Xiao Liu Kwok-Kee Wei

Transcription

1 Why does consumer behave differently for purchasing goods and services in online environment? An exploratory study of product effects on consumers E-commerce adoption intention Xiao Liu Kwok-Kee Wei Department of Information Systems, School of Computing National University of Singapore Lower Kent Ridge Road, Singapore Abstract This research investigates the effects of product type (i.e. physical goods and services) on consumers intention to adopt E-commerce. A theoretical model of consumers E-commerce adoption intention is developed and tested. The research findings suggest that services and goods have different influences on consumers E-commerce adoption intention through perceived usefulness, perceived ease of use and perceived risk. Specific recommendations for practitioners regarding the adoption of E-commerce in product (physical goods) business and service business are also offered. Keywords: Services, Goods, Perceived usefulness, Perceived ease of use, Perceived risk 1. Introduction Products could be classified into two groups: goods and services. Marketing researchers has long suggested that consumers would behave differently when purchasing goods and services in a traditional shopping environment (Eric et al. 1997; Philip and Gary, 2001; Philip et al., 1999; Robert and Virginia, 1987). While it is believed that, in the online environment, the same observation will hold, only modest efforts have been devoted to examining the effect of product type on consumers online shopping behavior. Hence, theories on product effects in an online environment need to be developed. This paper investigates the effects of different products on consumers intention to adopt E- commerce. Most importantly, a theoretical model of consumers E-commerce adoption intention is developed and tested.

2 2. Literatures and Hypotheses 2.1 Effects of product type on consumers perceptions about E-commerce Differences between goods (physical products) and services in the traditional shopping environment Robert and Virginia (1987) suggest that there are four unique characteristics of services, which differentiate services from goods. These characteristics are generally summarized as intangibility, inseparability, heterogeneity and perishability. Intangibility Services are intangible; that is, they cannot be seen, tasted, felt, heard or smelled before they are bought (Philip and Gary, 2001). In contrast, goods are tangible. The major problem that intangibility creates is the difficulty the customer has in judging the value of the service before it is actually purchased (Robert and Virginia, 1987). Inseparability Services are typically produced and consumed simultaneously. Production and consumption of services are inseparable, and selling comes before both. Goods, however, are first produced, then sold, and finally consumed (Robert and Virginia, 1987). If the service is rendered by a person, the provider is part of the service (Philip et al., 1999). The client is also present when the service is produced. Thus, both the provider and the client will affect the service outcome. Heterogeneity Services are highly variable since they depend on who provides them and when and where they are provided (Philip et al., 1999). The quality of a service is often inconsistent. Inconsistency is much more of a problem in services than it is with tangible goods. Tangible products can be good or bad in terms of quality, but with modern production lines the quality will at least be consistent (Eric et al., 1997). Perishability Inventory of services is different from that of goods. Services cannot be stored or inventoried because they are intangible (Robert and Virginia, 1987). If there are not enough employees and resources available to meet the demand for services, customers will leave dissatisfied (Robert and Virginia, 1987) Differences between goods (physical products) and services in the E-commerce environment Consumers may have different perceptions on the differences between goods and services in the E-commerce environment as that in the traditional shopping environment because of the lacks of social presence and product presence (Jahng, Jain and Ramamurthy, 2000) in an online environment. Thus, the dimensions of differences between services and goods need to be reexamined in the context of E-commerce. Intangibility Services are intangible in the traditional shopping environment while goods are tangible. In the E-commerce environment, goods are perceived to be intangible since consumers cannot touch, taste, feel, hear and smell goods before they make purchase decisions. As a result, in

3 the E-commerce environment, consumers could not differentiate services from goods based on the dimension of intangibility. Therefore, it might not be appropriate to use intangibility to differentiate services and goods in the E-commerce environment. Inseparability Production and consumption of services are not separable in the traditional shopping environment, while it is not true for goods. Goods are produced, then stored, later sold, and still later consumed. In the E-commerce environment, inseparability of services would make several unique differences between services and goods. Firstly, in the E-commerce environment, inseparability of services would make online transactions for services provide the immediate satisfactions to consumers, as consumers are involved in the production and consumption of services. In contrast, production and consumption of goods are separated. Thus, goods need to be delivered to consumers before they are consumed. It is likely that in the E-commerce environment, there is a delay in delivery. As such, goods could not provide the immediate satisfaction to consumers. Secondly, the delay of delivery will also create the uncertainty of goods. Consumers may find it is difficult for them to check whether the goods ordered are what they want and to predict the quality of goods since they could not get the goods immediately after their orders. Lastly, in the E-commerce environment, inseparability of services makes consumer be part of production as well as part of consumption of services. As such, online transactions for services would be perceived more complex than that for goods due to the involvement of consumers in the production and consumption processes. At the same time, the quality of services largely depends on consumers themselves. Consumers would think that E-commerce would be more useful for services than goods due to the immediacy of services, that E-commerce would be riskier for goods than services due to the uncertainty of goods and that E-commerce would be difficult to use for services than goods due to the transaction complexity (Melody et al. 2000) of services. Heterogeneity The quality of services varies according to different situational factors in the traditional shopping environment. The quality of services is inconsistent while the quality of goods is perceived to be consistent, either good or bad. In the E-commerce environment, services are standardized and digitalized. At the same time, most of the situational factors disappear from the consumption of services. The quality of services does not depend on form, place and time. Thus, it is likely that the service quality would be perceived consistent in the E-commerce environment. On the other hand, in the E-commerce environment, the ordered goods may be damaged during the shipment and delivery. The quality of goods may not be consistent as that in the traditional shopping environment. Therefore, it is very difficult to differentiate services and goods based on the dimension of heterogeneity. It is believed that heterogeneity would not be a difference between services and goods in the E-commerce environment. Perishability In the E-commerce environment, although services still cannot be stored and inventoried as in the traditional shopping environment, services become available to consumers at anytime and anywhere. Consumers may purchase services at anytime and anywhere at their own convenience. They do not need to wait in a long queue for the services. On the other hand,

4 goods such as foods are perceived to be perishable due to the delay of the delivery. It seems that it is very difficult to differentiate services and goods based on the dimension of perishability. It is not appropriate to use perishability to differentiate services and goods in the E-commerce environment Impact of services and goods on perceived usefulness, perceived ease of use and perceived risk in consumers E-commerce adoption behavior Intangibility, heterogeneity and perishablity of services do not make much difference between services and goods in the E-commerce environment. Thus, it is not appropriate to use intangibility, heterogeneity and perishability to differentiate services and goods. In the E- commerce environment, services defer from goods mainly because of the inseparability of services. This may lead to consumers different perceptions on usefulness, ease of use and risk on adoption of E-commerce for services and goods. Based on above discussions, it is expected that H1: Consumers will perceive higher level of usefulness of E-commerce for services than for goods. H2: Consumers will perceive lower level of ease of use of E-commerce for services than for goods. H3: Consumers will perceive lower level of risk of E-commerce for services than for goods. 2.2 Consumers intention to adopt E-commerce Perceived usefulness, perceived ease of use and perceived risk are suggested to be three most important antecedents of consumers E-commerce adoption intention (Kyu and Bipin, 2002; Paul, 2001). These constructs are developed based on TAM (Davis, 1989; Mauricio, 2001), which is used for studying users technology acceptance behavior. However, consumers E- commerce adoption intention includes not only intention to adopt the E-commerce technology, but also intention to adopt the new shopping concept: making purchases over Internet. Therefore, perceived usefulness, perceived ease of use and perceived risk need to be redefined and developed for studying consumers E-commerce adoption behavior Perceived usefulness In TAM, perceived usefulness (PU) is defined as the extent to which a person believes that using a particular technology will enhance his/her job performance (Davis, 1989; Venkatesh and Morris, 2000). In the online environment, perceived usefulness is about the perception on the usefulness of making purchases over Internet. Therefore, in this study, perceived usefulness is defined as the extent to which a person believes that making purchases over Internet (E-commerce) will create value to him/her. If consumers perceive high level of usefulness of making purchases over Internet, they would likely make the actual purchases online. It is believed that H4: Perceived usefulness will positively influence consumers intention to adopt E-commerce.

5 2.2.2 Perceived ease of use In TAM, perceived ease of use (PEU) is defined as the degree to which a person believes that using the system will be free from effort (Davis, 1989; Venkatesh and Morris, 2000). In the online environment, perceived ease of use is about the perception on the ease of making purchases over Internet. Therefore, in this study, perceived ease of use is defined as the extent to which a person believes that making purchases over Internet (E-commerce) will be free from effort. In the technology acceptance research studies, perceived ease of use has been shown to have an effect on intention via two causal pathways (Venkatesh and Morris, 2000): (1) a direct effect on intention and (2) an indirect effect on intention via perceived usefulness (PEU-PU- INT) (Davis et al., 1989; Venkatesh and Morris, 2000). In the online environment, it is expected that perceived ease of use will have both direct and indirect effect on intention to adopt E-commerce. It is believed that H5: Perceived ease of use will positively influence consumers intention to adopt E- commerce. H6: Perceived ease of use will positively influence perceived usefulness Perceived risk Researchers in psychology and other disciplines have widely studied the risk theory. Raymond A. Bauer (1967) introduced the notion of perceived risk to consumer behavior research. He suggested that Consumer behavior involves risk in the sense that any action of a consumer will produce consequences that he cannot anticipate with anything approximating certainty, and some of which are likely to be unpleasant (Bauer, 1967). There is an important difference between how the risk concept is conceived and used in consumer behavior research and that in other disciplines such as economics, psychology, statistical decision theory and game theory (Robert and Kjell, 1993). In other disciplines, the concept of risk is related to choice situations involving both potentially positive and potential negative outcomes (Weber and Bottom, 1989). When studying perceived risk in consumer behavior, however, the focus has primarily been on potentially negative outcomes only (Robert and Kjell, 1993). In the context of E-commerce adoption, the focus is primarily on potentially negative outcomes or potential losses/harms. Thus, in this study, we define perceived risk as a person s perception on the possibility of having negative outcomes or suffering harm or losses associated with E-commerce. The implicit uncertainty of using Internet technology in the online shopping environment has been realized by researchers (Paul, 2001). Perceived risk, as a conceptual construct of negative utility, has been explored by researchers in studying consumers E-commerce adoption behavior (Paul, 2001; Mauricio, 2001; Kyu and Bipin, 2000). In the online environment, if consumers perceive the potential huge losses/harms, i.e. if they perceive high level of risk, it is likely that they do not intent to make purchases over Internet. It is expected that perceived risk would negatively influence consumers intention to adopt E-commerce.

6 H7: Perceived risk will negatively influence consumer s intention to adopt E-commerce. In contrast to perceived risk, perceived usefulness will positively influence the consumer s intention to adopt E-commerce (Paul, 2001; Mauricio, 2001). It is expected that there is a negative relationship between perceived risk and perceived usefulness. If consumers perceive high level of risk for E-commerce, they probably think E-commerce is not really useful for them. As such, they probably perceive low level of usefulness of E-commerce. Hence, it is believed that H8: Perceived risk will negatively influence perceived usefulness. Based on above discussions, a theoretical model on consumers intention to adopt E- commerce is developed. It is shown in Figure 1. Perceived Risk H3 H8 H7 Product Type H1 Perceived Usefulness H4 Intention to Adopt E-commerce H2 H6 Perceived Ease of Use H5 Figure1. Effects of Product Type on Perceived Risk, Perceived Usefulness and Perceived Ease of Use in Consumers E-commerce Adoption Behavior 3. Research Methodology The survey research method was used to collect data for testing our theoretical model. Two products, namely, books (goods) and banking services (services), were chosen for this study since they are the most popular products over Internet, which is shown in the results of GVU s WWW User Survey (Source: Georgia Tech Research Corporation, USA.). Internet bookstore is the specific online product business for books (goods) while Internet bank is the specific service business for banking services (services). Internet banking is defined as carrying out banking transactions over the Internet (Kyu and Bipin, 2000), including balance inquiry, account transfer, online bill payments and online investment. 3.1 Operationalization of Constructs The constructs were developed based on the existing tested questions/measures from prior research studies where possible. New questions were developed based on the marketing and information system literature if necessary. Product type was operationalized as, code 1 for

7 services (banking) and code 0 for goods (book). Questions pertaining to all other constructs, perceived risk (Cheung and Lee, 2000), perceived usefulness (Moez et al., 2000), perceived ease of use (Venkatesh and Morris, 2000) and intention to adopt E-commerce (Moez et al., 2000), were measured on seven-point interval scales from strongly disagree (1) to strongly agree (7). 3.2 Survey Administration An experiential survey was conducted to validate the proposed models (Figure 1). GVU s WWW User Survey (source: Georgia Tech Research Corporation, USA. shows that a large group of Internet users are high educated with college degree. There are 62.4% of Internet users having some college or college education. GVU s WWW User Survey also shows that the age group has a large population among Internet users. As such, university students would be the typical Internet users. Therefore, we choose university students as our survey subjects. The survey was administered to 308 university students from different faculties. All of the respondents were volunteers. 4. Data Analyses and Results PLS, a structural equation modeling technique, was used for data analysis in this study. PLS assesses the measurement model (relationships between questions and constructs) within the context of the theoretical structural model (relationships among constructs) (Fornell, 1982). This technique is primarily intended for causal predictive analysis in situations of low theoretical information and is appropriate for early stages of theory development (Howell and Higgins, 1990). And also it does not require multivariate normal distribution or large sample sizes for its data (Fornell and Bookstein, 1982). Since this study was an early attempt to develop a theoretical model on consumers E-commerce adoption intention and the sample size available was not large, PLS was appropriate for this study. 4.1 Evaluating the Measurement Model Convergent and discriminant validity were assessed to establish the strength of the measurement model (Hair et al., 1998). All constructs measured using multiple reflective questions had to be assessed for convergent and discriminant validity. Convergent validity of a construct refers to the extent to which two or more attempts to measure the construct are consistent with one another (Cook and Campbell, 1979). Three tests were used to assess convergent validity: reliability of questions, composite reliability of constructs, and average variance extracted by constructs (Fornell and Larcker, 1981). In addition, Cronbach s alphas (Cronbach, 1951) were also used to establish convergent validity of the constructs. Previous studies have suggested standard measurement for three tests. Hair et al. (1998) recommended 0.5 as an indication of adequate reliability. Nunnally (1978) proposed 0.8 as an indication of adequate composite reliability. Fornelll and Larcker (1981) suggested 0.5 as an indication of adequate variance extracted. Table 1 reveals that all constructs in this study have adequate convergent validity.

8 Discriminant validity refers to the extent to which measures of each construct are distinct from one another (Campbell and Fiske, 1959). Two tests were used to assess discriminant validity. First, questions measuring each construct should be loaded more highly on their intended construct than other constructs (Thompson et al., 1991). This could be done by a factor analysis for all questions. Second, each question should correlate more highly with other questions measuring the same construct than with other questions measuring other constructs. This could be determined by comparing and seeing whether the variance extracted by each construct exceeded the shared variance between that construct and other constructs (Fornell and Larcker 1981; Grant 1989; Igbaria et al. 1994). Table 2 and Table 3 reveal that all of the constructs in this study have discriminant validity. 4.2 Evaluating the Structural Model Given an adequate measurement model, the hypotheses could be tested by examining the structural model. The explanatory power of the structural model was assessed based on the amount of variance in the endogenous construct for which the model could account. Our structural model could explain 30.3% of the variance for consumers intention to adopt E- commerce, which greatly exceeds 10% suggested by Falk and Miller (1992) as an indication of substantive explanatory power. After computing parameter estimates for all paths in the structural model, PLS employed a bootstrap resembling technique to compute T-values for all paths (Table 4). Given that each hypothesis corresponded to path in the structural model, support for each hypothesis could be determined based on the sigh (positive or negative) and statistical significance for its corresponding path. Product type has significant influences on perceived usefulness (H1), perceived ease of use (H2), and perceived risk (H3). Perceived usefulness (H4), perceived ease of use (H5) and perceived risk (H7) are significant predictors of consumers intention to adopt E-commerce. Perceived ease of use is a significant determinant of perceived usefulness (H6) but perceived risk does not significantly influence perceived usefulness (H8). Construct Questions Reliability of Question PR PR (Perceived PR Risk) PR PR PU PU (Perceived PU Usefulness) PU PEU PEU (Perceived PEU Ease of Use) PEU PEU INT INT INT INT (Intention to Adopt E- commerce) INT Composite Reliability Table 1. Results of Convergent Validity Tests Cronbach s Alpha Variance Extracted

9 Question Factor 1 Factor 2 Factor 3 Factor 4 PR PR PR PR PU PU PU PEU PEU PEU PEU INTEN INTEN INTEN INTEN Eigenvalue Variance extracted % % % 7.026% Cumulative variance % % % % Table 2. Results of Factor Analysis Construct PR PU PEU INT PR (0.685) PU (0.597) PEU (0.683) INT (0.744) Table 3. Shared Variance (Variance Extracted) Among Constructs Hypothesis Coefficient T-value P-value Outcome H1: PT to PU Supported H2: PT to PEU Supported H3: PT to PR Supported H4: PU to INT Supported H5: PEU to INT Supported H6: PEU to PU Supported H7: PR to INT Supported H8: PR to PU n.s Not Supported Table 4. Results of Hypotheses Test 5. Discussions and Implications In this study, a theoretical model on consumers intention to adopt E-commerce has been formulated and empirically tested. The results reveal that perceived risk will negatively

10 influence consumers E-commerce adoption intention while perceived usefulness and perceived ease of use will positively influence consumers E-commerce adoption intention. Most importantly, product type significantly influences perceived usefulness, perceived ease of use and perceived risk. The significant positive relationship between product type and perceived usefulness shows that consumers think E-commerce would be more useful for services than goods. The significant negative relationship between product type and perceived ease of use suggests that consumers feel it is easier to purchase goods than services in the E- commerce environment. The significant negative relationship between product type and perceived risk tells us that goods (physical products) will have a stronger influence on perceived risk than services in the E-commerce environment. In other words, consumers will perceive higher level of risk of E-commerce for goods than for services when they make online purchase decisions. They feel higher possibility to suffer losses/harms for purchasing goods over Internet than services. Comparing different effects of goods and services on consumers intention to adopt E- commerce, we could derive the following results based on above discussions. In product businesses (goods), higher level of perceived ease of use probably increases consumers E- commerce adoption intention. Lower level of perceived usefulness and higher level of perceived risk might be the main reasons that consumers would not adopt E-commerce. In service businesses (services), with lower level of perceived risk and higher level of perceived usefulness, consumers would likely adopt E-commerce. Lower level of perceived ease of use might decrease consumers intention to adopt E-commerce. With this result, implications for practitioners in product businesses and service businesses are discussed in the following sections. 5.1 Implications for Product Businesses In the E-commerce environment, it is obvious that consumers would look for evidence of the quality of goods since goods are perceived to be intangible. They will draw inferences about goods quality from the presentation of websites. Therefore, companies task is to manage the evidence and tangibilize the intangibility (Philip et al., 1999). This suggests that for product businesses, companies should design more effective websites so as to improve the presentation of goods in the website and make the virtual experience of consumers more pleasant. At the same time, the business processes and transactions should be designed to reduce the delay of delivery of goods to consumers in order to satisfy the consumers needs and provide them immediate satisfactions. This will increase the level of usefulness perceived by consumers and thus increase the consumers intention to adopt E-commerce. Generally, in the E-commerce environment, consumers will perceive different types of risk, namely, financial risk, social risk, time risk, physical risk, performance risk, psychological risk, privacy risk and security risk. For product business, it is likely that consumers perceive the potential losses mainly due to the difficulty to predict the quality of goods. They worry about whether they will get what they want. Thus, performance risk probably significantly influences consumers E-commerce adoption intention. Therefore, to reduce the performance risk perceived by consumers, companies should have a well-designed return policy so that consumers could return the ordered products and get back their payments if they feel that they do not get what they want. At the same time, to reduce performance risk perceived by consumers, the delay of the delivery should be reduced.

11 5.2 Implications for Service Businesses In the E-commerce environment, consumers are involved in the production and consumption of services due to the inseparability of services. At the same time, in an online environment, it lacks of social presence, i.e., sellers of services are not available. Thus consumers have to complete the transactions without any help from service providers. It is likely that consumers may find that it is not easy for them to purchase services online. This might lead to the decreases of their intention to adopt E-commerce. Therefore, companies need to standardize their online transactions so as to make the transactions of services as simple as possible for consumers and at the same time, design a more effective website with clear and understandable help instructions so as to provide helps to consumers for their completion of transactions and consumptions of services. This would increase the level of ease of use perceived by consumers and thus increase consumers intention to adopt E-commerce. 5.3 Perceived usefulness, perceived ease of use, perceived risk and consumers E- commerce adoption intention The results show that perceived usefulness and perceived ease of use would positively influence consumers intention to adopt E-commerce. This finding is consistent with other research studies (Kyu and Bipin, 2000; Paul, 2001). The hypothesis regarding the relationship between perceived risk and consumer s intention to adopt E-commerce is supported but the hypothesis regarding the relationship between perceived risk and perceived usefulness is not supported. This shows that the perceived risk has a direct influence on consumer s E-commerce adoption intention but not an indirect influence through perceived usefulness. Perceived risk plays a very important role in E-commerce. In order to get customers to transact or shop online, organizations have to reduce the level of risk perceived by the customers. Thus, more attention should be paid to and more resources should be put on risk reduction activities. 6. Conclusion Several key findings are presented as follows. First, perceived usefulness, perceived ease of use and perceived risk are determinants of consumers E-commerce adoption intention. Second, different products (services and goods) have different influences on consumers E- commerce adoption intention through perceived usefulness, perceived ease of use and perceived risk. The research results above are subject to some limitations. This study focuses on two specific products, namely, books (goods) and banking services (services), so attempts to generalize the results to other products (goods and services) should be done cautiously. The use of student subject may also have limited the findings generalizability. Future studies can extend the results of this study by investigating the different product classifications and different group of consumers.

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