proving that DC has positive significant influence towards PD with 99% confidence. The relationship between DT and PD is 2.9167, which is >2.57 proving that DT has positive significant influence towards PD with 99% confidence. Hence both hypotheses are proved that delivery charge and delivery time has positive significant influence towards the online purchase decision.

6. CONCLUSION

The customer satisfaction through supply service, which analyzing the key competitive features to attract the customer and avoid losing of business, as competitors‟ swipe customers‟ mindset


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through free DC (Schepper & Haezendonck, 2015). Manufacturers pressurize logistics service to provide service at low cost, in turn it affect the service quality from carriers which decrease the customer satisfaction (Xing et al., 2011). Managerial implication to focus on efficient logistics service, there are two contradictory approach, charging delivery from customers for better customer service from service provider, or design the pricing which do not affect the profit margin as well as providing free delivery of products from online retailers. Whereas customers expectation of free delivery, helps traditional direct consumers use of e-commerce which interconnect global business. This article also examine what is the priority of consumers during online purchases and it varies one another but the influence of the “free Delivery Charge” is reflected high. The research focused mainly on the DC and DT, further research elaborate to find every key element that influence online purchase which also include geographical factors and demographical factors. The practical implication allows the manager to revise the price of the online products which attract customer through price, free DC and on time fast delivery. This stops diverting the consumers away from product and use easy shopping.

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