Factors influencing consumers’ online shopping in China

Factors influencing consumers’ online shopping in China Wen Gong, Rodney L. Stump and Lynda M. Maddox

China now has 420 million internet users (CNNIC, 2010), representing the highest per country usage in the world. With growing disposable income, the hundreds of millions of netizens[1] are spending more and more on information and communication products and services compared to their daily necessities, thus creating huge prospects for the development of e-commerce and a digital economy in China. While many countries worldwide were severely hit by the global recession, China’s online retail market appeared to be unaffected and has actually been growing steadily. Recent data reveal that China had 87.88 million users shopping on the Internet compared to 74 million the previous year (CNNIC, 2009). This rapid growth represents opportunities as well as challenges for both domestic and international marketers operating in the e-commerce space. Thus it is crucial for e-marketers to understand what drives Chinese consumers to shop on the Internet in order to design e-marketing strategies that caters to their changing needs and lifestyles and improve their online shopping experiences and satisfaction. 

Despite the surge in internet usage in China, analysts and researchers have questioned whether Chinese consumers will become avid online shoppers. They point to China’s cultural preference for face-to-face business interactions as well as regulatory issues as factors that may inhibit the development of online shopping (Raven et al., 2007; Rein, 2008). While there is a growing body of research exploring consumers’ online shopping behavior in Western context, far less is known in other parts of the world (Stafford et al., 2004). Thus, whether these studies and associated theories are generalizable to other cultural contexts such as China remains largely unknown. To date, relatively few empirical studies have been carried out in the Chinese context. Given the tremendous growth this market is experiencing, an in-depth understanding of the underlying motivations, attitudes and behaviors of Chinese online shoppers is needed if marketers and advertisers are to influence consumers’ online buying decisions. This paper intends to fill some of this knowledge gap by empirically investigating the determinants of Chinese consumers’ online shopping intentions. In the following section, we review both the Chinese online retail market and factors identified in the existing literature that influence consumers’ online buying intentions. Next, we present our conceptual model and a series of hypotheses derived from it. Following that, we describe our methodology, present the results of our survey, discuss the implications of these findings and tender recommendations for future research.

Literature review

Overview of China’s online retail market

One manifestation of China’s continuous rapid economic growth during the past two decades is its consumers’ swelling consumption power (Zhao et al., 2008). As a result of the growing affordability and availability of Internet access, more and more Chinese consumers are using the internet for information, entertainment and communication purposes. At the same time, Chinese consumers’ increasing understanding of online applications, a more transparent and convenient online shopping environment and expanding investments by companies have turned more and more Chinese netizens into online shoppers. Evidence of this is reflected in China’s online retail market value reaching USD 18.8 billion in 2008 with a vigorous growth rate of 128.5 percent in 2008 (Lee, 2009). Rising against the global economic crisis, China’s online shopping penetration rate has reached 24.8 percent and the online B2C (business-to-consumer) annual growth rate is expected to exceed 100 percent over the next two years (CNNIC, 2009; Lee, 2009). One decade after the establishment of the first B2C web site 8848.com in 1999, China’s B2C e-commerce has entered a stage of rapid development (Weng and Lee, 2009; Shanghai Business Review, 2010). In contrast to most Western markets, C2C (consumer to consumer) e-commerce (akin to eBay’s model) currently dominates China’s online shopping market with 93.2 percent of total online sales in 2008 (CNNIC, 2009). Exemplifying this is Taobao, the largest e-tailer in China whose web site allows buyers to shop in C2C bazaars as well as B2C branded stores. However, the online B2C market is expected to rapidly grow and become the main driver behind the market expansion in the future as the B2C platform matures and more local and foreign firms use this model to enter the market (Lee, 2009; Shanghai Business Review, 2010). Chinese netizens have greatly increased their online spending over the years. The average spending online reached RMB1,600 (USD 234.3) in 2008 (IResearch, 2009; Lee, 2009) (see Figure 1 for trends from 2003 to 2008). Like their Western counterparts, the online shopping lists of Chinese consumers have also expanded a great deal from the initial simple selection of books, music and video products to include a more extensive array of product categories including apparel, housewares, digital products and many others. Critics posit that e-commerce will not work in China, arguing that Chinese consumers are traditionally conservative savers who refuse to buy on credit, distrust online vendors due to privacy and quality concerns, and need to feel and touch a product before purchasing it (Rein, 2008). Such perceptions may be in a state of flux as things have changed dramatically.

in China during the past three decades. The implementation of the one-child family policy and the rapid transition to a market economy have remolded the Chinese society culturally, as well as economically. Younger generations of Chinese hold a set of cultural values strikingly different from those of their parents and older generations (Gong et al., 2004). Young Chinese are more individualistic, novelty-seeking, admire foreign-made products, and have a heightened sense of brand and status consciousness (Gong and Li, 2008). Indeed, they have become the trend setters in almost every product and service category from street fashion to mobile phones and online purchases. Therefore, it is not surprising that several market research reports have found that young and educated consumer segments with higher income level are mainly the early adopters of online shopping in China (Lee, 2009; Rein, 2008). Characterized by high technology and low entry barriers, China’s online shopping market is very dynamic and highly competitive, yet it holds great promise (Lee, 2009). In recent years, the government has attached great importance to e-commerce as a means of spurring China’s economy and has released a series of policies to regularize and guide Internet and e-commerce development, mainly through the 11th Five-Year Plan and the 2006-2020 National Informatization Development Strategy (CNNIC, 2009). Despite these positive factors, China is not a country where it is easy for foreign firms to operate online effectively and compete. Online sales and logistics are separated everywhere in China and cash on delivery is still the main payment method for online shopping (Shanghai Business Review, 2010). Geographical diversity, cultural barriers, lack of cultural understanding, the fast-changing business environment and government regulations, and especially the poor distribution networks and the lack of a safe and efficient online payment mechanism all make this market less accessible to foreign firms (Lee, 2009). CNNIC’s surveys have consistently shown that Chinese internet users are less involved in e-commerce activities such as online shopping and payment, compared to their use of the internet as a tool for entertainment, communication and information. The relatively low adoption of e-commerce activities by Chinese consumers lags that of their Western counterparts, especially Americans (Zhao et al., 2008). This recap of the Chinese market not only highlights the importance of and an imminent need for more research on Chinese online shoppers but also implies that Internet marketing strategies developed in Western countries may not be applicable in the Chinese context.

Consumer demographics. Consumer demographics are the most frequently studied area in online shopping research. While there is abundant evidence that consumers’ demographic traits such as gender, age, income, education, and marital status are associated with their online shopping behavior (Liebermann and Stashevsky, 2009; Zhou et al., 2007), the extant empirical literature reports many inconsistent findings. We include these factors as the baseline for our analysis and to provide additional evidence to help resolve these inconsistencies. Consider first gender. Men were reported to hold the same (Alreck and Settle, 2002) or even more favorable (van Slyke et al., 2002) perceptions towards online shopping than their female counterparts, despite the fact that women usually have much more positive attitudes toward shopping in general and towards both store and catalogue shopping in particular. Explanations for such a gender pattern in the online setting have been offered from different perspectives, for example, women were reported to perceive higher risk in online purchasing than do men even when controlling for differences in Internet usage (Garbarino and Strahilevitz, 2004); men and women exhibited different shopping orientations – while women were more recreational-oriented and motivated by social interactions, men were more convenience-oriented and care less about face-to-face contacts (Swaminathan et al., 1999); men and women are interested in different types of product when shopping on the Internet (Jayawardhena et al., 2007; Zhou et al., 2007); e-shoppers are more likely to be male than female because e-shopping involves a computer technology with specific masculine associations (Dholakis and Chiang, 2003). In addition, men and women also show significant differences in online information search (Yoo-Kyoung and Bailey, 2008), women demonstrate a stronger need than men for tactile cues in product evaluation (Citrin et al., 2003), and women were found to be less satisfied than men with their online shopping experience (Doolin et al., 2005; Kim and Kim, 2004; Rogers and Harris, 2003). Another study also reported more men than women participated in online auctions (Fallows, 2005), indicating that consumers online buying behavior varies not only by gender but also by shopping formats (Shehryar, 2008). Summarizing these rationales, we posit.

 

Data for this study were collected as part of a larger effort to compare the attitudes and behaviors related to Internet use and online shopping of Chinese consumers with a benchmark study of US consumers conducted by Pew Internet & American Life Project (Horrigan, 2008). Some changes (such as income categorization and product categories) were made to fit the Chinese context based on CNNIC Online Shopping Survey (2006). The questionnaire was translated and back-translated to ensure semantic consistency between Chinese and English versions (Singh, 1995) prior to pre-testing. DigitalBiz.com, a Washington DC-based company specializing in online marketing research, was commissioned for data collection. The survey was conducted on a private web site administered by the company. The sampling frame included e-mail addresses collected from major Internet sites in China. Invitations to participate in the research were sent to 8,000 random addresses. A total of 503 respondents completed the survey, representing a response rate of 6.5 percent. No incentives or follow-up e-mail reminders were used to increase participation. Thus, the sample was a product of self-selection and all the respondents should be considered as Internet users. Data collection lasted about one week. Respondents were screened to be at least 16 years old. Table I presents the sample demographics and webgraphics and a comparison of the composition between those who have made a purchase online with those who have not yet done so. While male respondents seem to be overrepresented and those under 18 are underrepresented relative to the population of Chinas as a whole, the sample education and income distributions are in line with what have been reported about Chinese online customers (CNNIC, 2008a).

Discussion and managerial implications

Summarizing our results concerning demographics, our hypothesis related to gender (H1a) was not supported given the marginally significant parameter estimate, which suggests that Chinese male and female consumers hold similar online shopping intentions. We did find a significant inverse relationship with regards to age, thereby supporting H1b. H1c was partially supported in that the dummy variable corresponding to undergraduate degree was significant. As expected, we did find a significant relationship with regards to income, which supported H1d. H1e was supported in that the dummy variable corresponding to married with children was significant and greater than the other marital status/children in household categories. Perceived risk was found to have no significant influence on online shopping intentions, thus H2 was not supported. We found mixed results regarding the two media characteristics. Perceived ease of use generated a non-significant parameter estimate, which was contrary to H3a, whereas perceived usefulness was found to have a significant positive effect, which supported H3b. As summarized above, the results of our study are mostly in accordance with expectations and contribute to our understanding of the drivers of consumer e-commerce in China. Our results would be of the most practical interest to e-marketers, both domestic and international. Our research provides empirical evidence about how consumer characteristics (i.e. gender, age, income, education, marital status) and medium characteristics (i.e. perceived risk, ease of use and usefulness) can influence Chinese consumers’ online shopping behavior. We believe that we can all agree on the significance and potential of the B2C e-commerce in China. As such, our findings will be of value to both domestic and international e-marketers who are trying to influence consumers’ online shopping decisions. Our results will help develop an understanding of what drives Chinese consumers to shop online, which will, in turn, help e-marketers design e-marketing strategies that cater to the changing needs and lifestyles.

Marketers must know who their buyers are and what drives them in order to develop the most actionable marketing plans and strategies. Previous research has delineated the effects of consumer demographics in the buying process. Our results indicate that Chinese consumers’ age, education, income and marital status are significant predictors of their Internet purchase intention, echoing the findings from most of the existing literature in the area. Several market research reports have found that young and educated consumer segments with higher income level are mainly the early adopters of online shopping in China (Lee, 2009; Rein, 2008). The finding that gender is not a significant predictor of Chinese consumers’ online shopping intention appears to be at odds with what have been documented in the extant literature (e.g. Citrin et al., 2003; Garbarino and Strahilevitz, 2004; Rogers and Harris, 2003; Swaminathan et al., 1999; Yoo-Kyoung and Bailey, 2008). There may be a simple reason for this – the rapid growth of Internet use and online shopping in China may have evened out the gender aspect of the ‘‘typical’’ shopper, something certainly worth further investigation. Meanwhile, because of the over-representation of the male respondents in our sample, to better investigate the effects of gender, we conducted a post hoc analysis, where we split the sample by gender (n1 ¼ 361 for the male subgroup and n2 ¼ 128 for the female subgroup) and reran the models using the same variable set except the gender dummy variable. Interesting results emerged where some regression coefficients are significantly different across the two subgroups. According to the post hoc analysis results, we found negative effect of age is more pronounced in women than in men (t ¼ 1:81, p , 0:1); effect of highest education level is positive for men, whereas the opposite is true for women (t ¼ 1:80, p , 0:1); and effect of risk level is negative for men, whereas the opposite is true for women (t ¼ 21:95, p , 0:05). No doubt, consideration of individual differences in explaining consumers’ online buying intention could provide a better understanding of users’ adoption of the Internet as a shopping and transaction channel as well as enhance an e-tailer’s market targeting and segmentation effectiveness. An interesting finding of the study is the insignificance of perceived risk as predictor of Chinese consumers’ online shopping intentions. Although the majority of the Chinese respondents expressed their top concerns as product not being able to live up to expectations, disputes being difficult to resolve, unreliable customer service and making online payment, such concerns do not seem to affect their online shopping intention. This leads us to infer that security and privacy concerns are becoming less important in predicting Chinese consumers’ online shopping intention, especially with rapid advancement of information technologies and increasingly improved regulation/legislation on e-commerce in China. However, this by no means indicates that e-marketers would not benefit from adopting and implementing buyer-friendly online security and privacy protection measures. Contrary to our expectation, perceived ease of use was not found to be a predictor of Chinese consumers’ online shopping intention. Knowledge of the reality of China’s internet and e-tailing industry may help explain this finding. Although broadband Internet access have gained a wide popularity in China (91 percent, 94 percent and 98 percent for 2008, 2009 and 2010 respectively) (CNNIC, 2008b, 2009, 2010), download speed remains far behind that of developed countries (CNNIC, 2010) and the data transfer rate further slows down during peak hours because broadband width is shared (Lee, 2009). The poor nationwide distribution networks and the lack of a safe and efficient online payment mechanism are significant hurdles that hinder Internet purchases in China. In addition, despite the growing popularity, credit card usage and transaction volume are still very low in China, compared to those of developed economies (Hunkar, 2009). These local conditions may greatly reduce the convenience and, in turn, ease of use of online shopping among Chinese consumers. However, along with the increased affordability, increasingly more Chinese are searching on the Internet. Product information made available on the Internet via comparison sites, chat rooms, blogs or social media networks may be perceived as a great advantage. There is an old Chinese saying ‘‘never make a purchase until you have compared three shops’’. Such comparison convenience may be more appreciated by Chinese consumers. Further, source credibility greatly affects Chinese consumers’ search activity and word-of-mouth (WOM) is greatly valued due to their group orientation. Information shared by other consumers can be very influential because it is not controlled by the marketers and is thus seen as more credible. Therefore, although Chinese consumers may not perceive online shopping to be easy, they still exhibit favorable attitudes toward online shopping because of other advantages associated with it such as time-saving, lower price, and wide selection (Gong and Maddox, 2010). This consequently facilitates their online shopping intentions. Perceived usefulness showed a significant impact on Chinese consumers’ online shopping intentions. This is in line with what has been documented in the literature and reflects the general utilitarian nature of online consumers (Jarvenpaa and Todd, 1997). The finding suggests that e-marketers should incorporate features that can greatly enhance online shopping efficiency, for example, a search mechanism that can not only provide extensive relevant information but also facilitate product comparison and help users make their best decisions in a most efficient way. Of equal importance is the realization that shopping intention is not equivalent to actual purchase. While more web site visitors have become more comfortable and experienced shopping online, a recent study revealed that about 50 percent of Chinese online consumers abandon their shopping cart before purchase (China Business Daily, 2008), suggesting a problem for e-marketers who prefer buyers but not browsers. As such, it is important for the e-tailers to identify and address the drivers of cart abandonment and find innovative ways to bring consumers back and encourage future transactions. Cart abandonment highlights the challenge for e-tailors to understand online consumers’ potential frustration and unpreparedness to make a purchase as well as the opportunity for them to recover lost sales by clearing the path to purchase, keeping a tab on competitors’ prices, clarifying shipping costs and delivery times up front, avoiding out-of-stock scenario as well as pinning down the simplest checkout procedure.

Limitations and suggestions for future research

Several limitations of this study should be mentioned. First, despite the fact that we conducted a nationwide survey, males and older consumers are over-represented in our sample, compared to general online customers’ profile depicted by CNNIC (2008a). Also, the response rate can be improved by providing incentives and/or sending follow-up e-mails. As such, the Chinese sample may not be representative of the Chinese online shopping population as a whole. Second, we used consumers’ online shopping intention as the dependent variable in the study instead of their actual online purchase amount or frequency. The self-report nature of purchase intention may be a potential bias. Third, only two major categories of determinants of consumer online behavior, namely consumer characteristics and medium characteristics were included in our conceptual model. Taking these into consideration, the results are to be interpreted in light of the limitations outlined here. Future research should use Chinese consumers’ actual online purchases as the dependent variable and more revealing results regarding consumer e-commerce in China may come to light. Future research should also explore the effects of product characteristics, merchants and intermediate characteristics and environmental influences in online shopping behavior and enhance the predictive power of the proposed model. In terms of research methodology, other techniques such as web analytics can be considered and utilized in future research to better understand consumers’ web usage. Researchers should also start to investigate additional topics that may be of great interest to e-marketers in China. For example, how will customer service and return policy affect Chinese consumers’ online shopping intentions and subsequent purchase behavior? Knowledge in this regard will help e-marketers understand the role of these factors in the formation of expectations and their impact on customer satisfaction and retention. Social networking web sites are perceived by Chinese online users as good places for opinion and information sharing and allow them to make better shopping decisions (CNNIC, 2010). Insights about the potential of ‘‘social-shopping’’ sites in converting Internet users into online buyers in China should help e-marketers design more effective viral marketing and e-WOM marketing strategies on these web sites in generating desired outcomes.

Note 1. Throughout this paper we use the terms ‘‘netizens’’ and ‘‘internet users’’ interchangeably.

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Further reading Ajzen, I. (1991), ‘‘The theory of planned behavior’’, Organizational Behavior and Human Decision Process, Vol. 50 No. 2, pp. 179-211. Arnold, M.J. and Reynolds, K.E. (2003), ‘‘Hedonic shopping motivations’’, Journal of Retailing, Vol. 79 No. 2, pp. 77-95. Shankar, V., Smith, A.K. and Rangaswamy, A. (2003), ‘‘Customer satisfaction and loyalty in online and offline environment’’, International Journal of Research in Marketing, Vol. 20 No. 2, pp. 153-175. van der Heijden, H. (2003), ‘‘Factors influencing the usage of websites: the case of a generic portal in The Netherlands’’, Information & Management, Vol. 40 No. 6, pp. 541-549. Corresponding author Wen Gong can be contacted at: gong.gw@gmail.com


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