Young Consumer Online Shopping

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Young consumers online shopping: an empirical study

Dr Syed Shah Alam,

Faculty of Business Management Universiti Teknologi, MARA, 40450 Shah Alam,

Selangor, Malahysia.

[email protected]

Syed Shah Alam is Senior Lecturer in the Faculty of Business Management, University

Technology MARA (UiTM), Malaysia. He is a Doctorate in E-commerce. Prior to

joining at UiTM he was a coordinator of Postgraduate program and an active member of

the faculty research committee in the Faculty of Business and Law at Multimedia

University, Malaysia. His teaching and research interest are internet marketing, E-

commerce, mobile E-commerce. His articles on E-commerce have been published in

leading international journals.

Zaharah Bakar

Faculty of Business & Law, Multimedia University, 75450 Bukit Beruang, Melaka,

Malaysia.

[email protected]

Madam Zaharah Bakar is a marketing lecturer in Multimedia University since 1998.

She received her Bachelor of Science in Finance and Marketing from Southern Illinois

University, Carbondale, Illinois, USA in 1984 and her MBA majoring in Marketing

from Saint Louis University, Missouri, USA in 1985. She has more than 20 years of

teaching experience at Multimedia University and Universiti Kebangsaan Malaysia. She

also has two years of industry experience as Marketing consultant for Noris Architect,

handling its clients and customer relations. Madam Zaharah is currently activeconducting a variety of research in consumer behaviour and brand management. In

brand management, her specific interest includes strategies to build brand equity,

measure and manage brand equity and brand trust.

Dr Hishamuddin Bin Ismail

Faculty of Business & Law, Multimedia University, 75450 Bukit Beruang, Melaka,

[email protected]


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Hishamuddin Ismail is currently is Dean and a Senior Lecturer at the Faculty of

Business and Law at Multimedia University, Melaka Campus. He has published many

articles in the area of customer satisfaction, customer loyalty and e-commerce in JTMA,

JABC, JSS, JAMS and IIM Journal. His last post prior to being an academician was the

product manager where he led a team of professionals to develop data communication

related products. During his tenure, he had successfully launched new product where the

main feature is to enable the customer to virtually link themselves using the managed

point-to-point connection.

Mst. Nilufar Ahsan

Research Fellow, Faculty of Management, Multimedia University,

[email protected]

Nilufar Ahsan is currently a doctoral candidate in the Faculty of Management,

Multimedia University, Cyberjaya Malaysia. Her research interest includes

organisational behaviour, and ICT management areas.


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Journal of Internet Business Issue 5 - 2008

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Young consumers online shopping: an empirical study

Syed Shah Alam,

Faculty of Business Management Universiti Teknologi, MARA, 40450 Shah Alam, Selangor,

Malahysia.

Zaharah Bakar

Faculty of Business & Law, Multimedia University, 75450 Bukit Beruang, Melaka, Malaysia.

Hishamuddin Bin Ismail

Faculty of Business & Law, Multimedia University, 75450 Bukit Beruang, Melaka, Malaysia.

Mst. Nilufar Ahsan

Research Fellow, Faculty of Management, Multimedia University

Abstract

Young consumers are playing an important role in online shopping. The increasing use of

Internet by the younger generation in Malaysia provides an emerging prospect for online

retailers. If online retailers know the factors affecting Malaysian young consumers buying

behaviour, and the associations between these factors and type of online buyers, then they can

further develop their marketing strategies to convert potential customers into active ones. In this

study four key dimensions of online shopping as perceived by young consumers in Malaysia are

identified. Besides that this study also examined whether there are any differences in online

shopping by different races in Malaysia. It was discovered that website design, website

reliability, customer service and privacy are the four key factors which influence young

consumers perceptions of online shopping. However, there is no significant difference among

the various races in terms of online shopping behaviour in Malaysia. Finally, the

recommendations are presented in this research may help foster growth of Malaysian online

retailing in future.

Keywords: Online Shopping, Young consumers, Malaysia.


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Introduction

Commerce via the Internet, or e-commerce, has experienced rapid growth since the early years.

It is well known to most of the Internet researchers that, the volume of online business-to-

consumer (B2C) transactions is increasing annually at a very high rate. According to ACNielsen

(2007), more than 627 million people in the world have shopped online. Forrester (2006)

research estimates e-commerce market will reach $228 billion in 2007, $258 billion in 2008 and

$288 billion in 2009. By 2010 e-commerce will have accounted for $316 billion in sales, or 13

percent of overall retail sales. AcNielsen also reported that, across the globe, the most popular

items purchased on the Internet are books (34%), followed by videos/DVDs/games (22%),

airline tickets/reservations (21%) and clothing/accessories/shoes (20%).Goecart forecasts that

US online population will increase nearly 50%, from 1471.5 million in 2001 to 210.8 million

by 2006 (Cumulative Annual Growth Rate of 8.2%) and online retail sales will grow from

US$47.8 billion in 2002 to $130.3 billion in 2006. Similarly WIPO (2007) cited that about 10%

of the worlds population in 2002 was online, representing more than 605 million users.

A mid-2005 survey by the Malaysian Communication and Multimedia Corporation (MCMC),

only 9.3% of Internet users had purchased products or services through the Internet during the

preceding three months. Among those who did so, airline tickets were the most popular items

(43.8%) followed by books (15.6%) and music (6.8%). Amounts spent on these items were

small, however, with 57.7% of transactions worth less than M$500. Moreover, it is expected

Malaysian online sales will increase every year at a high growth.

Much research has been concentrated on the online shopping in the world. However, there is

still a need for closer examination on the online shopping buying behavior in specific countries.

While both established and new, large and small scale businesses are now using the Internet as a

medium of sales of their products and services (for example Dell computer, Amazon.com, in the

world and jobstreet.com, blooming.com in Malaysia). Still there is a huge research gap exists


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not only between countries, especially between developed and developing countries, which may

differ significantly between countries (Stiglitz, 1998; Shore, 1998; Spanos et al., 2002) that limit

the generalization of research results from developed countries to developing country contexts

(Dewan and Kraemer, 2000; Clarke, 2001). Shore (1998) and Stiglitz (1998) reported that

implementation of information system depend on specific social, cultural, economic, legal and

political context, which may differ significantly from one country to another country. Dewan

and Kraemer (2000) and Clarke (2001) argued in their study that findings from developed

countries are not directly transferable to developing countries. Thus, this research is needed for

non-transferability of findings from research in developed countries and also for the

improvement of understanding of the determinants of online shopping in developing countries.

Online shopping holds a great potential for youth marketers. According to Vrechopoulos et al.

(2001) young are the main buyers who used to buy products through online. Dholakia and

Uusitalo (2002) study examined the relationship between age and Internet shopping; found that

younger consumers reported more linen to the online shopping. Another study by Sorce et al.

(2005) found that younger consumers searched for more products online and they were more

likely to agree that online shopping was more convenient.

Objective of the Study

The objective of this study is to identify the key factors influencing young Malaysians online

shopping behaviour. Malaysia's cultural mosaic is marked by many different races and cultures;

which comprises the Malay, and the cultures of Malaysia's two important races --the Chinese,

and the Indians. So one of the main objectives of this study is to compare how the young

Malaysian of different races buyer perceive web site factors and website elements differently.


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Factors affecting online shopping

There are a number of streams of research that are relevant to this study. These include those

addressing the factors that have significant effect on online shopping (Shergill and Chen, 2005;

Phau and Poon, 2002; Jarvenpaa and Todd, 1997; George, 2002a; George, 2004b; Ward and

Lee, 2000; Hellier et al., 2003). We identified the factors that were found to be significant in

previous research about online shopping (please refer table 1). In this research we utilize the

four factors i.e. website design, reliability, customer service and security/privacy are defined by

Shergill and Chen (2005) in their empirical study in New Zealand. Web site design of a web

page is one of the most important factors that influence online shopping. Shergill and Chen,

(2005) identified web site design characteristics as the dominant factor which influences

consumer perceptions of online purchasing. By using a sample of 214 online shoppers,

Ranganthan and Ganapathy (2002) found four key dimensions of online shopping namely web

sites; information content, design, security and privacy. They concluded that, though all these

dimensions have an impact on the purchase intention, security and privacy will have greater

impact on the purchase intent of online buyers.

Turban et al. (2002) argue that elegant design of web site will serve better to its intended

audiences. According to Kin and Lee (2002) the web site design describes the appeal of the user

interface design presented to customer and customers are willing to visit more often and stay

longer with attractive web sites (Shaw et al., 2000). Following them, Than and Grandons

(2002) study found that quality web site design is crucial for online shopping.

Reliability is one of the important factors that have the most influential effect on online

shopping. Reliability is closely associated with risk since it is a measure of customers

perceptions about whether or not merchants can be counted on to deliver on their promises

(Vijayasarathy and Jones, 2000). According to Jun et al. (2004) online consumers apparently

want to receive the right quality and right quantity of items that they have ordered within the


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time frame, promised by the retailers, and they expect to be billed accurately. Accordingly, to be

considered as reliable online service providers, must deliver the promised services within the

promised time frame (van Riel et al., 2003).

Studies by Mayer et al., (1995) and Hoffman et al., (1999) reveal that trust and consumer

motivation have significant relationships. Other studies found that a high level of trust by buyers

stimulate favourable attitudes and behaviour (Anderson and Narus, 1990).

A consumers trust in an Internet store can be thought as the consumers trust directly in the

store. Nevertheless, Hoffman et al (1999) argued that the effectiveness of third-party trust,

certification bodies and the public key encryption infrastructure for ensuring financial security,

are the central success factors for building consumer trust in Internet shopping. Kini and

Choobineh (1998) suggested that trust in the Internet business is necessary, but not sufficient,

for an Internet buying behaviour to take place. The consumer must also trust the transaction

medium for online shopping.

The review of empirical studies has embodied different factors which influence online

purchasers behaviour. The antecedents of online purchase include many attitudinal

components; for example, attitude towards online shopping and perceived risk of an online

purchase. Consumers online shopping experiences, website and fulfillment of quality

expectations are deemed as the major components to successful online transactions. In essence,

our interest is in discovering the factors affecting consumers intent to buy online as well as in

quantifying their relative importance. Specifically, through surveying consumers based on the

literature, we are interested in identifying and rank-ordering factors affecting intent to buy

through online in Malaysia.


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The Research Model

The research model empirically tested in this study contains constructs that have demonstrated

literature support, based on a number of research done in this area in different countries,

particularly online shopping on end-user perspective (refer to Figure 1). The model examines

the factors that affect online. The research model is shown at Figure 1.

Figure 1. A Schematic diagram of the research model

The schematic diagram of the research model above shows the relationship between the

dependent and independent variables. Essentially, the theoretical framework shows above is the

foundation on which the entire research is based upon.

Online shopping is the dependent variable in this research. The dependent variable is analyzed

in this research in order to find out the answers or solution to the problem. Meanwhile, the

independent variables in this research are website design, reliability, customer service and trust.

The independent variables are believed to be the variables that influence the dependent variable

(online shopping intent) in either a positive or a negative way.

OnlineShopping

Reliability

Customer service

Trust

Website design


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Hypotheses:

A series of testable hypotheses were developed from the proposed research model, as shown

below:

Hypothesis 1: There is a significant relationship between web site design and online shopping

Hypothesis 2: There is a significant relationship between reliability and online shopping

Hypothesis 3: There is a significant relationship between customer service and online shopping

Hypothesis 4: There is a significant relationship between trust and online shopping

Hypothesis 5: There is a significant difference among different races and online shopping.

In general, base on the hypotheses, the research framework will be focusing on four factors as

independent variables and propensity to shop online will be the dependent variable. Looking at

previous discussions on the similar topic, this research will further hypothesize the following

i.e. for the hypothesis 1, 2 and 3 which are focusing on Web Site Design, Reliability, Customer

Service, and Trust, it is hypothesize that there should be a positive relationship that would likely

to influence the online shopping.

Research Methods

Sample and Data Collection

Data for this study was gathered by primary data collection method through consumer survey

administered among undergraduate students from two private universities in Malaysia. An in-

depth interview was conducted with ten lecturers from one university before the final survey

was conducted in order to identify the key elements to be asked in the questionnaire. A total of

550 respondents were approached but only 496 were found to be usable for data analysis. Most

of the rejected questionnaires are found to be incomplete especially if they did not answered


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wording and sequence of the questions. The revised questionnaire was then administered to

respondents with a cover letter explaining the academic purpose of the study. The third part

consisted of questions regarding the demographic characteristics of the respondents such as age,

gender, and race.

Measures

The reliability reported by Moore and Benbasat (1991) for the scale and Cronbachs alpha for

scale reliability obtained for our sample. The Cronbach alpha estimated for trust scale was

0.887, reliability scale was 0.800, website design scale was 0.724, and customer service scale

was 0.797. Reliability from our sample showed a reasonable level of reliability (>0.70). Factor

analysis also confirmed that the construct validity of the scales could be performed adequately.

The factor loadings for all items exceeded the minimum value of 0.4 considered for this study.

Table 1 shows the number of items comprising each factor loading value.

Factor1 2 3 4

trust2 .810 .147 .171 .106trust3 .777 .209 .136 .098trust1 .776 .209 .118 .121trust4 .600 .245 .222 .148relifac2 .172 .594 .220 .069relifac3 .208 .574 .140 .115relifac5 .171 .571 .151 .237relifac4 .130 .550 .217 .176relifac1 .179 .506 .201 .099

webfac3 .213 .245 .622 .070webfac5 .127 .092 .604 .141webfac4 .201 .098 .600 .127webfac2 .096 .272 .485 .102webfac1 .042 .306 .442 .169custserv2 .146 .219 .255 .750custserv1 .168 .300 .287 .574custserv3 .268 .246 .258 .488

Extraction Method: Principal Axis Factoring. Rotation Method: Varimax with KaiserNormalization.

Table 1: Rotated Factor Matrix(a)


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Data Analysis

Bivariate frequency distribution of the respondents were done according to age, gender, race

and average family monthly income and other questions related to Internet browsing.

To test the hypotheses of this study, regression and ANOVA were used. The analysis enabled us

to examine the individual impact of the independent variables on online shopping.

General usage of Internet

1. Internet access

One of the important indications of internet experience is the pattern of Internet access by the

consumer. In this situation, the Internet access could be assessed by looking from two different

aspects i.e. where and how long. Table II illustrates this pattern. It clearly shows that the

majority of the respondents (66.7%) used the Internet at home followed by 17.8% at university

and 10.1% at cyber caf. Majority of the users spent 1 to 2 hours everyday for Internet browsing

(36.5%), more than 4 hours (31.5%), 3 to 4 hours (23.2%), and only 8.9% spent less than 1

hour. In conclusion, the results show a general pattern of Internet usage of young consumers in

Malaysia whereby it could be concluded that they are having their own Internet connection at

home which lead to the active usage of Internet whereby the average time spend is more than 2

hours.

2. Use of the Internet

Among the seven popular usage of Internet, searching for information on the Web was the most

frequently adopted activity for Internet users (51.8%). The second category of usage is

communication purposes (45.0%), followed by entertainment (43.1%), education (31.5%),

pleasure (15.7%), work (15.1%), online shopping (8.3%) and others (1.8%). From the data it

was found that more than 60% never bought any product through online (62.3%). On the other

hand only 4.2% of the respondents regularly buy through online. Out of 496 respondents 105


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respondents occasionally buy products through online.

Frequency Per cent

Place of Internet Access

HomeAt universityCyber cafMissing

331885126

66.717.810.15.4

Purpose of Internet usage

WorkEntertainmentOnline shoppingCommunicationSeeking information

EducationPleasureOther

7521441223257

156789

15.143.18.345.051.8

31.515.71.8

Online buying

Never buy onlineBuy on the webOccasionally

30921105

62.34.221.16

Household monthly income

Below RM1000

RM1001- RM3000RM3001-RM5000RM5001-RM10000Above RM10000

77

372261110

15.5

75.05.22.32.0

Table 2: General usage of Internet

Hypotheses Testing

The strength of the proposed relationship was assessed using the respective statistical analyses

summarized in Tables 3 and 4.

Variables Beta t-value p-value

Website Design .073 1.589 .113

Reliability .239 4.863 .000

Customer Service .252 5.230 .000

Trust .161 3.647 .000

Table 3: Regression Results

Hypothesis 1:There is a significant relationship between web site design and online shopping


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factor that has positive effects on online shopping. Referring to Table III, the third hypothesis

tested the relationship between customer service and online shopping. The regression result

(beta = .252, t-value = 5.230, p-value = 0.001) indicates that the association between customer

service and online is significant at 0.01 level (p = 0.000). In term of direction, the result shows

that there is a positive direction between the two constructs. This study also confirmed the

findings of another recent study in New Zealand by Shergill and Zhaobin (2005). Furthermore,

it was found that the beta value of 0.252 is the highest when compared to other variables. This

result indicates that customer services could be considered as the most important variable that

may influence the online purchasing. In this situation, there is a need for the online companies

to improve their online customer services if they would like to have more young consumers to

involve in online purchasing.

Hypothesis 4:There is a significant relationship between trust and online shopping

Table III shows that the association between trust and online shopping is significant at 0.01

level whereby the analysis result showed the beta = 0.161 and t-value = 3.647 (p=0.000). The

support for hypothesis 4 reflects similar arguments in previous studies (Shergill and Zhaobin,

2005; Gefen, 2002; Jarvenpaa et al., 1999, 2000; Koufaris and Hampton-Sosa, 2004; Koufaris

and Hampton-Sosa, 2002). Similarly, it demonstrates that trust is also playing an important role

in an online buying situation. As such, it is recommended that the online companies to build this

kind of trusting relationship by developing strategy that could instil sense of belongingness

between them and the young consumers.

Hypothesis 5: There is significant difference in online shopping among different races inMalaysia

To test this hypothesis, one-way ANOVA was used. The purpose of testing this hypothesis is to

assess any perceived differences among the races and recommend suitable promotional strategy

for the company to increase the marketability of their online product or services. The analysis in

table IV displays the results where F value (1.169) was found to be insignificant. The result

indicates that there was no significant difference in online shopping among different races


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(Malay, Chinese, Indian and others) in Malaysia. Thus the null hypothesis was sustained and the

alternate hypothesis was rejected. The result provides very significant outcome for the company.

It could be argued that, the company should not develop different marketing strategy for

different races especially in the context of Malaysian young consumers. This will definitely give

great saving not only in term of their operating cost but also to the overall planning of the

strategy.

Sum of Squares df Mean Square F Sig.

Between Groups 1.352 3 .451 1.169 .321

Within Groups 189.613 492 .385

Total 190.965 495

Table 4: ANOVA- Difference in Online shopping among different races in Malaysia

Conclusion

The analytical results of our investigation indicate relationships between young consumers

perceptions of the factors that influence their intention to buy through online. More specifically,

consumers perceptions of the customer service, reliability and trust of online purchasing exhibit

significant relationships with their online buying intention. The analytical results are generally

consistent with previous. Trust has received the most consistent support as factors that influence

online buying (Gefen, 2002; Jarvenpaa et al., 1999, 2000; Koufaris and Hampton-Sosa, 2004;

Koufaris and Hampton-Sosa, 2002). Marketers need to realize that the online marketing

environment affects the way consumers view and develop relationships. In this context, to add

value to the online shopping experience and to build relationships, trust is everything.

Notably, examination of the relative strengths of the associations between the individual

independent variables and online buying intention clearly indicate that Customer Service, Trust

and Reliability can explain much of the variation in online buying intention (Shergil & Chen,

2005; Gefen, 2002; Jarvenpaa et al., 1999, 2000; Koufaris and Hampton-Sosa, 2004).

Furthermore, it was also found that, for online buyers, the good perception on the customer


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service is considered as the best predictor when compared to other constructs.

When individuals have more experience with online buying, the impact of perceived factors on

intentions to buy online is different from that of inexperienced online buyers. Information

obtained from experience over a period of time undoubtedly has the potential to modify future

intentions of online buying. Therefore, experience gained over time has potential implications

for the other buying behavior model and future research should be conducted in this area. This

will serve as a platform that will lead to the sustained confidence of the consumers in online

purchasing. In this study, it was found that few consumers were buying through online

regularly, although 72.4 percent of the respondents browsed the Internet everyday.

Limitations and Future Direction

It is necessary to recognize the limitations of the current study. Firstly, since the survey was

conducted among a group of students from two private universities, the results should be

interpreted with caution, particularly with respect to the generalization of research findings of

Malaysian consumers as a whole. Next, the sample size itself is relatively small. To accurately

evaluate Malaysian consumers perceptions of online shopping, a larger sample size is desirable.

Future research needs to focus on a larger cross section of Internet users and more diversified

random samples to verify the findings of the current study. Moreover, to further studies clarity

of the factors influence on online shopping, Technology Acceptance Model (TAM) or

behavioral model could be used. Future inquiries could also examine the causal relationships

between factors and how consumers perceive overall online shopping by employing a

structural equation modeling technique. In addition, future research needs to examine business-

to-business purchase in the context of cross-national and cross cultural differences.

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Young Consumer Online Shopping

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