Online shopping issues: Effects on consumer behavior

Online shopping issues and its effects on consumer behavior

Introduction

“Every now and then, a technology comes along that is so profound, so powerful, so universal that its impact will change everything. It will transform every institution in the world. It will create winners and losers, will change the way we do business, the way we teach our children, communicate and interact as individuals.” (Gerstner L., 1996)

In today’s business world, online shopping is a growing phenomenon, mainly in technologically advanced countries as they are providing facilities of E- malls over Internet. Nowadays, more than 1.7 billion people are connected to the Internet and these connections are growing by staggering rate. This might lead to a considerable increase in online shopping. Online shopping is a process through which goods and services are exchanged between customers and sellers via Internet. All cash flow, information flow and logistics operations via Internet are all included in the online shopping. This is an important part of electronic commerce. This research paper will focus on consumer consumption issues related to online shopping and its effects on consumer behavior.

Due to advancement in technology and easy availability of Internet, masses of people have access to online shopping, leaving local traders out of pocket. In developing countries, online shopping has observed tremendous growth in last few years. As because of this revolution a person living in a small town can order branded and latest technology products which are not available in his local market. Nowadays, websites contain not only household products but also fashionable clothes, books, electronics, computing devices and accessories, mobiles, jewellery, toys and games, health products, dvd, music, kitchen appliances, software and safety products.

There are various advantages of online shopping. Customers can place order for products via Internet from anywhere as the access is available. As this is a demanding world, here time is precious and time is money. Everyone has busy schedule that’s why now people prefer online shopping. It’s difficult for them to spare time to shop at malls and markets, also, for the added reasons of shops being crowded, less comforting and tiring at times. Online shopping offers better bargains compared to regular shopping and efficient product return policies. EMI options are also available there. The products brochure on the online portal gives all relevant detail pertaining a product, including the option to compare with similar products. By just typing the name of product we get what we want. What else can we demand for?….

Despite the current unstable economy and low consumer confidence, it is forecasted that the spending in online retail will increase by 220% within next couple of years. Because of this insurer RSA warns retailers to protect themselves against many risks related with online transactions. RSA found the biggest issues that the industry is facing today are the unreliable delivery of products and increasing threat of online fraud. That is why in spite of turbulent growth in this sector consumers face the following critical issues related to online shopping:

1. Issues of privacy

2. Security issues

Issues of privacy

For example imagine you are shopping in a traditional supermarket. Suddenly you notice a watch guard named “Cookie” starts following you. Now it depends on your situation either you will feel annoyed or you will feel flattered. Pretty soon you begin to notice that whenever you put something into your shopping cart and then decide to put it back, the watch dog offers you 10% discount on every item you are putting back. Now would you consider it invasive? Do not get shocked. This is what is going on especially when you are shopping online.

Consumer privacy issues are not new. They have worried for years how government and businesses are using their personal data. As found in Privacy and Human Rights 1999 report, Privacy is the basis of human dignity, values and other human rights like freedom of joining and freedom of speech. In contemporary west society it is one of the most important rights.

Most of Internet users feel blissful by shopping in the privacy of home. They just sit in front of their computer screen totally unconcerned about their privacy. They have no idea that every time they visit any website or click on a link, their movements are being monitored and their actions are being tracked that is all due to innovation of cookie technology (Ho, 1999). Nowadays most web sites that take personal information from their visitors keep it private. But what people cannot realize that the companies like AdForce and Doubleclick can track their visits and collect that data for a long term basis with the help of setting persistent cookies on every computer. By this these companies can analyze the consumer shopping behavior and sell this information to the merchants who are interested in this information. This type of information gathering activity is unregulated on Internet (Scambray and McClure, 1999). A privacy violation occurs when a company uses its customers’ private information like phone numbers, emails, credit card details etc. to know his online shopping behavior without his knowledge. Database technology has long been used lacking any concern over solitude issues (Ho, 1999).

IBM Multinational Consumer Privacy Research found that 40% of the consumers do not want to shop online due to privacy concern. They do not want to put their correct information on web sites, as they don’t know what the companies are going to do with it (Pescovitz, 2007).

90% of the online consumers want the right to have power over how their personal information is used by the companies after it is collected. E-shopping users worry that the information they share on web sites will produce unsolicited e-mail or telemarketing calls. Because of this half of the online shopping consumers’ support the policy that forbids the sale of data to the third party and keen to contact government to regulate the Internet privacy policy (Cyber Atlas News, 2006).

Issues of security

The second major concern for online shopping consumers is the security of their information from the third party or we can say intruders. For example, most of our personal information floats around cyberspace. Like our name if we have ever shop from a website. Our e mail address, surely, if we are getting junk mails. Most probably our postal address and date of birth too. More over more personal details including our credit card number, is probably there on several websites protected by different passwords which we have problem in remembering. What will happen if any of the website holding that information goes burst? What if hackers intercept them?

Cybercrime has negative impact on consumer purchase behavior. It is a big hindrance for such an innovative sector. Consumers’ negative experiences will affect their tendencies to purchase again. Boston consulting group found that 48% of online buyers with a positive experience, made purchase again while only 17% consumers who have negative experience made purchase again (Saban et al, 2005).

Miyazaki and Fernandez (2001) found that data security was biggest fear of online shopping with 37% of sample responded to the threat of third party fraudulent behavior. More than 20% of sample responded about individual fear of unauthorized third-party access to credit card information. One interesting thing is that the inconveniences of online shopping is placed second above security concern and deceitful behavior of online retailers are placed on third and fourth respectively.

Online shoppers want to feel that their privacy is being protected. For this issue security experts demand for government intervention, while business men demand for self regulation, to provide consumers with information of how their private data are used and offering consumers privacy preferences are the main issues they think should be dealt with (Rubin, 1995). Though CNET believes that voluntary disclosure program is favorable to one order by law (Barr, 1999).

If we analyze the UK online shopping business, we see that it had faced highest level of security fraud in Europe in the last couple of years (Financial Times, 2005). If we gain more insight then we see that due to security concerns consumers have stopped online buying in Europe. There, 1/3rd of Internet users do not buy online because of security reasons. When we elaborate security concern to different countries then we find some interesting variations. Consumers from Spain, Portugal, Netherlands and Belgium respond that they were never stopped by the security concerns from buying online. So we can conclude that security concerns are important barriers against online shopping in certain countries.

Government agencies and corporations need to understand the importance of how cybercrime and its related activities have impact on confidence of consumers to adopt Internet as a way of trusted procurement. Figure 3 is based on the force field concept, where the sense of balance between the forces supportive of the use of the Internet is compensated with the forces discouraging such use (cyber terrorist/ Cyber crime).

Conclusion

While privacy and security issues have long been worrying to consumers’ privacy advocacy groups, because of increased ability and advancement in technology of online retailers to store and analyze private information of consumers on updated basis has enlarged severity of these worries. In this environment, business is very competitive so online retailers use consumers information in order to refine their products, services and to maximize profits by providing them with what they want. Corporation and government must understand online security threats and they should increase online security budget to provide protection that consumers recognize that they need. The government should make an alliance or make a group of companies that can create digital identities for online shoppers that can be passed to any shopping or normal website that has signed to that alliance or group. Those identities should have some in-built security and the companies or websites signing up to that alliance will have to satisfy certain security criteria. As of now, in most of the countries when a user purchases some product from any website, then the payment page will directly go to their respective banks’ site and from there, it can only be accessed by the user to do his transaction. So, by this way it is not easy for intruders to get information from there as banks websites are highly secured. Trust is the key to success of online shopping. Government should restrict that the personal information should not be used without consumers’ consent and should not be sold to third parties. Companies those are able to maintain this trust will benefit in sales due to increase in consumers’ confidence.

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