The three most common beliefs that consumers have about shopping online are that it saves time, saves money and helps find products that best match needs. But how do these beliefs, either individually or in combination, influence online purchase behavior? The premise of the article is that the effect of beliefs on online purchase behavior is moderated by demographic characteristics such as income, education, and generational age, and by consumption values such as the inclination to consider many alternatives before making a choice, the enjoyment of shopping, and the tendency to research products prior to making a purchase. The findings on how beliefs and consumption values influence purchase behavior can assist online retailers formulate product positioning strategies that create more value for consumer segments through better customization, thereby enhancing retailer profits. The findings can also help public policy makers design communication strategies to help lower-income consumers realize the same benefits of e-commerce as their higher-income counterparts.Research Highlights► The effect of beliefs on online purchase behavior is moderated by demographics and consumption values. ► The belief that online shopping helps find products that best match needs is more salient for consumers who enjoy shopping. ► The belief that online shopping saves time is less salient for consumers who have a tendency to research products. ► An understanding of these relationships can help retailers formulate online positioning and communication strategies.
Due to the rapid growth of e-commerce, consumer purchase decisions are increasingly being made in online stores. In the 12 years that the U.S. Census Bureau has kept track, e-commerce sales have grown at a double-digit rate from $5 billion in 1998 to an estimated $160 billion in 2010 (http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf). Based on the latest statistics, e-commerce sales registered a 14% increase in 3Q 2010 in comparison to a 4.0% increase in overall retail sales for the same period. Web-based stores offer immense choice and provide a “virtual” shopping experience that is more real-world than ever before, through the use interactive video, animation, flash, zoom, 3-D rotating images, and “live” online assistance.
Shopping on the Internet is commonplace. For example, in 2007, nearly 60% of American consumers used the Internet to research products, while 50% made an online purchase. The Internet has made it easier for consumers to search for the best price when that is most important due to the profusion of merchants on the Web (Brynjolfsson and Smith 2000). The large selections offered by these merchants coupled with the ability of consumers to navigate through these product assortments have also made it easier to search for the best product fit (i.e., the match between product attributes and consumer needs) when that is most important. A study of new car buyers showed that consumers who shopped online paid $450 less (on average) for their purchases (Scott Morton, Zettelmeyer, and Silva-Risso 2001). The increased variety provided by online merchants has given rise to the long-tail phenomenon (Brynjolfsson, Hu, and Smith 2006), where even the most demanding consumers can find products that closely match their needs. But the extent to which consumers realize these benefits depends on the beliefs they have about e-shopping, their demographic characteristics and their consumption values.
According to a 2008 report on “Online Shopping” from Pew Internet & American Life Project, the top three beliefs that consumers have about online shopping relate to saving time, finding a low price, and obtaining the best product fit, i.e., the match between product attributes and consumer needs (Horrigan 2008). Consumer beliefs can relate to either the benefits of online search or the costs of online search or both. Who are the consumers whose beliefs relate more to the cost of search (e.g., saving time) compared to those whose beliefs relate more to the benefit of search (e.g., finding a low price or obtaining the best product fit)? For example, do consumers with more income believe that online shopping saves times to a greater extent than their lower-income counterparts? And to what extent do these beliefs and related consumption values such as shopping enjoyment and the inclination to consider many alternatives before making a choice influence online purchase behavior?
An understanding of how beliefs and consumption values influence purchase behavior can assist online retailers to create more value for consumers thereby reducing their price sensitivity and enhancing retailer margins. Web customization strategies that are consistent with existing belief structures are also likely to enhance customer satisfaction, increase loyalty, and potentially lead to cognitive lock-in (Johnson, Bellman, and Lohse 2003). For example, consumers whose belief structures focus more on saving time could be presented with a customized product assortment generated by an adaptive Web design (Baraglia and Silvestri, 2007 and Goy et al., 2007) that emphasizes time, convenience and ease of navigation, and de-emphasizes price. On the other hand, the same adaptive Web design could highlight low-priced products for consumers whose belief structures value saving money. Likewise, for consumers whose belief structures relate more to finding the best product fit, an adaptive Web design could be used to highlight the breadth, depth and the variety of the product assortment offered by the online merchant.
On the public policy front, past research indicates that certain segments of consumers may have benefited disproportionately more from the Internet than other groups (Zettelmeyer et al., 2005 and Pauly et al., 2002). An understanding of how beliefs and consumption values influence purchase behavior could also be used by public policy makers to formulate communication strategies to help lower-income consumers realize the same benefits of e-commerce as their higher-income counterparts (Baye, Morgan, and Scholten 2003).
The average American has less free time than in any period in modern history (Comor 2000). Shopping on the Internet normally takes less time than shopping in traditional retail outlets because of the time-consuming activities associated with the latter, e.g., driving to the store, waiting in line at the check-out, etc. (Bellman, Lohse, and Johnson 1999). An understanding of how consumer beliefs about the potential benefits of online shopping (e.g., saving time, saving money, finding a product that matches needs) influence the consumer decision to shop online for different consumer segments is therefore invaluable to online retailers as they seek to expand the pool of online shoppers (Montgomery and Smith 2009). An understanding of how the beliefs–behavior relationships for different demographic segments lead consumers to adopt a time-conscious, price conscious or product-fit conscious shopping orientation can help online retailers implement segmentation strategies that create more value for the three target segments, thereby enabling them to enhance margins by being able to price their product assortments to capture the added value created, or at least prevent the “commoditization” of their products. Online merchants can also select a product mix and delivery options that are in sync with the product fit, money saving, and time saving beliefs of consumers.
For online merchants, whose positioning strategies seem to focus on a particular segment (e.g. the online Walmart store and the price-conscious segment), information on how consumer beliefs relating to saving money vary across their customer base would be invaluable in making product assortment decisions, such as the depth of the assortment at key price-points. Recent developments in adaptive Web design (Baraglia and Silvestri 2007) and the use of RFID tagging has enabled retailers to significantly expand the personalization and customization strategies that can be deployed online. An awareness of the belief–intention relationships for different segments of shoppers can also help online retailers implement promotional and adverting strategies that are in tune with existing consumer belief structures, thereby cutting through online media “clutter” and enhancing message effectiveness.
The findings indicate that the belief structures of higher-income online shoppers relate to the time-savings features of Web-based shopping environment to a greater extent than lower-income consumers. Similarly, the belief structures of online shoppers with more education relate to the potential these environments offer in finding products that best match needs to a greater extent than shoppers with less education. Consumer characteristics such as generational age, degree of Internet usage, whether consumers like to have many choices, and whether they enjoy shopping moderate the relationships between consumer beliefs and online purchase behavior.
While higher-income consumers exhibit a strong tendency toward the belief that online shopping saves time, the relationship between income level and beliefs about saving money is less certain. Saving time has been, and continues to be, an important belief for most higher-income and many lower-income consumers, possibly because it relates to the “cost” side of the cost–benefit framework, as opposed to beliefs relating to saving money or finding the product best that relate to the “benefit” side of the framework. It is possible that e-shoppers pay more attention to and act upon beliefs that are more immediate and tangible and at the start of the shopping episode, as opposed to others that are less tangible and are not realized till the end of the shopping process, if at all.
For higher-income online shoppers with more education, two different belief structures are discernible. One group appears to have beliefs that mainly relate to the time savings aspect of online shopping, while the other group has beliefs that relate to the ability to find hard-to-find products on the Internet. Neither group seems to focus on the money savings aspect of online shopping, possibly because they value their time and finding products that best match needs. Hence, the difference between the two groups relates to whether they focus on the cost of search (i.e., time spent) or a benefit of search (i.e., product fit obtained).
There appear to be three different belief structures among lower-income, less educated online shoppers, those who believe that online shopping saves time, those who believe it saves money or helps find products that best match needs, and those who believe it does neither. The group that believes that online shopping is neither about saving time or money, needs to be educated about both the time and money savings potential offered by online setting. It is possible that these consumers are late adopters of the Internet and have not yet developed the cyber fluency (i.e., Web expertise) needed to actively participate in e-commerce.
The group that believes that online shopping is about saving time may not be adequately distinguishing between potentially high-value and low-value online pursuits. Lower income consumers need to be educated that the Internet is not just about saving time, but also about saving money (Bertrand, Mullainathan, and Shafir 2006). They should be reminded of the importance of having separate “mental accounts” for high-value and low-value online activities and encouraged to use recommendation agents and shopbots to become knowledgeable about the online market place by using these tools to discover new products and update information on previously known products.
Manufacturers can play a more active role in changing the belief structures of lower-income, less educated consumers to include beliefs relating to both time and money savings potential of the Internet because they stand to benefit the most when all income segments begin to actively engage themselves in e-commerce. Economic models show that there is often a transfer of consumer surplus (i.e., the difference between the “price paid” and the “willing to pay” price) from consumers who purchase a high-priced product to those who buy a low-priced bargain in the same product category (Aron, Sundararajan, and Viswanathan 2006). Lower-income consumers stand to benefit the most from this transfer of consumer surplus because in a strange irony it has been created for them by their higher-income counterparts. For the public policy implications, the focus can be on designing communication strategies that can help lower-income consumers realize the same benefits of e-commerce as their higher-income counterparts. These campaigns may be implemented by non-profit agencies such as the Ad Council (www.adcouncil.org). Maintaining and increasing the benefits from the Internet to all segments of society continues to be an important public policy goal (Scott Morton, Zettelmeyer, and Silva-Risso 2001).
