Online Shopping in India : Findings from a Consumer Research

 E-MARKETING

-- T Sai Vijay
Research Scholar
IIMT, Hyderabad.
The author can be reached at
tsaivijay@gmail.com

-- M S Balaji
Assistant Professor,
IBS, Hyderabad.
The author can be reached at
makambalaji@yahoo.com

Consumers, all over the world, are increasingly shifting from the crowded stores to the one-click online shopping format. However, in spite of the convenience offered, online shopping is far from being the most preferred form of shopping in India. A survey among 150 internet users, including both users and non-users of online shopping, was carried out to understand why some purchase online while others do not. The results suggest that convenience and saving of time drive Indian consumers to shop online; while security and privacy concerns dissuade them from doing so.

The Internet is no longer a niche technology - it is mass media and an utterly integral part of modern life. As our lives become more fractured and cluttered, it isn't surprising that consumers turn to the unrivalled convenience of the Internet when it comes to researching and buying products.

-- Jonathan Carson
President - International,
Nielsen Online

The above statement best illustrates how Internet has changed the way consumers do nearly everything. A recent study by market research firm ACNielsen suggests an upward trend in online shopping across the world. A significant observation of this study is that India beats the global counterparts in number of purchases per month, with 5.2 purchases against the global average of 4.9. Online shopping is described as the process by which consumers purchase products or services over the Internet.

In today's fast-paced environment, with our lives becoming busy and chaotic, online shopping has become a culture and an inevitable part of one's life. The best thing about shopping online is that it provides consumers freedom and control, and choice of a wide range of products, with the favorite items being only a few `mouse' clicks away. Some say that it is technology and others say it is a business model; but there is no gainsaying that online shopping has revolutionized the way companies sell products and services, and also the way people shop.

Online shopping provides several advantages over the traditional brick-and-motor shopping. Exhibit 1 presents a comparison between the features of traditional and online shopping. In the traditional model, retailers are the people who play a crucial role as they are responsible for selling products or services to the end users. This model leads to high distribution, inventory, logistics and other costs which in the current volatile and dynamic market situation render it uncompetitive in many situations. Online shopping helps companies cut costs and enables them to compete effectively and efficiently in today's, as well as, tomorrow's market. In addition, online shopping provides seamless interactions with the customers and enables the firm in better understanding the consumers' value propositions. The benefits and disadvantages of internet shopping for customers have been discussed extensively in literature; some of which are presented in Exhibit 2. Two kinds of benefits - intrinsic and extrinsic - are identified. The former refers to the benefits gained from purchasing online and include pleasure, novelty and altruism, while the latter pertains to benefits obtained from the outcome of performing the activities such as monetary savings, time savings, self-enhancement and social adjustment.

Online shopping, in India, is still in its nascent stage. Even though India occupies eighth position in terms of number of internet users, the percentage penetration is low at 3%. With the growing popularity of cybercafés, low cost of broadband, and government initiatives, the internet usage is expected to grow at 150% in the next few years. Some of the common activities undertaken by internet users in India are e-mail and chatting (98%), job search (73%), banking (34%), shopping (28%), bill payment (19%), matrimonial search (17%), and stock trading (14%). Though online shopping has witnessed incredible growth in the past few years in India, it is not as pervasive like in the west. In India, the most commonly purchased items in online shopping include books, electronic gadgets, apparel accessories, railways and airline tickets, computer and peripherals, music and movies and hotel bookings. Exhibit 3 presents the various products bought by percentage of internet users during the year 2006-07.

Online Shopping in India

With the year 2007 being declared as the broadband year in India, various initiatives were undertaken by the Indian government to increase PC and Internet penetration. Currently, there are approximately 42 million active Internet users and over 4.7 million broadband Internet connections in India. Nearly 77% of all the Internet users belong to the age group of 18 to 35, with majority being in socioeconomic classes A, B and C. English is the most preferred language of Internet users (Users of vernacular websites have increased to 34%, up from 12% in the previous year). The average internet usage has been 25 days a month with each visit averaging 28 minutes. Of the internet users in India, approximately 10.8 million or 25% shopped online during the year 2006-07, an increase of 76% over the previous year. During 2007-08, major metropolitan cities namely Mumbai (24%), Delhi (20%), Chennai (9%) and Bengaluru (6%) contributed to the bulk of online commerce; and 88% of the shoppers were male.

According to a survey by MasterCard, India and China would become the largest online shopping markets in the Asia-Pacific region by 2010, surpassing Japan and South Korea. Robust economic growth, large scale urbanization and rising spending by the middle class have been identified as the growth drivers for online shopping in India. In another study by IMRB and Internet and Mobile Association of India (IAMAI), online shopping in India was expected to reach Rs. 9210 cr during the year 2007-08, 30% more than during the previous year. The various reasons identified in this study for consumers to adopt online shopping are: saves time and effort; convenience of shopping from home; availability of a wide variety/range of products, detailed information about the product; and easy comparison between alternative products/brands. The growing number of internet users and favorable environmental factors provide excellent opportunity for firms to offer their products online. Many traditional retail firms are seriously looking at e-tailing as a future revenue generator. While the above assessment paints a rosy picture for online shopping, not all view it as the next big thing in India. Some are skeptical about its growth prospects. Various factors like limited choice, security or perceived risk, and inefficient services have been ascribed to be depriving consumers from getting value from shopping online.

Why Some Purchase and Others Just Browse?

Despite growing popularity of online shopping, only 25% of internet users patronize the virtual format. Concerns of privacy, security, concerns about after sales service, and missing out point-of-purchase promotions have been described as some of the factors that deter consumers from shopping online. To further understand why some just browse while others purchase online, a survey was carried out among students of a leading management school in India. The objective of the study was to investigate the behavior of online consumers and to identify the factors that differentiate online shoppers from those who just shop offline. A convenient sample of 149 subjects (internet users with debt/credit card) was recruited for the study. The majority of the subjects were between the age of 20 and 27 years (94%). Sixty-one percent of the respondents were male. On average, about 73% of the subjects had been using the internet for more than five years. Based on items generated from a focus group of 10 students (five online shoppers and five offline shoppers), a survey instrument was constructed. Sixty percent or 90 respondents had purchased online during the previous three months (users), while the remaining 59 had purchased offline during the same period and had never purchased online (non-users). Apparel, books, electronic goods and computer peripherals were the most popular categories bought by the respondents in both offline and online shopping contexts during the previous three months. The independent sample t-test was used to compare the mean differences between users and non-users of online shopping using SPSS statistical software. Exhibit 4 depicts the results of the independent sample t-test.

Results

The results of the t-test reveal that the difference in the mean scores between users and non-users of online shopping is significant for most items except for price discounts, price as a motivational factor, and availability of wide assortment of products in online shopping. Convenience (M: 6.08 vs. 5.02, p < 0.000) and saves time (M: 6.30 vs. 5.12, p < 0.000) are significantly higher for users of online shopping when compared to non-users. Comfort and ease of use that represent how easily shoppers can achieve their goals using a computer is significantly greater for online users. Online shopping was somewhat less stimulating, exciting and fun for non-users. Perceived availability as measured by merchandise availability (M: 4.52 vs. 3.47, p < 0.002) and cannot get item elsewhere (M: 5.72 vs. 4.12, p < 0.000) are important motivational factors for consumers to shop online. The availability of product information and product details was perceived as high by online users. Results of security and privacy concerns suggest that non-users were significantly more concerned about adequacy of security features (M: 3.97 vs. 5.50, p < 0.000); exposing private information (M 5.58 vs. 5.13, p < 0.000), perceived risk (M: 5.85 vs. 5.01, p < 0.021) and online security worries (M: 5.61 vs. 4.86, p < 0.003) as compared to users of online shopping.

Discussion

In the survey, we systematically investigated the factors that influence consumers to shop online as against the traditional format. Independent sample t-test was carried out to compare the mean scores of users and non-users on 18-items generated through a focus group discussion. The results show that privacy concerns, online security and perceived risk deter internet users from shopping online. Perceived risk in purchasing the product represents an inherent risk involved in online shopping. The inherent risk arises as a result of the asymmetry between the online retailers and the consumers. Consumers do now know whether the retailers would deliver the products they have ordered or deceive them by supplying counterfeit products. While consumers perceive risk in most purchase decisions, it has a distinct dimension in the new shopping format, i.e., shopping online. Apart from product and channel risk, security and privacy risk are also significantly higher in case of non-users of online shopping. Enhancing the security and privacy features of e-commerce websites by the use of secure socket layers to transmit personal information can reduce the risks associated with such purchases.

Shopping is an important personal and social activity for many consumers. The results show that users perceive online shopping format as more stimulating, exciting and fun experience. Some of the factors that could have a negative influence on the online shopping experience include loss of sensory shopping and social interaction. Lack of social interaction dissuades many consumers from shopping online. Further, consumers who value experiential shopping are less likely to shop online. The perceived time saving and convenience offered by e-retailers has a significant influence on users to shop online. The high responses received on factors like availability of much product information and product details by non-users further shows that non-users have to work hard and put in more effort in collecting information when purchasing offline. To conclude, the study proposes that risks pertaining to product, security and privacy, lack of sensory and social interaction are the most important factors that dissuade internet users from shopping online in the Indian context. Improving these could persuade the current non-users to purchase online in future.