Online Shopping Habits and Consumer Behavior

Table of Contents

1. Introduction
1.1. Problem Discussion
1.2. Objectives of the study

2. Literature Review
2.1. Customer Behaviour
2.2. Digital Shopping Behaviour-Key Facts
2.3. Customer behaviour and Clothing
2.4. Consumer Behaviour Analysis
2.5. Consumer Analysis Determinants
2.6. Consumer Attitude
2.7. Consumer Motivations
2.8. Knowledge and Learning process

3. METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Research Approach
3.4 Research Methods
3.5 Secondary Research
3.6 Primary Research
3.6.1 Qualitative Research
3.6.2 Interview
3.6.3 Sampling
3.6.4 Quantitative Research
3.6.5 Questionnaire
3.6.6 Sampling

4. Findings and Analysis

5. Discussions
5.1. Demographic Distribution
5.2. Buying Behaviour
5.3. Customer Tastes and Preferences
5.4. Internet Efficiency
5.5. Brand Impact and Awareness of Visual Technology
5.6. Personal Comments and Interview

6. Conclusions
6.1. Need for Recognition of target segments
6.2. Branding Awareness- Developing Internet
6.3. Virtual Recognition Technology- Need for Innovation
6.4. Customer Perceptions- Customer Perceived Quality
6.5. Buying Behaviour-Customer Analysis
6.6. Social Networking-Analysing its Importance
6.8. Limitations
6.9. Recommendations

7. References

1. Introduction

In the last few decades, the internet has been a powerful tool. The advent of internet has removed major industry barriers and made shopping much more easily. The development of internet from last 5 years has significantly increased the web-users which are due high speed data transmission and other technology developments have created an advantage for the firms to promote themselves more significantly. In the current era of internet customers use internet for varied purpose and activities; searching information about products/ services, companies, product features and prices, availability of the product , selection of products, placing order and paying them online ensuring a smooth transmission of the complete process. According to the UCLA centre for communication policy, online shopping has become the third popular internet activity which further followed up by e-mails and web browsing. Many researches have indicated that the internet shopping particularly in B2C has risen and online shopping become more popular to many people. According to The Emerging Digital Economy Report, in some companies the weight of e-commerce sales is high (Dell computer reached $ 18million sales through internet). This advent of internet has made the marketers to realise that the consumer behaviour transformation is unavoidable and thus they have to change their marketing strategy.

Consumer Behaviour can be defined as the decision making process and physical activity involved in acquiring, evaluating, using and disposing of goods and services. (Engel et al., 1995) states that consumer behaviour is all activities directly involving, acquiring, consuming and disposing products or services and the procedures to incur decision making before and after these activities. While understanding the system of virtual shopping, Behavioural nature of the consumers is a priority issue for practitioners who compete with the fast growing virtual market place. ‘In several countries More than 20 per cent of Internet users already buy products and services online’ (Taylor Nelson Sofres, 2002).

At the same time more than 50 per cent of US internet users regularly buy online (Forrester Research, 2003. According to the http://visual.ly/online-shopping-statistics 2011, around 75% of the population use internet. Around $186 billion was spent in 2010 on online transactions in America.  Around 81% of the customer’s researched internet about the products, 26% of the customer used internet auctions and around 66% of the customers purchased goods online. The below chart determines the top 5 products sold online, Accordingly, 85% of Asian customer shopped online and stands 1st in the global ranking as online customers, while Australia being second by gearing 83% of online customers. 83% of European customers shops online every year and America being low of having 81% of online customers. Development in the recent technology is transforming e-business in to a mainstream business activity while at the same time the behavioural nature of the online customers are getting matured which makes the virtual vendors realize the importance and urgent need of a professional and customer oriented approach which have more chances on influencing with the marketing strategies.

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( http://visual.ly/online-shopping-statistics )

1.1. Problem Discussion

The aim of this study is to analyse weather customer behaviour influences the marketing strategy of B2C business which includes the strategies of e-business on online clothing business. An e-commerce site for a business should include Business-to-Consumer system which can bring efficiency and reduce the cost at the same time, But the point is the strategies included in the B2C business will try to have any affect with the consumer behaviour towards it is the question. To find out the answer is the aim of the study.

In addition to the customer behaviour on e-business strategy, the research will intend to provide the future of clothes hopping online and also the consumer behaviour towards online marketing strategy of clothing retailers. The research will also goes on to the question whether the B2C business will overcome the consumer’s behaviour towards their marketing strategies which take over as the trend in the e-business.

(Chen and Dubinsky, 2003), the worth of a product in the minds of the consumer is very much capable in predicting the purchase intentions of the products. This concept provides the intentions of the buyers which is an act of behavioural nature of the customer towards the online products.

1.2. Objectives of the study

The e-business strategies of B2C business towards consumer behaviour will lead us to the following questions which will be looked upon in this research:

- What are the factors that affect the minds of the consumers in selecting a fabric or clothing via online?
- What are the Characteristics of the consumers which lead them to shop for clothing online?
- Do the previous encounters in online purchase affect their (consumers) decision to proceed with future online business?
- Can online shopping applications enhance the buying experience enough to counter the real shopping experience?

2. Literature Review

Introduction

The chapter starts with defining Customer behaviour and its implications on the business strategy as well as marketing strategy. A brief description will be encompassed defining the online business industry and their current trends in strategy for creating success in their business. An attempt is made to explore the relationship between the strategy and customer behaviour. The influencing factors are considered that forces marketers to take customer behaviour as an important aspect while designing their strategy using real time business evidences practical research work. Finally, conclude what strategies can e-business marketers can use to increase their market share in terms of gaining more customers and what limits them in the market by doing so.

2.1. Customer Behaviour

Before defining consumer behaviour, it is better to understand the need of this definition. For the marketers to design policies and to make better managerial decisions they need to know, how customers buy and use goods/services, what is their reaction to prices, advertising and the business settings?  Consumer behaviour is a vast concept and cannot be defined from a single perspective. Economists states the consumer behaviour is depended on the price of the product/service. (Zinkhan 1992), According to the utility theory, consumer is a “rational economic man” and their behaviour is influenced by range activities beyond purchasing.

The official definition of consumer behaviour is given by the American Marketing Association as: the dynamic interaction of the affect and cognition, the behaviour and environment through which people carry out transactions in their life.

(Bennett 1995, page 59)

“Consumer behaviour…. Is the study of the processes when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires”,

(Solomon, Bamossy et al. 2006, p6)

“The behaviour that consumers display in searching for, purchasing, using evaluating and disposing of products and services that they expect to satisfy their needs”.

(Schiffman and Kanuk 2007)

“Consumer behaviour that, it covers all the grounds that are related to selection of product or service, buying and then consumption of goods or services”

(Kotler, 2002)

“Consumer behaviour is the study of the individuals or groups of the individuals when they think about selection of a product service”

(Permer, 2001)

“Consumer as well that defines it as to, assume someone gathers all alternatives, applies logical rules of self-interest, uses careful cognitive processing and gives equal attention to each option, before making a purchase”.

(Bareham, 2004)

“Consumer behaviour is also defined as the dynamic interaction of affect and cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives”.

(Anon, 2004)

There are number approaches that define consumer behaviour from different perspective which are based on differing traditions of psychology. (Foxall 1990), emphasized on five major emerging models on consumer behaviour and presents a definition for the concept from different perspectives.

- Economic man
- Psychodynamic
- Behaviourist
- Cognitive
- Humanistic

As per Economic Man approach, consumer is regarded as a rational human being and self-interested making decisions based upon the ability to maximise the utility whilst expending minimum effort… getting a more units out of a utility with less effort and price. The approach argues that to make better decisions consumers must aware of available alternatives in the market and should also be capable of rating them in terms of utility effectively, but this efficiency of making decisions is no more considered realistic because consumers rarely have adequate information or time to make efficient decisions.

Psychodynamic approach attempts to define consumer behaviour using the traditions of psychology; states that behaviour is subjected to biological influences through “instinctive forces” which act outside of conscious thought. After their research Sigmund Freud presented three facets of human and their behaviours; ID, the EGO and the SUPEREGO.

(Sigmund Freud 1939, Stewart 1994),

The perspective of these three facets is that the behaviour of a consumer is influenced and determined by biological drives rather than individual cognition or environmental stimuli. The Behaviourists view is relative to the Psychodynamic approach, but differs subtly in other ways. Contradictorily behaviourists had different views and presented different facts which made the concept of consumer behaviour confusing.

Amongst them John B Watson 1920, published his study of behaviour which was later known as “Little Albert”, the latter of the theory was: behaviours is explained by external events and that all things that organisms do, including actions, thoughts, feelings can be regarded as behaviours. From Cognitive perspective, customers are viewed as “information processors”. In contrast there are numerous models that define consumer behaviour and the determinants within them.

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(Stimulus –Organism-Response Model of Decision making) Source: (Cziko 2000)

Stimulus-Organism-Response model, suggests that there is a linear relationship between the three stages with environmental and social stimuli acting as antecedents to the organism assuming that stimuli to act depends upon an inactive and unprepared organism.

Cognitive approach is appropriate in ethical purchasing behaviour. The criticisms and limits of cognitive models lead to the development of Humanistic perspective of customer behaviours. Cognitive approach relies upon the assumption of the consumer being a rational decision maker, which neglects the role of emotion in decision making. (Nataraajan & Bagozzi 1999)

“There is a pressing need in the field to balance the rational, cognitive side of marketing thought and practice with new ideas and research on the emotional facets of marketing behaviour”

(Nataraajan and Bagozzi 1999)

The cognitive and reinforcement model focuses on the modification of consumer behaviour and thus may explain the change that may occur in their purchasing whilst few consumers purchases only particular goods from particular stores which is just like habitual purchasing behaviour.

For instance in case of super market goods, important stimuli is the colour, size, and shape of the products (William1966), who found that colour impacted the most then followed by size and shape of the product or packaging.

Engel, et al. (1986, 5) define consumer behaviour as “those arts of individuals directly involved in obtaining, using and disposing economic goods and services, including the decision process that precede and determine these acts.

Studying Consumer Behaviour-Helps whom

The need for study of customer behaviour evolved as a distinct field of study during 1960’s, where there was a formation of an Association for Consumer Research in 1969 ( www.acrweb.org ).

The first Journal of Consumer Research was first published in 1974. The need for this broad description of consumer behaviour is because of the scope of the terminology Consumer Behaviour.

The behaviour of the customers varies according to the industry and as well as to the external environment operating around them. Contradictorily it is difficult to govern or monitor the changes in customer behaviours. The more the study of consumers helps the marketers realize their customer behaviours and the influencing factors impacting them.

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(F. Furaiji, 2012, An Empirical study of the factors influencing consumer behaviour, Vol. 6)

The above table describes the factors that impact consumer’s behaviours which were outlined by researchers over a period of time.

For instance the decision making process of customers have shortened due to the advent of the internet. Henceforth it is obligatory for the marketers to know their customer behaviours with an in deep understanding. Consumer behaviour is the study of individuals and groups, through which they design required processes and designs to satisfy their needs. It helps to forecast the customer’s wants and what they don’t need.

By effectively studying consumer behaviour, firms can gain a competitive advantage over their competitors. Many retail firms like Primark, Next and M&S they design their marketing strategies based on the demand for the particular jeans or trousers in the market, but not by studying their consumer behaviours.

But the customer purchases the product based on price and availability of the product, whilst masking their original preference of taste and choice. Moreover these firms operates under low profits and they knew that investing on marketing and promotional functions doesn’t have a significant impact on the customer’s behaviour, as the customers have perceived these companies as low operating firms rather than branded.

The study of Consumer behaviour helps the marketing managers to design their marketing strategies and helps to enhance the retention of their existing consumers. The study may also lead to new markets; studying different segments helps the managers to know varying tastes and preferences and work accordingly to produce the particular if it is not within their portfolio.

Value creation can be enhanced, so if the value for a product is created more efficiently customers will be buying more products/services as they derive the value from the products/services.

2.2. Digital Shopping Behaviour-Key Facts

Due to the advent of the internet, the percentage of the individuals aged 16-74 in the Europe who make purchases online has raised over 24 per cent in 2008 and 30 per cent in 2010. Denmark was considered to have highest number of internet shoppers which accounted nearly 50% increase in consecutive years. E-commerce has said to be one of the fastest growing markets in Europe and United Kingdom. Based on the CRR research commissioned by Kelkoo 2011, online sales in UK accounted over £55 billion and £170 million comprising of both UK and Europe online sales.  A report by of com International, states that 8 out of ten UK and Europe customers use e-commerce for their purchases which can be through via internet or even through mobile phones. The technology innovation has cleared few barriers for customers like middlemen, brokering, and reduction in commission costs and more importantly the time frame involved in the purchase is less. A statistical bulletin from the office of National Statistics: Retail Sales August, 2012 also suggests that the e-commerce sector has become one of the booming industries in the market with increasing customer rates. The study was undertaken in September 2012 which covered the entire geographical areas of UK and the findings were;

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(Office for National Statistics: Retail Sales August 2012, Great Britain)

As per the report, the food stores and textile clothing sector has increasing sales rate and has been contributing value to the business year by year. The theory of internet marketing and consumer behaviour has been investigated by various scholars from decades. They used certain variables to measure the behaviour of consumer in relation to the website elements like; customer satisfaction, loyalty towards the vendor site, and commitment. The design and layout of the vendor’s website page is first the images of the company which is viewed by the customers.

The world clothing and textile industry almost reached to $2,360 trillion during 2010 and expected to grow with an increasing rate of 8% every year (United States Central Bureau and International trade administration and ITA).

According to the key facts provided by United States Central Bureau and International trade administration, the Chinese industry has been a major source of textile by producing 3000 tons of soot each year. During the period 2011, about £4.3 billion worth of clothes were purchased over the internet and as per the report of (Mintel); a 100per cent growth has been forecasted for the next 5 years. When the textile retail firms adopted internet technology to sell their products, industry analysts doubted the success of a firm and effectiveness of the strategy, quite surprisingly the strategy was effective and efficient.

According to verdict of (Neil Saunders, Retail Analyst) “many shoppers now prefer to buy clothes online and try them on in the privacy of their home”. The report for IMRG, the online shopping trade body stated that the clothes shopping over the internet had remained strong in the last year, whilst the other sectors have seen declining growth rates. The below statistics provided by Plunkett’s Apparel & Textile Industry (Almanac 2012), provides the key facts about the clothing and textile industry.

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(Plunkett’s Apparel & Textile Industry Almanac 2012)

The two concepts “customer behaviour” and “online sales and key marketing stats” have been briefed out, whilst bringing these two elements in relation textile industry would help us to determine what the research is intended to do. The need for describing individually is because the relativeness and scope of the topics. Online marketing and customer behaviour are two distinct topics which requires in depth understanding when they are brought together to determine the implications on business and strategy.

2.3. Customer behaviour and Clothing

Customers when they make an online purchase they always tend to seek tangibility of the products; that is they like to touch and feel the product, contradictorily online purchases are the service which is due to the advent of the technology where there is no tangibility and as a fact a question of trust arises between the minds of customer before making a purchase. The main driver for consumer to make purchase decision depends on the brand. Laura Wade-Grey, when she was the CEO of Tesco.com in an interview stated that;

“Having an extremely strong existing brand, the power of internet, and our ability to use it-these are the key factors for success. There is virtually no limit to what we can sell be it physical goods or services and where we can sell it”.

If the firm has a positive and strong brand in place, customers are ready to vest their time and effort to carry out the purchase. “A brand can be strong enough to revoke feelings of belonging, love and affection” (Kotler, Keller, Goodman & Hansen, 2009); keeping this in the mind the marketers must primarily develop their brand. In contrast the current development signifies moving change in the mind-sets of the marketers. Nowadays marketers are focusing towards the social websites and are efficiently exploiting the opportunities provided by the internet. Facebook, Twitter and My space has provided a much required roofs for the firms to expose their products and attract the customers.

Visual-focused social sites help special appeal to luxury marketers given their preferred content strategies and conversation tactics. Another factor that has a major impact on customer behaviour is availability of information. Online stores need to provide all product information that is available for the consumers.

Ajit Kambil in his article “What is your Web Strategy” Stated that “we are at the threshold of web 5.0, quasi-emotive web that is more aware of your feelings”, which means the existing e-commerce strategies are not quite effective. Customer are expecting much more efficient and interactive. As in a clothing sector, customers cannot actually wear and check if it suits them as because they make a purchase online, yet they can see how it would fit on the models but not on them.

To challenge this, www.fits.me , a German company came up with a virtual fitting room website, where customers can select the product, select their size and see whether the particular cloth suits them or not by placing them on the virtual models with more customization options. The customers can insert their body measurements and the particular model measurements with respect to the customer measurements.  This is what the customers are expecting and would radically influence on their behaviour too.

A case study by Pretty Green revealed that it had increased customer purchases through online by adopting virtual fitting rooms. Another case study by Hawes & Curtis London, revealed that due to advent of virtual fitting rooms it was able enhance their customer satisfaction and increased loyalty within them. A revealing case study Cape Gemini “Digital Shopper Relevancy” outsourced the outputs of their key findings of customer needs.

“To improve the usage of digital channels in the purchasing process, retailers and manufacturers should provide an integrated experience between physical and digital touch points”.

Digital Shopper from Italy

“I use the Internet mainly to acquire product information, but decide on purchases only after seeing and trying on the product”

Digital Shopper from Finland

Ideally the customer is looking for some sort tangibility which needs not to be to high extent, but to a certain extent where actually he can experience a product. Certain customer often looks for the value from the product they purchase.

They shop online primarily to find the best deals on products they know they want and they expect a value for their unit they purchase, free shipping or a cash discount can work better for them. Trust as discussed earlier is what matters really in e-tail business.

A study by Warne & Holland 1999, determined two types of trust; innate trust and subjective trust. Innate trust refers to the tendency to trust others by having in m

ind previous experiences, whilst subjective trust is the trust related to particular situation.

The E-tail business has certain mechanisms to enhance and ensure the level of trust maintained. Security, Assurance, Reputation, Web searching, Fulfilment, Presentation, Technology and Interactions (Yoon 2002) and these relatively has an impact on customer behaviour. Customer prefers to buy from Next.com or Amazon.com, rather getting from the third party, which is because of the presentation of the website and previous transactions with the firms. The customer experiences high level of trust with them for these reasons.

Regretting fact is that the technological innovation has led the development of numerous websites. The barriers set for online business is not a barrier anymore. Technological innovation has removed such barriers by reducing costs and time.

There are numerous firms like Amazon.com, ASOS.com, Clarks.com, Debenhams.com and many more. There is a high intensity of competition between each rival firm, but at the same time it has provided many alternatives and substitute products to the consumers. Many consumers may be brand and quality oriented whiles at the same certain customers intuitions are governed by price and dependability aspects. Amazon and E-bay fight on price wars, Amazon products are priced low and most of the products incur shipping charges, while E-bay products don’t incur shipping charges for certain products. From the post-modernist view the marketers are at the end of survival in the e-tail business.

The marketers should now stop thinking about the profits and market share and focus towards their customer’s and align resources and design strategies relative to them. Many researchers and scholars from decades are trying to provide a clear distinction about consumer behaviour, but have failed it to give them clearly as because the behaviour is not constant and keeps on changing. There are no more first mover advantages in the internet industry as because the every possible opportunity is exploited by one or the other which is explained in the Myth of first mover advantage in M. Porter’s Strategy and Internet, A HBR review and Ajit Kambli’s What is your Web Strategy.

The marketers now have to focus on using the technology as their capital innovation. Move back to basics and doing same differently. Marketers may start thinking psychologically and apply those concepts to understand clearly about their customers. A virtual simulation tool might not be a power tool at the time, but by customizing the elements and designing according the customer’s accordance might lead the firms to generate a sustainable competitive advantage over their competitors.

To provide better shop experience than traditional shopping experience it is obligatory for the business managers to either reframe their technical abilities or to radically create technical abilities and capabilities. Consumers attitude towards n e-tailer will be positively influenced by customer perceptions of e-tailer images, and to change perceptions the marketers should know the perceptions of consumer’s which can be achieved by studying their customers and governing their behaviour using appropriate techniques.

2.4. Consumer Behaviour Analysis

According to (Solomon, 2006: Blackwell et al., 2001; Peter and Olson 2008), Consumer behavior is complex pattern and sophisticated understanding for marketing researches, but simply defined; study of psychological, social and physical actions when people buy, use and dispose products and service, ideas and practices. The generalized idea behind the consumer research was to finding out the buying reason of the customers and analyzing their purchasing patterns and most the obviously the motivation among the customers for buying products and services online. Consumer behavior is a dynamic process, because of the continuous changes in ideas, perceptions and activities of consumers as an individual or in a group (Olson and Peter 2008). Consumer’s responses towards the company or the sector and their reaction to the firms marketing strategies are the main areas of focus and the questions to be answered.

2.5. Consumer Analysis Determinants

Consumers should be analyzed in a systematic process. According to Peter & Olson 2008, consumer should be analyzed by looking into three objects; affect and cognition, behavior and environment and their relations between each other. All elements should be considered when deciding for marketing strategy.

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(Modified figure: Peter & Olson, 2008, p.22)

The emotions relating to a product like admiring or hating is conceptualized as “Affect”, while cognitions can related as mental activities such as learning, interpreting and evaluating. When individuals or groups are exposed to stimuli, they have the image of objects, situations, people or experiences in their minds; like-wise every individual has own way of perceiving and understanding things in his own environment. According to (Peter & Olson 2008; Chisnall, 1995), “Affect and Cognition” are connected to each other intensively however they are originated totally in different ways as feelings and thoughts”. Peter and Olson defined this term as “overt consumer behavior” which means consumer’s activities can be analyzed by quantitative and qualitative methods.

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