CHAPTER I INTRODUCTION

Transcription

1 11 CHAPTER I INTRODUCTION 1.1. Background This research methodology is a replication of Eun Young Kim and Youn-Kyung Kim s research of Predicting online purchase intentions for clothing products and would be titled Predicting Online Purchase Intentions for Clothing Products in Indonesia Internet Phenomenon The Internet has been a cornerstone for mankind and has changed the way we communicate today. The Internet was the idea of several IT experts in the early 1960s who wanted computers to share information and development in the area of military and scientific needs. The word Internet derives from Interconnected Network. As computers become more and more available to the public, the Internet soon became usable by anyone as a result of Microsoft s entry in to the browser, server, and Internet Service Provider industry (Howe, 2010) The Internet interconnects computers globally through the World Wide Web consisting of countless types of networks; private, public, government, academic, business, etc. Now every household that has a computer and subscribes to an Internet Service Provider could access the Internet. The introduction of the Internet to the public created many private companies that operates online and became the very first dot-com companies. Dot-Com Companies

2 12 are companies that use the internet to operate its business, the company s primary source of income comes from the website and the term dot-com is derived from the URL most company uses that ends in.com. (Ah-Wong.J, Gardhi, Patel, & Shah, 2001) Companies like Amazon.com and Ebay.com were amongst the first companies to start selling items through the Internet in combination with the introduction of online financial payments/transactions. (Prof. Ben Gomes-Casseres, 2001) Internet Shopping has been growing phenomenally in western countries such as The United States and Europe due to the rise in transaction security. Secure digital systems such as encryption tools, digital signature have increased potential customer s willingness to purchase online (Han & Maclaurin.A, 2002) Nevertheless there are still several drawbacks to internet shopping and online purchasing, one example is that potential consumers would not be able to touch and feel the products they are interested in and could only rely on visual information about the products. There are several attributes that we need to understand why consumers prefer to buy online in Indonesia. This research aims to identify the dimensions of attributes for shopping clothing online in Indonesia, therefore online retail companies will be able to develop more effective strategies for marketing the clothing products Online Purchasing in Indonesia Based on Net Index Study of 2010, Indonesia is the largest and fastest nation in terms of Internet user growth in South East Asia. Due to cell phone usage and evermore cheap rates of Internet Service Providers, according to Nielsen, internet users in Indonesia have reached 30 million in the year 2010, and may continue to increase as

3 13 cell phone operators and internet service providers continue to build 3G and HSDPA infrastructures for data communication and internet services. The Nielsen Company is a multinational marketing and advertising research company active in over 100 countries. The company s headquarter is in New York city, USA and is one of the world s leading suppliers of Online Intelligence and Mobile Measurement, marketing information, media information and TV ratings. (Nielsen, 2010) With the expanding Internet population, more and more online retailers have surfaced in search of profit; online retailers can be defined as retailers or shops that sell goods and services through the internet via a website. But the success of the said online retailers hugely depends on the products it offers, depending on differentiation, uniqueness, attractiveness, etc (Hui & Chau, 2002) Fast selling online products have always been the products that the customers have sufficient information beforehand, for example; books, software, electronics, shoes, hardware, etc. (Schaeffer, 2000) (Reda, 2001) However, as technologies are imbedded in websites that could give consumers access to interactive try on sessions like virtual dressing room, digital supply chain and online fit prediction, products such as clothing have improved in sales (Marketing, 2001) The Nielsen Global Trends in Online Shopping survey was conducted from March 8 to march 28 year 2010 involved 27,665 internet users in 55 markets in Europe, Middle East, North America, and South America. The survey also included 505 respondents from Indonesia. The report states 80% of Indonesian online consumers

4 14 were planning to shop online in the next six months, which is a sign that there is a growing trust in online purchasing and increasing popularity in Indonesia. (Jakarta- Post, 2010) Online Shopping Attributes One of the attractive attributes for online shopping is convenience, online stores are able to cater to customers 24-hours a day as they do not have to open a physical store and be limited to the constraints of employees working hours, customers may come and visit the online stores whenever they want, be it at work or at home and the product they purchased could even be sent to their front door. The other positive attribute is information and reviews, i.e. most online clothing retailers have descriptions, images, and previous buyer s reviews about a selected product. Previous buyers reviews on the online shop and the clothing itself are valuable inputs to the potential buyers at point of purchase. Customers engaging in online shopping i.e. clothing would also have the advantage of reviewing and comparing prices and selections of clothing between online shops with just a few clicks of the mouse. However there are also certain negative attributes to online shopping, one of the most concerning attribute for a potential online shopper is security and fraud. As customers do not have the ability to inspect the product they have purchased, there is a higher risk of being cheated. Another negative attribute to online shopping is the time it takes for the purchased goods to arrive, mostly buyers have to wait a minimum of a few days after purchase.

5 Predictors to online purchase intention According to UCLA Center for Communication Policy (2001), shopping online is ranked third in terms of Internet activity, behind and communications and browsing the web. It has even become more popular than finding information and news. Douthu and Garcia (1999) claims internet shoppers are older and he/she has the purchasing power with access to credit cards and the younger consumers use the Internet only to search for information regarding the product. Recently Matwick et al. (2002) reported that online shoppers appeared to be younger than 44 years old, were well educated and more affluent. Online shoppers may be persuaded to shop online if they perceive that it saves time, effort, convenient, thus creating higher value. The potential for consumers to revisit websites are regulated by overall convenience, competitive price and sales promotion.. (Chiger, 2001) (Supphellen-Nysveen, 2001) This research studies whether these attributes are also relevant for the Indonesia online market specifically for clothing products Indonesian Consumers Behavior Indonesia has approximately 230 million citizens with characteristics that could be characterized as a target market of retail business with increasing purchasing power due to economic growth (Kanjaya & Susilo, 2010) Indonesians have the tendency to go to physical stores or shopping malls to kill time, and engage it as a social activity with friends and families (Kanjaya & Susilo, 2010). Online shopping rarely becomes an option for consumers with time. However,

6 16 people in the country have become more and more busy with their work and with the ever increasing traffic in the big cities like Jakarta, Bandung, Surabaya, many of them may want to spend whatever time they have left of their day at home resting, online shopping is an attractive option for them. Hence, the attribute of Convenience comes into play. Apart from time saving, consumers in Indonesia would also want to save cost with the ever rising inflation in the country, Internet users in Indonesia would engage in internet shopping to look for the best deals, the cheapest prices, and incentive programs. This research plans to find out which attributes are the most influential in Indonesia s consumer decision to purchase online Indonesia s Internet Users According to IndexMundi.com Indonesia s internet users as of 2010 has reached to a population of 30 million. The website gets its source of information from CIA World Fact Book and if otherwise noted, this information is accurate as 30 th December, 2010.

7 17 Figure Number of internet users from Indonesia from 2003 to 2010 Table Percentage growth of internet users in Indonesia from 2003 to 2010 Definition; this entry gives the number of users within a country that access the internet. May include users who access the internet at least several times a week to once in a few months. /Indonesia/internet_users.html This data is also supported by which gets its sources from various trustworthy sources mainly data published by Nielsen Online and ITU.

8 18 Figure Asia s top ten ranking of internet users Indonesia s access to the Internet Broadband Internet or high speed internet access enables consumers to access the internet at higher speeds than dial-up internet access. Broadband speeds may vary from the type of service users subscribe with their Internet Service Providers or ISP. Speeds range from 200kbps to 100mbps depending on the facilities provided by each ISP. Broadband can be provided through different mediums like

9 19 Digital Subscriber Line or DSL, Cable Modem, Fiber-Optic Cable, Wireless Connections, Satellite and Broadband over Powerline or BPL. (Federal Communications Commision, 2010) Wireless/Mobile Internet is a major contribution to Indonesia s growing internet population. In the year 2009, there were approximately 159 million cell phone subscriptions in Indonesia, among them 15 million subscribe to internet broadband access. (ITU, 2009) Nielsen Media Index Indonesia Data Yearbook-2010.pdf Figure Indonesian s Online Shopping Activities The above graph depicts that only 0.62% of Indonesians engage in online clothing activity. Although it is a small percentage, further observation of the above graph shows that it is amongst the largest activity in online e-commerce in Indonesia.

10 20 Figure Indonesia s Top Retail Sites of 2009 The above diagram shows a list of the top 10 retail sites visited by Indonesians in There are no retail websites that sell clothing specifically amongst the 10 top retail sites indicating that online clothing purchasing is still in its infancy. Figure How Frequently Indonesians go Online Figure above depicts that a majority of Indonesians go online a few times a week. This may indicate that the majority population still does not engage in online activity daily.

11 21 Figure How Long Indonesians Spend Online According to Nielsen Media Index Indonesia, majority of respondents spends their time using the internet in the range of 1 hour less than 2 hours. This may be due to the fact that Internet Service Providers charge by the hours online or data downloaded. Figure How Indonesians go Online The above figure shows how the majority of Indonesians go Online, Indonesians still go online through Internet Cafes, further observation by the author confirms the data above as Internet Cafes provide cheap and fast access to the internet.

12 22 Figure What Indonesians did Online in 2009 Figure shows that only 3% of Indonesians engage in purchasing online in Other activity includes information search, downloading software, playing games and chatting, etc.

13 23 Figure Indonesian s E-Commerce activities in 2009 Figure shows that E-commerce activity involving Clothing Apparel having a 0.56% out of 4% of Internet users that engage in E Commerce.

14 Previous Research This research is a replication of a previous research done by Eun Young Kim and Young-Kyung Kim entitled: Predicting Online Purchase Intentions for Clothing Products. The previous research identified the dimensions of online shopping attributes and demographic variables, using a self-administered questionnaire developed based upon literature and using three major variables; online shopping attributes, purchase intentions for clothes, jewelry, or accessories through the internet and demographic characteristics. Based on the previous research s result, it was found that Transaction/Cost factor was the most significant contributor to overall perceptions of online shopping attributes. The study also demonstrated that the two factors of online shopping attributes (i.e., transaction/cost, incentive programs) and the four demographic variables (i.e., gender, income, education and number of children) were significant predictors in determining the consumer s online purchase intentions for clothes. As the previous research was conducted at the year 2004 and in The United States, the same conclusion could not be said in Indonesia as it is demographically and culturally different Problem Identification Based on the research titled Predicting Online Purchase Intentions for Clothing Products conducted by Eun Young Kim and Young-Kyung Kim, This research is titled as Predicting Online Purchase Intentions for Clothing Products in Indonesia

15 25 This research would provide helpful data of Indonesia s consumer behavior and intentions toward online purchasing for the market study of online retailers marketing and sales strategy. Few years ago in Indonesia, the Internet was just a medium for information search and sharing, people would surf the internet about the product they were interested in and share information about the said product, and then go to a brick and mortar retail store to purchase the desired product. But nowadays with ever improving security and trust, consumers would visit online retails and engage in online shopping. (Ah- Wong.J, Gardhi, Patel, & Shah, 2001) Therefore, online retailers need to understand and know what important attributes are affecting consumer s decision to purchase clothing online. 1.2 Scope To determine predictors of online clothes purchasing in Indonesia, this research would make use of a self administered questionnaire. Questionnaires would be distributed online via URL posted on online shops. The boundaries for this research are limited to respondents in Indonesia limited to the age of 17 in the questionnaire as purchasing online would involve having a personal bank account and 17 is the age limit in which an Indonesian obtains and ID card or KTP to apply for a bank account. And as the questionnaire is also in Bahasa Indonesia, the respondents would automatically be narrowed to Indonesians only.

16 Aims and Benefits By conducting this research, the Author aims to conclude the following objectives: a. To identify the dimensions of online clothing shopping attributes that consumers perceive to be most important. b. To determine predictors of consumers purchase intention concerning clothes based on attributes of online shopping and demographic variables. By achieving the above aims, the results that will be concluded in this research would provide great benefits for online clothing retailers based in Indonesia. a. This research can provide a more concentrated view of online consumer behavior for further understanding for academic purposes. b. The results of this research would provide valuable data for online clothing retailers in targeting consumers in Indonesia as they would understand more about their behavior and intentions, thus creating a more effective marketing and sales strategy.

17 Structure CHAPTER 1: INTRODUCTION This chapter consists of the brief history of the Internet, Online purchasing in Indonesia, the description of online shopping attributes, Indonesia s consumer behavior, and a brief description of the previous research and why it has to be replicated in Indonesia, the scope in which this research will cover, and aims and benefits of this research. CHAPTER 2: THEREOTICAL FOUNDATION Chapter 2 discusses about the theories involved, brief history of ebay.com and Amazon.com, academic literatures and other studies related to this research CHAPTER 3: RESEARCH METHODOLOGY This chapter consists of the method of research used by the author in gathering and analyzing the data. CHAPTER 4: RESULTS AND ANALYSIS This chapter will analyze and discuss about the results of SPSS done in the previous chapter. CHAPTER 5: CONCLUSION AND RECOMMENDATION The final chapter of this research would consist of conclusion of the research, summary of the findings and suggestions for further studies.