Drivers of Internet Shopping

Mohamed Khalifa and Moez Limayem

The two distinct forms of e-commerce—business-to-business (B2B) and business-to-

consumer (B2C)—have emerged as an important way of doing business that will surely
grow in years to come. According to some recent forecasts, total Web sales will reach
1.4 trillion dollars in 2004. Most of the growth, however, is expected to be in B2B, with
projected B2C barely constituting 21% of Web sales in 2004 [3]. With the exception of
software, hardware, travel services, and a few other niche areas, shopping on the Internet
is far from universal, even among people who spend long hours online. While B2C has
not yet attained widespread acceptance in the overall scheme of e-commerce, the poten-
tial is definitely there. Indeed, there is substantial room for the growth of B2C once the
major obstacles are overcome.
Although some of the hurdles to the growth of B2C e-commerce have been dis-
cussed in the literature, we still lack a good understanding of consumer behavior on
the Internet and how new technologies challenge the traditional assumptions under-
lying conventional theories and models. Butler and Peppard [1], for example, explain
the failure of IBM-sponsored Web shopping malls on a lack of understanding of the
true nature of consumer behavior on the Internet. A critical understanding of this
behavior in cyberspace, as in the physical world, cannot be achieved without a good
appreciation of the factors affecting the purchase decision. If cybermarketers know
how consumers make these decisions, they can adjust their marketing strategies to fit
this new way of selling so that they can convert potential customers to real ones and
retain them. Similarly, Web site designers, who are faced with the difficult question
of how to design pages to make them not only popular but also effective in increas-
ing sales, can benefit from such an understanding.
In this research we applied well-established behavioral theories to explain Inter-
net consumer behavior. We then conducted a longitudinal survey study to identify
key factors influencing purchasing on the Web and to examine their relative impor-
tance. The results of this study enhance our understanding of consumer behavior on
the Web and lead to valuable implications for marketers and managers on how to

Mohamed Khalifa (iskhal@cityu.edu.hk) is an associate professor and director of the Asia Centre for
Electronic Business at City University of Hong Kong.
Moez Limayem (ismoez@cityu.edu.hk) is an associate professor and coordinator of the BBA Electronic
Commerce Program in the Information Systems Department at City University of Hong Kong.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies
are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. To copy
otherwise, to republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee.

© 2003 ACM

COMMUNICATIONS OF THE ACM December 2003/Vol. 46, No. 12ve 233

develop effective strategies to win the battles of cyber competition. The findings of
this study should also help Web designers in their difficult task of designing sites that
must compete with millions of other sites on the Web.

Explaining Internet Consumer Behavior

Studies that investigated consumers’ perceptions of obstacles hindering the development
of Internet shopping have reported several concerns, for example, security, trust, band-
width, legal framework. These concerns, however, will soon become irrelevant. The
rapid development of e-commerce technology will alleviate the security and bandwidth
problems. Several governments have realized the strategic importance of e-commerce
and are rapidly developing appropriate legal frameworks. Perceptions will also change as
more and more people adopt Internet shopping. As these concerns are being addressed,
other factors, such as the convenience of the entire shopping cycle (ordering, payment,
delivery, and support), product quality and variety, and customer service, become more
salient. Although most of these factors have been discussed in the e-commerce literature,
their effects and their relative importance are still not well understood. This lack of
understanding is causing a wide confusion regarding what is really happening, how
much potential there is, and what companies should be doing to take advantage of
Internet shopping.
This study sheds light on Internet consumer behavior through the application and
empirical testing of a comprehensive behavioral model. Based on a thorough literature
review and focus group meetings with 177 Internet consumers, we identified important
factors affecting the adoption of Internet shopping and the level of its use. The elicita-
tion of these factors was based on a well-accepted behavioral model proposed by Trian-
dis [4]. According to this model, behavior is preceded by intentions and is affected by
facilitating conditions. Intentions are in turn determined by social influences, attitude
towards the behavior, and perceived consequences of the behavior among other factors.
Seven perceived consequences were identified as particularly influential. The partici-
pants in the focus groups perceived that their Internet shopping behavior was motivated
by cheaper prices, convenience, saving time, improved customer service, and their abil-
ity to do comparative shopping. They also thought that they would shop on the Inter-
net more frequently if they did not have concerns regarding risks of security breach and
privacy violation. On the social side, the influences of the family, media, and friends
were perceived to be important. The participants also identified five conditions for facil-
itating Internet shopping. These included transaction efficiency, navigation efficiency,
product description, site accessibility, and Web page loading speed.

Internet Shopping Surveys

Following the elicitation of the beliefs of Internet shoppers regarding the various fac-
tors affecting their intentions and behavior, we conducted a longitudinal study con-
sisting of two online surveys. The first survey was aimed at assessing the intentions of
Internet shoppers regarding their future behavior (shopping frequency) and exploring
the determinants of these intentions, such as attitude, perceived consequences, and
social influences. A total of 6110 consumers were chosen randomly from 4 Internet-
based directories and were solicited by email to complete the first online question-
naire. The respondents were told that they would be asked to answer a second
questionnaire in three months and that, in order to match the first questionnaire with

234 December 2003/Vol. 46, No. 12ve COMMUNICATIONS OF THE ACM

 Percentage (%)
Category
Age
Less than 20 years 10
20 – 35 years 49
35 – 50 years 23
Greater than 50 years 16
Missing values 2
Education
Bachelor 37
Master 18
Ph.D. 10
Others 32
Missing values 3
Annual Income
Less than 20,000 USD 27
20,000 – 35,000 USD 24
35,000 – 50,000 USD 21
Greater than 20,000 USD 19
Missing values 9
Number of Purchases within 3 Months
None 26
1 – 5 purchase(s) 36
5 – 10 purchases 16
10 – 15 purchases 6
15 – 20 purchases 2
Over 20 purchases 8
Missing va lues 6

Table 1. Demographics.

the second one, they had to specify the last five digits of their phone number. This
method allowed us to keep the survey anonymous while enabling us to match the
answers of the two questionnaires to the same individual. A total of 1410 responded
to the first survey. The second survey, on the other hand, focused on investigating the
effects of intentions (assessed in the first survey) and facilitating conditions on actual
Internet shopping behavior. Only 705 of those who responded in the first round
answered the second questionnaire. Table 1 describes the demographic profile of the
respondents.

Results and Discussion

The analysis of the data was done in a holistic manner using Partial Least Squares (PLS),
a procedure that tests both the structural model (hypothesized relationships between fac-
tors) and the measurement models (items measuring each factor) simultaneously (see
[2]). The results of the analysis are presented in Figure 1. The significant effects (signif-
icant path coefficients for constructs and weights for measurements items, as indicated
by t-statistics) are indicated with solid lines with the most important ones (highest coef-
ficients & weights) in double lines. Both intentions and facilitating conditions are found
to affect Internet shopping behavior (that is, frequency of shopping) significantly. Facil-
itating conditions, however, have a more important effect. It is not enough to form an
intention to shop online; such an intention will not translate into action if the appro-
priate conditions are not present. All facilitating conditions, identified through the lit-

COMMUNICATIONS OF THE ACM December 2003/Vol. 46, No. 12ve 235

 Convenience

Cheaper
Prices Privacy
Violation
Improved
Security Customer
Breach Service

Comparative
Saving Shopping
Time

Perceived Actual Internet

Attitude Consequences Shopping

Intention to shop online

Social
Influences

Facilitating
Conditions

Transaction Web Page

Media Efficiency Loading Speed
Family
Product Navigation
Description Efficiency
Site
Friends
Accessibility

Most important effects

Significant effects
Insignificant effects

Figure 1. Significance and relative importance of Internet shopping factors.

erature review and the belief-elicitation process, are significant. These findings highlight
the importance of transaction efficiency, product description, navigation efficiency,
Web-page loading speed, and site accessibility in assisting the Internet consumers to act
on their intentions.

236 December 2003/Vol. 46, No. 12ve COMMUNICATIONS OF THE ACM

 Although all significant, two out of the five facilitating conditions emerged as the
most important ones, specifically, site accessibility and transaction efficiency. To
enhance the accessibility of an Internet shop, one has to make sure that the site is
always up and running (available) and that it can be easily located. Choosing the
appropriate domain name, registering the site with important search engines and
optimizing its ranking, reminding visitors to bookmark the site address, and estab-
lishing a presence in popular cybermalls are all techniques that can enhance the acces-
sibility of Internet shops. Improving the transaction efficiency, on the other hand,
requires the optimization of the cycle times associated with product identification and
selection, ordering, delivery, and after-sale service. While some aspects of transaction
efficiency are associated with the user-interface design (for example, number of clicks
required), others are associated with the reengineering of the order taking and fulfill-
ment processes.
Although not as important as accessibility and transaction efficiency, the other facil-
itating conditions—product description, navigation efficiency, and Web page loading
speed—are nevertheless significant and should not be neglected. To improve loading
speed, the literature provides a number of guidelines for Web designers, such as keeping
graphics simple and meaningful, limiting the use of unnecessary animation and multi-
media plug-in requirements, using thumbnails, providing a “text-only” option, continu-
ously monitoring the server and the Internet routes, and allowing text to load first,
followed by graphics. To improve navigation efficiency, Web designers should carefully
think of their online store layout. Some online stores keep a similar layout to that of the
physical stores with which customers are already familiar. Other useful guidelines for
navigation design include creating intuitive/meaningful hyperlinks and labeling them
properly, providing a site map, and developing an effective search engine. It is important
to note that navigation efficiency affects transaction efficiency (discussed previously), an
important facilitating condition of online shopping. Finally, providing a good product
description is a significant facilitating condition that can minimize an important draw-
back of online shopping: the inability of the customer to physically feel and examine the
product. Enhancing the information content of the product is often cited in the litera-
ture as one of the critical success factors of online shopping. While in a physical store
customers may complain about information shortage, in an online store they may be
overwhelmed by information. The main challenges of Web designers are therefore to
decide on the appropriate amount of information, to organize it, and to present it prop-
erly.
The results also indicate that the intentions of Internet consumers are significantly
affected by the perceived consequences of online shopping, the consumers’ attitudes
towards it, and social influences. Perceived consequences of online shopping, however,
have the most important effect. Out of the hypothesized seven consequences, five are
perceived to matter. The insignificant two are privacy violation and convenience. Sur-
prisingly, our respondents did not give much importance to the convenience (anywhere
and anytime) and privacy factors in forming their intention to shop on the Internet.
Instead, they were enticed by cheaper prices, saving time, improved customer service,
and the ability to do comparative shopping while they were discouraged by security con-
cerns. There is a clear indication that security remains a big hurdle for the growth of
B2C despite the important improvements in the technical solutions. Therefore, Inter-
net retailers should work on their consumers’ perceptions in addition to implementing

COMMUNICATIONS OF THE ACM December 2003/Vol. 46, No. 12ve 237

effective security measures. The results also indicated that the possibility of saving time
is an important perceived consequence of online shopping. This is a confirmation of the
significance of transaction efficiency and represents an important guideline for Web
designers. Improved customer service is also found to be a significant perceived conse-
quence of online shopping. Preferably, customer service and support should cover pre-
purchase interactions, purchase, and post-purchase activities. According to the
literature, one of the main advantages of Internet shopping is the improvement of infor-
mation content, customization, and speed of customer service. In addition to improv-
ing customer satisfaction, online support can also reduce the operational costs of
businesses. For example, adding a frequently asked questions (FAQ) section about the
company and its products/services can significantly reduce customer requests and can
alleviate the burden on call centers. Another perceived consequence that is found to be
significant in this study is comparative shopping. Supporting the search-and-compari-
son activities of shopping helps the consumer to make a more informed decision.
Finally, out of all perceived consequences, cheaper prices emerge as having the most
important influence on intention formation. The bottom line for Internet consumers is
saving money. This is an important factor for Internet retailers to take into considera-
tion in formulating their business strategies in general and their marketing strategies in
particular.
Other significant factors affecting intention formation for online shopping are
social influences. The literature indicates that individuals use the Internet more fre-
quently if they have a more socially supportive environment, including friends and
relatives who are also Internet users. Our results indicate that online shoppers are sig-
nificantly influenced by family members and the media rather than by friends. What
is new in this study is that the media turned out to have the most important social
influence on forming intentions to shop online. These days, one can hardly read a
newspaper or watch TV without coming across some e-commerce news or commer-
cials. The media can therefore play a very important role in the development of B2C.
Although online advertising presents several advantages, it is not supposed to com-
pletely replace, but rather supplement, the traditional advertising channels. The
importance of media influence indicated by the results of our study implies that
online businesses should promote their sites in the media—radio, TV, newspapers,
and trade journals.

Conclusion
The purpose of this study was to gain a better understanding of online consumer
behavior through an investigation of factors affecting online shopping intentions and
behavior. This was done based on a well-established behavioral model. Coupling
belief elicitation through focus groups with a review of prior research allowed us to
obtain a salient set of measures that resulted in interesting practical implications for
Web designers and marketers about the critical drivers of facilitating conditions,
social factors, and perceived consequences of online shopping. The use of a longitu-
dinal approach for data collection provided a causal understanding of the factors
affecting online shopping intentions and behavior. Nevertheless, this study, like all
others, is not without limitations. It is important to recognize that online shopping
behavior was self-reported and was assessed only once, three months from the time
intentions were measured. Moreover, we did not evaluate the breadth of this behav-

238 December 2003/Vol. 46, No. 12ve COMMUNICATIONS OF THE ACM

ior (that is, the variety of products bought) or its change over time. We realize that it
is important for businesses to sell, but what is probably more important is to retain
their customers for repeated purchases. Future research should use a wider variety of
measures of online shopping and track the shopping behavior over a longer period of
time.
References
1. Butler, P. and Peppard, J. Consumer purchasing on the Internet: Processes and prospects.
European Management Journal 16, 5 (Oct. 1998), 600–610.
2. Chin, W. W. The Partial Least Squares Approach for Structural Equation Modeling. Lawrence
Erlbaum Associates, 1998.
3. ePayments Resource Center. Electronic transactions statistics, 1999; www.epaynews.com/
statistics/.
4. Triandis, C. H. Values, attitudes and interpersonal behavior. Nebraska Symposium on Moti-
vation (1979). Beliefs, Attitudes and Values, University of Nebraska Press, Lincoln, NE, 1980.

COMMUNICATIONS OF THE ACM December 2003/Vol. 46, No. 12ve 239