The Socio-Demographic Profile and Buying Behaviors of Generation Y Online Shoppers: A Survey Study in Taiwan

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1 The Socio-Demographic Profile and Buying Behaviors of Generation Y Online Shoppers: A Survey Study in Taiwan Danna Liang, Lecturer, Department of Business Administration, China Institute of Technology, Taiwan ABSTRACT Generation Y (born between 1978 and 1995) has tremendous buying power and represents the future market for electronic commerce (e-commerce). Although e-commerce cannot ignore this market segment, there are few studies on generation Y s profile and buying behaviors in Taiwan. This research aims to create a profile of Generation Y online shoppers in Taiwan and examine their socio-demographic characteristics, as compared to Internet users, but non-shoppers. The study provides guidance to e-commerce marketers to formula their effective electronic marketing strategies that encourage Generation Y Online shoppers to make online purchases. Keywords: electronic commerce (e-commerce), electronic marketing (e-marketing) strategies, online shopper profile, online buying behavior, generation Y INTRODUCTION The Internet has a rapid development in recent years. IDC (2004) predicted that the number of people using the Internet is forecast to exceed 1 billion by The Internet usage has become a global trend and it, in turn, revolutionizes the traditional ways of doing business as well as the way we live. Nowadays, more and more people rely on the Web as an important channel to communicate, to work, to search for information, to shop, to entertain, or merely to kill time. People in America during the 2004 holiday season have spent $23 billion online shopping (Economist, 2005). It is due to this explosive growth of the Internet that many companies feel compelling to take initiatives to go online. On the other hand, the world of business today is experiencing an unprecedented transformation. Companies are performing under intense pressure in a time-sensitive environment to create and develop new business opportunities to remain competitive and generate profits. The urgency to expand, however, is tempered with caution due to a troubled economy and the challenge of how to effectively integrate the evolving force of e-commerce. To add to the intensity of the evolving business environment, there is a paradigm shift of the business model from a product-oriented to a customer-oriented model (Kotler, 1999; Levitt, 1975; Sawhney & Zabin, 2001). Companies are cognizant that they must closely examine their customers to capture the latter s wants based on what customers buy, as well as where, when and how they buy goods and services (Kotler, 1999). Sawhney and Zabin (2001) claimed that initially, a company must understand what their customers think, how they buy and what motivates them. The challenge is that companies that choose to appeal to a new market do not have customers data of this type and their online purchase behavior / preferences to utilize. In order to develop a strategy to appeal to a unique target market and attract them to make online purchases, a firm may rely on methods of grouping people such as target segmentation, as well as to rely on Web sites essential characteristics that distinguish them from other competitors. Target segmentation extracts a portion of a population and creates distinct cohorts based on common needs and wants, along with similar life experiences (Kerin et al., 2003; Kotler, 1999; Levy & Weitz, 2001; Smith & Clurman, 1997; Solomon, 2001). Most recently, forward-thinking firms are developing databases based on initial information derived from customer contacts in an effort to enhance and customize the communication and build the relationship with existing customers (Gilmore & Pine, 2000; Kotler, 1999; Lewis & Bridger, 2000). Companies may also decide to identify and pursue new customers as a growth strategy (Kotler, 1999; Sawhney & Zabin, 2001). When researching emerging target markets, firms inevitably notice the wealthy, emerging consumer

2 group born since 1976, which has not yet fully aligned with specific firms in the distribution channel, such as specific manufacturers or retailers. Companies that elect to focus on new target markets, such as the youths, face the challenge of formulating initial strategic plans without existing internal data to research and manipulate. These companies would benefit from a customer s purchase behavior and preferences of the population, which they are targeting. Most recently, generational marketing has focused on Generation X, consumers born between 1965 and The newest consumer market, however, is Generation Y. Generation Y has a shopping behavior unlike earlier population segments. They grow up in strong economic times and have a trait that is revealed by their purchasing habits. They are comfortable buying online, particularly if returns are allowed in a brick and mortar store. Generation Y, also called Echo Boomers or Millennials, is the wealthiest generational cohort. In America, Generation Y makes up 24% of the population, but account for 40% of all the web pages viewed (Economist, 2005). For Taiwanese companies considering growth via market expansion and targeting Generation Y consumers in an e-commerce format, an understanding of the characteristics of shopping Web sites in influencing their decision to make online purchases or considering making online purchases would allow a Taiwanese firm to develop an appropriate marketing strategy for this target market. Therefore, this research aims to create a profile of adult Generation Y Internet shoppers (so called online shoppers ) in Taiwan by examining their socio-demographic characteristics as compared to Internet users, but non-shoppers. The results of this study can provide useful information in enabling Taiwanese firms to engage in e-commerce effectively. Based on the information, Taiwanese companies interested in expanding their business in an e-commerce format can expand the understanding of the adult Generation Y online shopper s buying behavior and preferences, therefore, can identify the effective Web-based marketing strategies that encourage Generation Y Internet users to make online purchases. The paper starts with the literature review on the socio-demographic factors, Generation Y online shoppers, and Internet usage in Taiwan. Then, the paper will present the research methodology and report the results of the survey study. Final, it makes discussion and draws conclusions. LITERATURE REVIEW Socio-demographic Factors Previous studies of in-home shoppers have examined the socio-demographic factors and the results have varied (Berkowitz et al., 1979; Cunningham & Cunningham, 1973; Darian, 1987; Donthu & Garcia, 1999; Donthu & Gilliland, 1996; Gehrt & Carter, 1992; Gillett, 1970). Berkowitz et al. (1979) found age and income differences, but no differences in educational level between in-home shoppers and non-shoppers. Darian (1987) found similar results when researching in-home shoppers. He determined that the age of in-home shoppers is lower than non-shoppers. Gillett (1970) studied in-home shoppers and claimed that in-home shoppers come from a higher social class, higher income level and educational level than the non-shoppers. In a later study of in-home shoppers, Cunningham and Cunningham (1973) concurred with Gillett s findings. Gehrt and Carter (1992) studied catalog shoppers and found significant differences in income, age and education. Interestingly, demographic data researched by Donthu and Gilliland (1996) provided that infomercial shoppers and non-shoppers are the same when age, education, income and gender data were evaluated. Gender, age, income, and educational level are the socio-demographic factors that will be analyzed in this study. Generation Y Internet Users and Shoppers in Taiwan In spite of the small number of research studies conducted on the Internet usage and shopping behaviors of Internet users in Taiwan, compared to those of Internet users in the U.S., some data that are relevant to this study of Generation Y online shoppers have been obtained from governmental research studies and other research studies. The number of Internet users in Taiwan reached million by the end of September 2005 (FIND, 2005). While both females and males were found to be equally likely to utilize the Internet on a regular basis, the majority of the Internet users were aged between 15 and 30 the Generation Y category (Lee, 2001). More recently, Lee (2004) found that only 10.9 percent of the regular users of the Internet had shopped online. The Internet users cited the following concerns with

3 shopping online: (a) online privacy; (b) security of online payments; (c) quality of products and services; (d) Internet fraud; and (e) delivery and refund issues. The socio-demographic characteristics of Internet users and shoppers, as well as their concerns, were also replicated in other research studies, with slight variations. Peng (1999) found out that the majority of Internet users and shoppers were male, young, and educated. However, the predominance of male Internet users was undermined by the fact that more males than females participated in the study, due to sampling errors. Yao s (1998) investigation of the factors that affected Taiwanese consumers willingness to purchase online also highlighted the fact that a majority of Internet users (73 percent) were no older than 24 years old. Furthermore, these Internet users were typically well-educated students. However, other researchers have also constructed different profiles of the typically Internet user and shopper. Tang (1998) provided that the typical Internet shopper was a male Internet user who owned credit cards and possessed tremendous experience with Internet usage and shopping. Similarly, Yu (1997) also found that the typical online shoppers were older males with a high level of education, high incomes and credit cards. Clearly, about reviews indicated that the literature varies in their construction of the profile of the typical Internet user and shopper in Taiwan. Nonetheless, since it is evident that the vast majority of the Internet users in Taiwan fall within the Generation Y range, it is important for Web-based companies to determine how they can improve the proportion of online shoppers in this population of Generation Y Internet users. Internet Use and Online Shopping in Taiwan The Taiwan Internet market is also expected to achieve significant growth in the past few years. About 13.2 million people, 58% of Taiwan's population, were general Internet users in 2005, 8% up from the previous year (FIND, 2005). It is worth noting that there was a significant rise in the percentage of people over 60 using the Internet from less than 10% in 2004 to 25%. However, in spite of the large increase in the number of Internet users, the survey showed that only nine percent of the users in 2000 utilized the Internet for making purchases, while 13 percent employed the Internet to gather information about products (Chen, 2004). This description of the e-commerce environment in Taiwan is important to this discussion on the marketing strategies of online Taiwanese firms by providing the background information of the unique e-commerce environment in Taiwan. It demonstrates clearly that Taiwanese online firms have a growing market of Internet users who are increasingly willing to engage in online shopping, in spite of conventional concerns with the problems associated with online shopping. Furthermore, the Taiwanese government is also highly supportive of online Taiwanese businesses, as indicated by its provision of education to Taiwanese enterprises, its formulation of laws pertaining to the Internet and the issuance of credit cards. How online firms in Taiwan have succeeded in marketing their products and services to this growing market is central to this discussion. RESEARCH METHODOLOGY In this research study, a quantitative research approach was used to gather and analyze the data. An online anonymous questionnaire survey of national population of Generation Y Internet users aged between 18 and 27 including both online visitors (non-shoppers) and purchasers (shoppers) were conducted. The survey specifically addressed above socio-demographic factors such as gender, age, education, and income. With regard to the questionnaire, the respondents were asked to assess the relative importance of each of the characteristics in terms of their influence on their decision to make online purchases. The values for this particular Likert scale are: 1= Very Important ; 2= Important ; 3=No opinion ; 4= Not Very Important ; and 5= Not Important At All. Newsgroup, BBS, online forums and advertising banners were used to invite interested participants. Approximately 3,500 s were also sent to individuals directly as invitations of survey from 1 July 2005 to 31 July A follow-up reminder sent out two weeks later. This online survey addressed 8 socio-demographic/general information questions. SPSS was used in this study for data analysis to conduct the t-tests, and the one-way analysis of variance (ANOVA).

4 A total of 1,187 responses were obtained from 1 July 2005 to 30 Sept The HTML programming prevented respondents from leaving the questionnaire with incomplete questions, resulting in all of the 1,187 questionnaires being usable for this research. Descriptive analysis was conducted to profile respondents by their socio-demographics and shopping behaviors. A Cronbach s Alpha test was conducted on different sets of statement results to determine their reliability index. SURVEY FINDINGS AND RESULTS Table A.1 to A.4 in Appendix A provided the breakdown of four socio-demographic factors that were examined in the survey on Generation Y consumers who are potentially or actually online shoppers. From above socio-demographic statistics, they provided that (a) more women than men showed an interest in responding to the questionnaire; (b) the largest age-grouping was in the 20 and 21 area (16.8% and 16.3% respectively) and again in the 27 area (14.1%); (c) by far the largest number of respondents had at least some postgraduate education (53.3%); (d) the highest levels of income per month ranged from Under NT$20,000 (35.0%) to NT$20,001-NT$40,000 (37.7%) while No Income was reported by more than one-fifth of the respondents (21.9%), with these three groups representing an overwhelming 94.6% of the total; (e) veterans of the Internet with more 45% indicating more than 6 years experience and another 26.5% with 5-6 years of use; (f) spend 1-10 hours per week on the Internet (46.1%); (g) 69.1% have bought merchandise Online; and (h) spend less than 1 hour per week shopping Online (51.8%). Thus, an initial profile of a typical Taiwanese Generation Y respondent would be: female (slightly less likely to be male), aged 20 or 21 or 27 (representing almost 50% of those aged between 18 and 27), with some postgraduate studies, and earning less than NT$40,000 per month. A cross-correlation of age groups by year with current population data was not performed, but might reveal whether the preponderance of ages 20, 21 and 27 years was an anomaly or a reflection of birth rates in certain periods and years. From the above results, the running of a means test indicates that shoppers and non-shoppers can be distinguished by virtue of only some of their demographics. Internet shoppers scored higher in age, and education than non-shoppers. As for income, the only three categories of any statistical significance are No Income; Less than NT$20,000; and NT$20,001-$40,000. Of these, those shoppers in the NT$20,001-$40,000 are most easily distinguishable. It has already been established that female respondents are slightly more likely to be Internet shoppers than males. Table B.1 to B.4 in Appendix B provided the statistics of Internet usages on Internet shopping. The results of analysis appear that Taiwanese Generation Ys are (a) veterans of the Internet with more 45% indicating more than 6 years experience and another 26.5% with 5-6 years of use; (b) spend 1-10 hours per week on the Internet (46.1%); (c) 69.1% have bought merchandise Online; and (d) spend less than 1 hour per week shopping Online (51.8%). In cross-tabulations between socio-demographic factors and Internet usages, results were summarized as: 1. Gender/Length of time using the Internet: Female percentage for those with more than six years experience slightly higher but not significantly than male/female respondent numbers (54.9% versus 52.6%) 2. Gender/Hours per week on the Internet: Female percentage for those using the Internet 1-10 hours slightly higher but not significantly than male/female respondent numbers (55.6% versus 52.6%). However, in the 41 hours or more per week category, males outnumbered females (57.4%), the only category in which that was the case. 3. Gender/Internet purchases: Female percentage for those purchasing on the Internet slightly higher but not significantly than male/female respondent numbers (56.0% versus 52.6%). However, a higher percentage of male respondents answered NO (55.0%). 4. Gender/Hours spent shopping on Internet: Female percentage in the majority category (Less than 1 hour per week) higher than male/female respondent percentages (56.1% versus 52.6%). As well, of those responding NONE, 55.3% were male. 5. Income per month/length of time using the Internet: In the More Than 6 Years Category, the largest number earned NT$20,001-$40,000 (40.6%) while those earning Under NT$20,000 scored 32%. 6. Income per month/hours per week on the Internet: In the 1-10 hours per week category, the largest number earned Under NT$20,000 (41.7%) while those earning NT$20,001-$40,000 scored 34.4%.

5 7. Income per month/internet purchases: those earning NT$20,001-$40,000 represented 40.1% of those making Internet purchases, followed by those earning Under NT$20,000 at 33.4%. Interestingly enough, those who reported No Income made up 20.5% of those reporting having made purchases on the Internet. As well, 74.8% of those earning NT$20,001-$40,000 reported buying merchandise on the Internet, higher than the overall average of 69.1%; while 66% of those earning Under NT$20,000 reported purchasing merchandise Online. 8. Income per month/hours per week spent Online shopping: In the majority category (less than 1 hour per week), there were 55.6% of all those earning NT$20,001-$40,000 and 52.0% of those earning Under NT$20,000. This is in line with the percentage of all earners in the less than one hour category (51.8%). At the same time, those earning NT$20,001-$40,000 represented 40.5% of those in the Less than 1 hour category, while Under NT$20,000 earners represented 35.1%. 9. Age/Internet Purchases: The highest percentage of those who have purchased merchandise versus non-purchase is the 26 age group: 91.3% of respondents in this group said they had bought merchandise over the Internet. This compares to 69.1% for the entire Gen Y age group. Among 20 and 21 year olds, the percentages are 64.0% and 62.4% respectively. The lowest percentage was among the 18 age group: 51.1%. 10. Internet Purchases/Education: When it comes to Educational level and whether or not a purchase has been made on the Internet, 55.1% of those with some college/vocational school had made such a purchase; 62.6% of those with a college degree; 74.6% of those with some postgraduate studies; 80% of those with a postgraduate degree. DISCUSSION AND FURTHER RESEARCH Age, gender, income, and educational level are the socio-demographic factors identified in this study. Previous research studies have simply focused on determining the proportion of online shoppers among Internet users and creating a general profile of online shoppers. However, with this study, researchers can begin to hone in on specific groups of Internet users based on gender, race/ethnicity, city, region and country. Essentially, researchers could utilize the research approach in this study to apply it to any particular market segments in the future. Further research to expand the understanding of the diverse potential market segments among Internet users is invaluable to companies engaged in e-commerce. Furthermore, this study provided detailed insight of socio-demographic of the Generation Y online shoppers and non-shoppers in Taiwan, so Taiwanese companies interested in expanding their business in an e-commerce format can expand the understanding of the Generation Y online shopper s purchasing behavior and is able to identify the effective Web-based marketing strategies that encourage Generation Y Internet users to make online purchases. This study only focused on socio-demographic factors of Generation Y online shoppers. The increased understanding of the preferences and the interests of online shoppers and non-shoppers can thus contribute to the growing trend of Internet shopping and help companies develop ever more effective marketing campaigns and strategies. Further research on different types of characteristics of online shoppers and alternative Internet factors, that influence their decisions to make online purchases, is suggested. In addition, similar research could also be conducted in overseas, such as greater China region. Since the online shopping can easily be conducted across the national boundary, it is natural for business to explore similar markets in the greater China region. CONCLUSION The study on Generation Y online shoppers and non-shoppers possess tremendous significance. Generation Y consumers constitute a large market segment with substantial spending power in e-commerce. The investigation of the Internet usage of the Generation Ys and their buying behavior is particularly illuminating for companies that are engaged in e-commerce. This study contributes to the knowledge on current practice in the Internet buying behavior by providing useful market information for companies engaged in e-commerce that are interested in targeting Generation Y market segment.

6 The study has achieved its aims and identified the socio-demographic profile of Taiwanese Generation Y consumers, who today are shopping online and buying around the Internet world with greater confidence and satisfaction than ever before. The results of this study is a useful exercise for those companies who wish to expand their business in an e-commerce format and market their Web sites as places to shop. This study also established the foundation for further research on the topic of online shoppers. In further research, different types of characteristics of online shoppers and alternative Internet factors which influence online shoppers decisions to make purchases, that are not uncovered in this study, can be explored. The increased understanding of the preferences and the interests of online shoppers and non-shoppers can thus contribute to the growing trend of Internet shopping and help companies develop ever more effective e-marketing campaigns. REFERENCES Berkowitz, E. N., Walton, J. R., & Walker, O. C., Jr. (1979). In-home shoppers: The market for innovative distribution systems. Journal of Retailing. 55(2), Chen, G. C. C. (2004). The present and future of Internet and electronic commerce in Taiwan The current status of legislation and the future measures for electronic commerce. In Proceeding of 9th Softic Symposium 2003, Tokyo, Japan. Accessed May Cunningham, I. C. M., & Cunningham, W. H. (1973). The urban in-home shopper: Socioeconomic and attitudinal characteristics. Journal of Retailing. 49(3), Darian, J. C. (1987). In-home shopping: Are there consumer segments? Journal of Retailing. 63(2), Donthu, N., & Garcia, A. (1999). The Internet shopper. Journal of Advertising Research. 39(3), Donthu, N., & Gilliland, D. (1996). Observations: The infomercial shopper. Journal of Advertising Research. 36(2), Economist (2005). Economist, 4/2/2005, 375(8420), Special Section, FIND (2005). Internet subscribers and users 2005, FIND. 22 Dec Accessed May Gehrt, K. C., & Carter, K. (1992). An exploratory assessment of catalog shopping orientations. Journal of Direct Marketing. 6(1), Gillett, P. L. (1970). A profile urban in-home shoppers. Journal of Marketing. 34(July), Gilmore, J. H., & Pine, B. J., II (2000). Markets of one: Creating customer unique value through mass customization. Boston: Harvard Business School. IDC (2004). Worldwide Internet Usage and Commerce Forecast: Internet Commerce Market Model Version 9.1. IDC, March 19, 2004, Pub ID: IDC Kerin, R.A., Berkowitz, E. N., Hartley, S. W., & Rudelius, W. (2003). Marketing (7 th ed.). Boston, MA: McGraw- Hill. Kotler, P. (1999). Kotler on marketing: How to create, win, and dominate markets. New York: The Free Press. Lee, M. (2001). Consumers perceptions on Internet shopping: U.S. vs. Taiwan, Global Competitiveness. 9(1), 459. Lee, M. (2004). Attitudes toward direct marketing, privacy, environment, and trust: Taiwan vs. U.S. International Journal of Commerce and Management. 14(1), Levitt, T. (1975). Marketing myopia. Harvard Business Review. 53(5), Levy, M., & Weitz, B. A. (2001). Retailing management (4 th ed.). Boston, MA: McGraw-Hill/Irwin. Lewis, D., & Bridger, D. (2000). The soul of the new consumer. London: Nicholas Brealey. Peng, Y. S. (1999). The impacts of Internet shopping and TV shopping on the traditional store shopping: A niche analysis. Unpublished masters thesis, National Chiao Tung University, Taiwan. Sawhney, M., & Zabin, J. (2001). The seven steps to nirvana: strategic insights into e-business transformation. New York: McGraw-Hill. Smith, J. W., & Clurman, A. (1997). Rocking the ages: The Yankelovich report on generational marketing. New York: HarperCollins. Solomon, M. R. (2001). Consumer behavior: Buying, having and being (5 th ed.). Upper Saddle River, NJ: Prentice Hall. Tang, C. H. (1998). The research on the impact of consumers purchase involvement, Internet use behavior and the attitude towards Internet shopping information environment on Internet shopping intention. Unpublished masters thesis, National Chiao Tung University, Taiwan. Yao, C. J. (1998). A study of factors influencing the behavior of electronic shopping. Unpublished masters thesis, National Chiao Tung University, Taiwan. Yu, K. W. (1997). The impact of consumer and product characteristics on purchase intention in Internet shopping. Unpublished masters thesis, National Chung-Kong University, Taiwan.

7 Appendix A Table A1: Gender Breakdown of Respondents Frequency Valid Valid male female Table A2: Current Age of Respondents Frequency Valid Valid Table A3: Income Per Month Frequency Valid Valid No income Under NT$20, NT$20,001~$40, NT$40,001~$60, NT$60,001~$80, NT$80,001~$100, More than NT$100, Table A4: Highest Level of Education Completed Frequency Valid Valid Less than high school High school graduate or equivalent Some college / vocational school College graduate Some postgraduate study Graduate degree

8 Appendix B Table B1: Length of Time Respondent Has Used The Internet Frequency Valid Valid Less than 6 months months to 1 year to 2 years to 4 years to 6 years More than 6 years Table B2: Hours Per Week Spent On The Internet Frequency Valid Valid None hours or more Table B3: Purchase of Merchandise Over The Internet Frequency Valid Valid Yes No Table B4: Hours Per Week Spent Shopping On The Internet Frequency Valid Valid None Less than