Advantages and Disadvantages of Online Shopping and Corresponding Strategies - Literature review Example

LITERATURE REVIEW: E-COMMERCE By Literature Review The traditional system of shopping for many decades remained the popular method of shopping for many buyers and sellers in the trade industry. However, with the development of e-commerce, online shopping has become a popular method for many sellers and buyers because of the benefits that are associated with the method. Therefore, by connecting through computers and mobile phones, consumers can go online to sellers’ websites and search for goods that they require; pay for them through approved online payment systems and consequently, receive the goods from the sellers. For instance, according to Jia-xin, Hong-xia & Jun (2010), it is estimated that one of four customers in China and 2 of three in Europe and Korea use e-commerce in making their purchases. However, despite all the benefits associated with e-commerce from both the perspective of the business and consumer, there are inherent challenges, which are affecting both the buyers and business in e-commerce platforms. Therefore, this literature review will focus on the advantages, disadvantages of e-commerce from both the perspective of consumers and business; look at the e-commerce market in the UK; examine culture of youth employment in UK and the Hofstede’s culture dimension and finally, the theoretical framework underlying e-commerce. Advantages of E-Commerce to Consumers According to Doolin et al. (2005), most consumers making their purchases through B2C consider it as a habit because of the popularity the method has gained as a new of way of shopping for goods in the UK, U.S.A, Asia and Japan. Moreover, Jia-xin, Hong-xia & Jun (2010) argues that, e-commerce is a convenient and easier way of shopping for goods because it is more flexible in terms of place and time. Therefore, this implies that as long as you are linked to the internet you can shop from any place or any time by going online to a business’s website store and make orders for goods and services. Thus, as consumer you will need not to stop working or get stuck in traffic as you go for in-store shopping. Conversely, e-commerce shopping provides comprehensive information about goods and services that are stocked by a business to consumers, hence, making them feel satisfactory and confident in purchasing such goods and services (Jia-xin, Hong-xia & Jun, 2010). That notwithstanding, e-commerce is less costly compared to in-store shopping because consumers will not have moving from one shop to another looking for goods or engage in bargaining negotiations with salesmen, thus, saving them traffic fees and transaction energy and time (Jia-xin, Hong-xia & Jun, 2010). In addition, e-commerce provides consumers with an opportunity of to find a variety of goods to choose from, in addition to, providing them with customer review from past buyers concerning the quality of products & services provided by the business. It is undeniable that most business website stores allow customers to preview past customers’ reviews about the services and goods they received and this helps boast their confidence about the services and goods they are about to purchase (Jia-xin, Hong-xia & Jun, 2010). Disadvantages of E-Commerce to Consumers Jun, Yang and Kim (2004) argue that consumer information security is one of the major problems that face consumers because they make most purchases through their credit cards. Therefore, most consumers feel reluctant and confused to make purchases online because of the fear of the risk of paying online despite the fact that most businesses have taken measures to ensure their consumers’ personal information is protected such as the recent case of hacking of personal information of eBay consumers, which prompted the business to direct their customers to change their passwords. Another disadvantage consumers’ face is that of long deliveries compared to in-store shopping (Koyuncu and Bhattacharya, 2004). In addition, lack of effective after-sale services in event goods purchased do not meet the merchantability or quality required by the customer because e-commerce is a remote sale, thus, making warrantying and returning of goods a rather difficult process (Koyuncu and Bhattacharya, 2004). Other disadvantages include there is no human interaction between the business and the seller and possibility of fraud especially after a customer has made payment for the goods. Advantages of E-Commerce to Business According to Koyuncu and Bhattacharya (2004), one of the most significant benefits that business derive from e-commerce is the increase of market share or customer base. Thus, with only a website store a business can penetrate into global markets from its local market area and be able to establish a large clientele of international customers. Moreover, e-commerce stores saves a business the largest cost of overheads of establishing outlets and structures since the company only need to create a dynamic and responsive website, which is easily accessible to its customers, thus, allowing them to make orders and payments online. Conversely, this a saves the business other overheads such as rent, electricity, gas, wages and salaries for staff among many other associated overhead costs (Koyuncu and Bhattacharya, 2004). That notwithstanding, e-commerce offer a business flexibility because there are no limitations to business size and, therefore, a business can list as many items as possible on its website store. Disadvantages of E-Commerce to Business Despite the benefits aforementioned benefits e-commerce to a business, Doolin et al. (2005) argue that e-commerce exposes a business to outside competition from international business. Therefore, despite the large customer base that e-commerce provides to a business, competition from such international businesses diminishes the market. Moreover, Doolin argue that these international businesses can often offer goods and services at lower prices compared to those of the business, hence, forcing to lower its prices to cope with competition. Thus, this reduces the profits margins of the businesses below even the breakeven point. In addition, e-commerce poses threat to new entrants because consumers often lack the confidence or feel confused to buy from a new website store for fear of being defrauded thus, forcing the business to engage in aggressive promotion activities to enable it convince and gain trust from consumers. That notwithstanding, businesses, which already have online e-commerce platforms can find it difficult to expand their market share if the competition has already better established e-commerce platforms (Doolin et al., 2005). E-Commerce Market in the UK According to Wakefield and Cushman (2013) report, the UK is the most advanced e-commerce country globally in terms of technological infrastructure, regulatory environment and size of the online and retail market. Therefore, according to the report, the UK online retail market defeats those of Germany and the US primarily because of the high volume of the UK’s online sales per capital, which stand at $869. Moreover, the report states that, the other factors that are contributing to this tremendous growth in online retail marketing in the UK include the total retail sales, overall market share attributed to 2007-2008 online retail market growth and the UK’s openness to social media and online new business. Another significant factor, which has contributed immensely to this growth is the popularity of credit card as a method of payment for e-commerce purchases. Ecommercenews.eu (n.d.) states that about 40% of all online purchases in the UK are done through credit cards while 3 in 10 are completed through debit cards, hence, totalling to about 96% with the addition of PayPal. Source: (Ecommercenews.eu, n.d.). That notwithstanding, the UK according to data on online sales by the Centre for Retail Search accounts for 10.7% of all retail sales in the UK, which is worthy about £110.5 billion. Moreover, sporting and fashion goods form one of the critical products that are purchased in the UK, followed by household items and travel. Other important and popular products include music and movies and magazines and books, which are usually purchased from UK’s big online stores such as Amazon (16% market share), Tesco (9% market share), eBay (8% market share), Asos, Next, John Lewis among others (Ecommercenews.eu, n.d.). Further, according to a Daily mail article, about 82% of internet users in the UK make regular purchases online, which makes the UK the top most among the 28EU member countries in online purchases (Ecommercenews.eu, n.d.). In addition, according to the last quarter of the 2013 online retail purchase statistics, it is estimated that about 70% of UK customers own smartphones, which they use in making online purchases (Ecommercenews.eu, n.d.). Culture Culture of Youth Employment in the UK According to Patrick and Paul (2011), the “get rich quick” culture of celebrities, which is demonstrated by dysfunctional footballer’s lives and The X Factor has immensely impacted on the youth’s perception regarding employment, hence, creating a society that is ‘out of balance’. Therefore, instead of the youth focusing on learning new skills especially in technology that are imperative for the 21st century jobs, they have resorted to other quick dubious means of acquiring money such as joining gangs to satisfy their desires of getting rich quickly. For instance, according to the director of corporate affairs at Microsoft UK, IT jobs will increase inside and outside the technological space such as in the e-commerce platform, which will require people with IT skills. He goes to say that, however, kids leaving schools have no pre-requisite skills that can help them secure a job or take advantage of future technological advancement (The Economist Intelligence Unit, 2013). That notwithstanding, Christina and Susie (2013) argue that, “most young people anticipating work are aware of the soft skills required by employers, and in some cases, believe that they possess these skills”. Therefore, because of this culture and the fear of learning technological skills many of the youth in the UK lack confidence and find interviews very stressful because they have no prior experience concerning the workplace (The Economist Intelligence Unit, 2013). Thus, due to lack of these skills, which are driving the United Kingdom‘s economy, thus, influencing the UK’s service sector, many of the youth are finding it difficult to find employment or be innovative to establish e-commerce based business that requires good entrepreneurial and technological skills. Hofstede’s Culture Dimension Hofstede proposed six cultural dimensions that can influence value. These included the following; power distance, individualism vs. collectivism, uncertainty-avoidance index, masculinity vs. femininity, long-term orientation versus short-term orientation and indulgence versus restraint. However, for the purpose of this literature review, the paper is going focus on the dimensions of power distance, individualism vs. collectivism, uncertainty-avoidance index and long-term orientation versus short-term orientation. Thus, to begin with it is imperative to note that e-commerce is mainly affected by two factors namely IT development and trust that stems from people’s culture (beliefs, attitudes, responses and preferences). However, because it has already been recognised that UK has better infrastructure and regulation mechanisms, the paper is only going to analyse the UK culture based on the identified dimensions, which influence consumers’ buying behaviour online. The UK is a highly individualistic country and thus, consumers only mind about themselves and their immediate families unlike in collectivist countries like China. Therefore, people follow their own goals and beliefs and develop their own perception about a website store (Abdulah and Robert, 2013). Thus, because of this it is important that businesses create website stores, which focus less on group oriented links. Moreover, individualistic countries such as the UK do not value trust more highly like collectivist states a good indication of the reasons behind the success and adoption of e-commerce in the UK. Moreover, UK is low power distance culture and, therefore, consumers will always strive for equal power distribution within the culture. Therefore, businesses intending to sell in the UK will need to display customers and other less privileged people in society as equals on their website stores rather than featuring only prominent customers on their websites because this will eventually affect the consumers’ buying behaviour by influencing their perception regarding the business (Abdulah and Robert, 2013). On the other hand, consumers in the UK like in many other European countries are also relatively risk averse implying that their level of uncertainty avoidance is relatively low. This is evident through the relatively less strict rules and regulations the UK government has instituted to regulate online purchases by consumers, which has resulted to increased online retail purchases in the UK making the country to be ranked as the top most country with most advanced e-commerce platform (Ecommercenews.eu, n.d.). Conversely, it is important to note that the UK culture is a long-term oriented culture base on the manner in which the country has adopted the e-commerce platform. Statistics indicate that about 82% of internet subscribers in the UK have made purchases online signifying a society, which is ready to adapt to the changing business platform, which is being propelled by technological innovations (Ecommercenews.eu, n.d.). Theoretical Framework Having examined the various empirical evidences underlying the development of e-commerce, it is important that to look at the theoretical framework upon which the development of e-commerce in anchored and how relevant the theories are in the context of this literature review. Therefore, for the purpose of this research paper, the Technological Acceptance Model (TAM), E-Shopping quality and the Decision-making process theory will considered. Technological Acceptance Model (TAM) The TAM is based on the theory of reasoned action and tries to predict the level of acceptability of a system of information technology, in addition to, identifying modifications that must be made to the new system of information to make it more acceptable to the users. (Davis, 1993). Moreover, according to this model there are two factors, which determine the level of acceptability of an information system; firstly the perceived ease of use that refers to the extent to which an individual believes that it is effortless to use the system. Secondly, the usefulness of the system to the users, which refers the extent to which an individual believes the system can improve his performance. For instance, Davis (1993) argues that, “the use of an information system is determined by the behavioural intention, but on the other hand, that the behavioural intention is determined by the person’s attitude towards the use of the system and also by his perception of its utility”. Moreover, he goes on to argue that, in addition to, the attitude of a person, the effect the system has on the individual’s performance also influences his acceptability of the system(Davis, 1993). Therefore, the possibility of a consumer using a new system of information and in this case, an e-commerce platform will be influenced by his/her perception of the effect and usefulness the new system will have on his/her purchasing experience. Thus, this theory is applicable in this research to help us understand why consumers will either reject or accept a new e-commerce business. E-Shopping Quality The e-shopping quality include components such as the quality of the system, service quality, information quality, delivery quality, post-purchase quality and product quality (Raijas, 2002). Moreover, according to Lee, these are some of the most important elements that influence the consumers’ buying behaviour (Ahn, Seewon and Ingoo, 2004). For instance, system quality refers to a website store’s measures in processing information and taps of engineering-oriented performance attributes such as appearance and operational efficiency (Ahn, Seewon and Ingoo, 2004, p. 407). Therefore, the characteristics of a system such as easy of navigation and response time are critical in influencing a customer’s intention of buying. For instance, a website with a high response time and is easy to navigate influences a customer’s intention to buy positively (Ahn, Seewon and Ingoo, 2004). On the other hand information quality refers to the content and quality of content that a website store contains, which enables customers to compare different products and be able to make quality decisions (Ahn, Seewon and Ingoo, 2004, p. 407). For instance, an ecommerce site with less products and product information is less likely to influence a customer to buy from an online store. That notwithstanding, it has been empirically proved that product quality, which refers to the functionality of the product; service quality referring to the global judgment concerning the excellence or superiority of the service provided; post-purchase quality such as guarantee of returning money in event the product does not meet the merchantability and quality expectations of the customer all influence a consumer’s purchasing behaviour either positively or negatively (Raijas, 2002). Therefore, this model is applicable in this research because the possibility of success an e-commerce site is anchored on the aforementioned components of the model. Decision-Making Process Theory The decision-making process theory articulates that decision-making is a cognitive process, which results to the selection of a course of action or belief among many other possible alternatives (Monahan, 2000). Therefore, according to this theory, decision making-processes have ultimate choices, which can prompt an individual to take an action or not. Therefore, this theory is important in predicting, studying and understanding the behaviour of a consumers in making a decision to buy goods from an online website store. For instance, because of the perceived impact that the theory has on an individual’s behaviour, it is justifiable to say that the theory has the ability to influence the attitude and belief of a consumer to make a decision to buy goods from an e-commerce site. Moreover, because of this influence on attitude and belief, researchers have realized that the theory just like the e-shopping equality model is influenced by factors such the service and system quality, which are integral components to the success of any e-commerce site (Ahn, Seewon and Ingoo, 2004). Therefore, the decision-making process theory is relevant in this study to enable us to predict and understand the factors, which influence a consumer’s online buying behaviour. Bibliography Abdulah, A., and Robert, M., 2013. Cultural Impact on E-Commerce: A Comparative Study. Issues in Information Systems Volume 14, Issue 1, pp.431-440. Ahn, T., Seewon, R., and Ingoo H., 2004. The impact of the online and offline features on the user acceptance of internet shopping malls. Electronic Commerce Research and Applications, 3 (4), 405-420. Christina, C., and Susie, F., 2013. Young People’s Views on Literacy Skills and Employment. Davis, Fred D., 1993. User acceptance of information technology: System characteristics, user perceptions, and behavioural impacts. International Journal of Man-Machine Studies, 38 (3), 475-487. Doolin, B., Dillon, S., Thompson, F., & Corner, J. L., 2005. Perceived risk, the Internet shopping experience and online purchasing behaviour: A New Zealand perspective. 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