Changing Consumer Behaviors towards Online

Shopping During COVID-19 Pandemic Change

(A Case of Home Appliances)

BY
Hans Raj Joshi

A Graduate Research Report submitted in partial fulfilment of the

requirement for the degree of
Master’s in Business Administration (MBA)

at the
Global College
Mid-Western University College Faculty of Business and Accountancy

Kathmandu, Nepal
November, 202
 CHAPTER I
INTRODUCTION

1.1 Background of the Study

The internet has changed the way consumer shop and buys goods and services.
Internet has rapidly evolved into a global phenomenon. Many companies have started
to use the internet with the aim of cutting marketing cost, thereby reducing the price
of their product and services. Customer use internet not only to buy the product
online, but also compares price, product features and after sales service facilities.
During the last decade, Nepal has rapidly being grown in terms of use of internet
technology and has enabled consumers from Nepal to purchase product or services
from web retailers and search product information over the internet (Mohanraj &
Sakthivel, 2016).

The recent COVID-19 outbreak as a global pandemic billions life has been in risked
and economy crisis around the world. The risk of COVID-19 is hitting business really
hard, creating a risk of investment and production. In a foreseeable scenario, billions
of investment is at risk and it is being more challenging to come up with the
preventive measures related to virus. Without any doubt covid-19 has left a negative
impact in the economy. Key sectors have been affected such as entertainment
industry, education sectors, factory, retail, business and so on. The outbreak of Covid-
19 has slowdown the economy of the nation and will take a long period of time for the
recovery. For the first time in history no one knows what the future holds.

In the time of economy stress, there is a change in cultural perspective. This pandemic
time has shifted the "I" of western society into "WE". People tend to be more
collectivist and focus on buying the products which can be shared with others. In
simple words buyers motivation automatically shifts and this activity will bring a
positive impact in the society as well as consumer behavior. In the same time this
pandemic can bring change in an individual life style, behavior, needs and wants.
Most of them now focus of their health, exercise, passion and hobbies. These people
can come up with new demands and needs according to their change in lifestyle. On

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the other hand, there will be some group where people plan not to change their
lifestyle and demand will be constant. So this change in consumer behavior can open
up some new opportunities. Government is closing down non-essential service to limit
the spread of the virus. Some of the business are drastically downsizing such as
airline, factories and so on.

As new technology continues to emerge at pace, the world we live in is changing fast
and consequently so is the way we buy things. People who had previously been
reluctant to shop online are setting up online accounts and experiencing an entirely
new customer journey. And once they get a taste for online convenience, they may
never go back to their old ways.

The internet is an extremely important new technology, and it is no surprise that it has
received so much attention from entrepreneurs, executives, investors, and business
observers (Porter, 2001). It has become an essential business platform for trading,
distributing and selling products between organizations, among organization and
consumers, and even among consumers. This has brought e-commerce to an entirely
new level. The investments to this new media and e-commerce profits are
continuously increasing every year and that is one of the reasons to follow this new
technology and try to describe and analyses internet user behavior (Corbitt et al.,
2003).

Over the past decade, the internet has developed into a vast global place for the
exchange of goods and services in the world. In many countries, the internet has been
adopted as an important medium, offering a wide assortment of products with 24
hours availability and wide area coverage. In Nepal also, internet is used for e-mail
and instant messaging, job search, internet banking, bill payment, stock trading and
matrimonial search.

Online shopping attitude can be referred to consumer’s psychological state in terms of

making purchase in internet. Thus, internet marketers are urged to explore the
determent of consumer online purchasing intention among web shopper (Li and Zang,
2002). Gao (2005) has identified determinants of the consumer online purchasing
intention and found determinants as impulse purchase orientation, quality orientation,
brand orientation and shopping enjoyment orientation. Ling and Lai (2000) stated
online shopping behavior refers to the process of purchasing product or services via

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internet. The process consists of five steps similar to those associated with traditional
shopping behavior. Internet is gaining popularity in almost every facet of the world
and is used for a numerous causes by Persons, government, universities and business.
Internet is now used as a business tool for companies and individuals. Today, the
internet is a public, cooperative and self-sustaining facility accessible to hundreds of
millions of individuals worldwide (Janacek and Muchhala, 2004).

The Internet is considered a mass medium that provides the consumer with purchase
characteristics as no other medium. Certain characteristics are making it more
convenient for the consumer, compared to the traditional way of shopping, such as the
ability to at anytime view and purchase products, visualise their needs with products,
and discuss products with other consumers (Joinetal.2003).Oppenheim and Ward
(2006) explain that the current primary reason people shop over the Internet is the
convenience. They also recognize that the previous primary reason for shopping
online was price, which has now changed to convenience.

Smith and Rupp (2003) also state that the consumers have never had access to so
many suppliers and product/service opinions. Therefore, the Internet has developed to
a highly competitive market, where the competition over the consumer is fierce. In
order to have an impact on and retain consumers, in a competitive market,
Constantinides (2004) stated that the first step is to identify certain influencing aspects
when purchasing online, these can be regarded as factors.

Over the past decade, the world has become increasingly hyper-connected by
technology in an environment where the internet and its associated services are
accessible and immediate; and, where people and businesses have been able to
communicate with each other instantly (Touch, Puangpronpitag, & Issarapaibool,
2013). This hyper-connectivity has deeply redefined relationships between
individuals, consumers and enterprises, and citizens and governments; it is
introducing new opportunities but also new challenges and risks in terms of individual
rights and privacy, security, cybercrime, the flow of personal data, and access to
information (Dutta & Bilbao, 2012). Recently, technology development including
internet, telephone, electronic devices break the physical barriers to communication
and allowed humans to interact freely and also changed the lifestyle, business and
communication of the humans.

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Online shopping is the process consumers go through when they decide to shop on the
Internet. The Internet has developed into a “new” distribution channel (Hollensen,
2004) and the evolution of this channel, e-commerce ,has been identified by Smith
and Rupp(2003) to be the most significant contribution of the information revolution.
Using the Internet to shop online has become one of the primary reasons to use the
Internet, combined with searching for products and finding information about them
(Joinesetal., 2003).

In this day and age, retailer is facing increasingly extreme challenges, which include
continuous enlargement, designs and new operating skills to meet customers’
demands. With rapids the technological modernization, most innovative retailers such
as large store, hypermarket, wholesale sales warehouse, warehouse clubs, shopping
center, shopping center, and at the outlet center are developing and introduced on the
market (Ming, Mengkuan, & Chiang, 2008). Retail has always offered a variety of
stores option to consumers and in advance world today, the retail trade on the internet
is one of the most successful forms of commerce (Shim et al., 2001).

The continuation of the development of communication technologies, the internet, has

increased both the retailers' potential to reach consumers all over the world and access
of consumers to these retailers (Ilagan, 2009). One of the most important
communication channels in the world which is internet are expanding and the use of
the internet is motivating some changes in the consumer purchase process (Guinahu,
2007). In other words, it provides customers with traditional benefits of retail such as
the free access of information to help them make informed purchasing decisions.
Consumers are progressively turning more to available websites in order to get the
information on which to base their decisions (Kozinets, 2002). Online formats that
they are using for instance are blogs, podcasts, social networks, bulletin boards and
wikis to share ideas on a specified product, service, or brand and contact other
consumers, who are considered more objective sources of information (Kozinets,
2002).

Customer satisfaction on the internet has been a significant issue for companies doing
business online (Touch, Puangpronpitag, & Issarapaibool, 2013). The customers
satisfied or dissatisfied have a cognitive or affective reaction which appears as a
response to a single or prolonged set of services used (Rust and Oliver, 1994).

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According to Touch, Puangpronpitag, and Issarapaibool (2013) a high level of
customer satisfaction is

widely believed to be the best indicator of company’s future profit. Therefore, with a
better understanding of the customer satisfaction chain, firms would be able to make
more effective use of their limited resources through quality initiatives for the real
needs of their customers. Thus, customer satisfaction is considered to be one of the
most important competitive factors for the future, and will be the best indicator of a
firm’s profit abilities.

Recently, a trend of e-tailing business in Nepal has been increasing and the aim of the
e-tailing business is to reach wider and faster business market to the nation and world.
A study done by Pongvitayapanu (2012) in Thailand suggested that the E-commerce
shops have a lot of competitors, most online shops try to attract their customers by
offering lower product prices or conducting special promotions, providing another
reason to increase the numbers of online shoppers in Thailand. Additionally, he also
recognized the possibilities of increasing direct trade channels and the huge amount of
markets in the e-world.

The invention of the Internet has created paradigm shift of the traditional way people
shop. A consumer is no longer bound to opening times or specific locations; he can
become active at virtually anytime and place and purchase products or services. The
Internet is a relatively new medium for communication and information exchange that
has become present in our everyday life. The number of Internet users is constantly
increasing which also signifies that online purchasing is
increasing(Joineset,Scherer&Scheufele,2003).The rapid increase is explained by the
growth in the use of broadband technology combined with a change in consumer
behaviour(Oppenheim&Ward,2006).

The most experienced and successful e-commerce companies are beginning to realize
that key determinants of success or failure are not merely web presence or low price
but delivering the high customer satisfaction. Research shows that price and
promotion are no longer the main draws for customers to make a decision on a
purchase. More and more sophisticated online customers would rather pay a higher
price to e-tailers who provide high quality e-service (Schneider & Perry, 2001).
Customer satisfaction has a significant impact on loyalty, retention and purchase

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decisions and even on company’s financial performance. Thus, to build customer trust
and loyalty, and customer retention, e-tailers must shift the focus to online business.

1.2 Problem Statement

The behavior of consumer when shopping online is different from their behavioral in
physical market place. This thesis aimed to find out the factor affecting online
purchase behavior of home appliances. It answers to questions like is there is any
significant relationship between variables online purchase with, faster delivery time,
return policy, trust and prior buying experiences. At any given moment thousands of
people are online and each of them is potential online consumer for a company which
is providing online services and goods. Even in Nepal the number of online stores as
well as customers is on the rise. Therefore, it is vital for web retailers and internet
marketers understand the determinants of online customer purchase intention to
interpret what is important to the Nepalese context. It is very important to know what
kind of things and strategies help to increase sales and which segments of customers
are most profitable.

Problem recognition appears when consumer sees a significant difference between

his/her current state of affair or actual state and some desired or ideal state. (Belch &
Belch, 2003) A person’s actual state can decline if they are not satisfied with the
current state of affairs, or if they are out of stock, or if new needs or wants are
evolved. (Solomon, et al., 2013) In general consumer behavior theory, a need can be
triggered by either internal stimuli such as hunger and thirst or external stimuli such
as advertisement or suggestion from friends. (Kotler & Armstrong, 2012) In the case
of smartphones, this can mean that the buyer recognizes a need of new smartphone for
social status, or to upgrade and enjoy new features or for his/her daily work need.

Kotler (2012) stated that “a marketer’s job does not end when the product is bought”.
Also Blech and Blech (2003) mentioned post purchase evaluation as an important
stage for marketers where customers evaluate and analyses the product after
experiencing its performance if the purchase met their expectations, exceeded
expectations or left them disappoint. After buying smartphone consumer make actual
use of it and analyze its functions and evaluate it as satisfying or disappointing based
on its experience.

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If consumer is fully satisfied he/she may rate the specific brand with five stars and
post comment about their experience. However if consumer is not happy with the
product, he/she may review it negatively. Post purchase evaluation of one customer
helps other customers in buying the products.

Reichheld & Schefter (2000) found that it costs online retailers 20% to 40% more to
attract new online customers than to serve an equivalent traditional market. But
Mitchell (2008) stated that out of 100% more than 85% of internet users from all over
the world have made at least one online purchase and the segment of the world’s
population who had shopped online increased by approximately 40 percent within two
years. In such an environment, it is important for researchers and practitioners to find
methods to appreciate customer loyalty and competitive advantages.

Internet Retailer (2011) reported that the percentage of Internet users who have
shopped online continues to increase and will surpass 90% by 2015. Even though an
increasing number of e-customers are turning to the internet to make their purchases,
many e-stores are going out of business. A Commerce Net/Nielson Media Research
Survey found out that only 15% bought online and 53% used the Net to make
purchase decision but 73% users used the Net to window shop. According to the
report published by the export.gov (2018) there were more than 56,286 registered
websites in Nepal, including 40,000 commercial websites. This study is developed to
address a more mature e-commerce environment.

It seems quite simple to change e-tailers because of having an unsatisfactory e-service

quality, e-store security and e-store design. There is no switching cost from one e-
tailer to another one, so managers of e-stores needs to know what evaluative criteria
customers use while selecting an e-store to attract and retain customers, and which
factors are driving e-customer satisfaction (Lim & Dubinsky, 2004). Customers’
future purchase intentions, customer retention and companies’ profitability are also
key influence for e-customer satisfaction. Szymanski & Hise (2000) analyzed e-
customer satisfaction on the basis of customers’ internet retail experience as
compared to their experiences with traditional retail stores. So, if customers’ have
more experience in traditional retail then the e-retail than customers may not use
internet retail. On the one hand, increase in e-customer satisfaction has a higher
chance of increase the number of loyal e-customers in e-tailing industry and also

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satisfied customers have repurchase products and service from the same e-store. On
the other hand, dissatisfied e-customers are likely to switch from e stores to retailers
and engage in negative word of mouth advertising for e-shopping. Thus, unsatisfied e-
customers might not purchase a service and product from e-store if they have a choice
of shopping somewhere else (Kim & Eom, 2002).

Hence, Zhao & Dholakia (2004), Chiu et.al,. (2005) Ahmad & Al-Zu’bi (2011) and
Ludin & Cheng (2014) have tried to address the problem by examining customer
satisfaction factors. The effects of website, the foundation of e-commerce, on
customer satisfaction were frequently discussed. Devaraj et, al., (2002) investigated
the effects of e-customers satisfaction using Technology Acceptance model and Task
Technology Fit model. Dabrowski et.al., (2014) supported the positive effects of
website attributes dimensions on customer satisfaction. Liang & Chen (2009) found
that all three dimensions namely system quality, information quality and service
quality of website significantly improve customer satisfaction. Jupiter Research
(2003) found that if interface of the website is difficult to use for the users, they
would have a poor impression of the company and defect to a rival website. Martín &
Camarero (2008) found that variables of system quality dimension include website
design and interactivity are logically connected with customer satisfaction.

At any given time there are millions of people online and each of them is a potential
customer for a company providing online sales. Due to the rapid development of the
technologies surrounding the Internet, accompany that is interested in selling products
from its website will constantly have to search for an edge in the fierce competition.
Since there are so many potential consumers, it is of the out most importance to be
able to understand what the consumer wants and needs.

The importance of analyzing and identifying factors that influence the consumer when
he or she decides to purchase on the Internet is vital. Since the Internet is a new
medium for there have been new demands set by the consumer. That is why it is
crucial for the online retailers to know what influences the online consumer.

Since online retailing is a new retailing medium and online consumer behaviour is
diverse from traditional consumer behaviour, one must identify what influences the
online consumer. Analyzing the process that the online consumer goes through when
deciding and making a purchase over the Internet , shows some factors that consumers

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consider. These factors need to be identified and taken into account by online retailers
in order to satisfy consumer demands and compete in the online market.

In context of Nepal, there are thousands of online customers and each one of them is a
possible buyer for a business that provides online shopping. Due to the advancement
of Internet-based technologies, selling products online is not easy tasks as it sounds as
there are so many competitors and one have to focus on its Unique Selling Point, that
may be advertisement, product and services, selection of relevance keywords and so
on. Since there are so many potential consumers, being able to understand what the
consumer wants and needs is of the utmost importance. It is important to evaluate and
classify factors that affect the customer when they want to buy on the Internet.
Because the Internet is a digital tool and the expectation and demand of customer
always grows. So, understanding what drives or influences the online customer is
important for the online shopping.

Online Shopping is a modern retail medium, and customer activity online is distinct
from conventional consumer behavior, it is important to understand what affects the
online user. Analyzing the mechanism by which the online user chooses and makes a
transaction over the Internet, reveals certain considerations that consumers find.
Online Stores need to recognize and take these considerations into account to meet
customer expectations and succeed on the international market. To understand further
how these factors influence different types of consumers, identifying segments will

allow us to make comparisons.

The major questions for the research study of this thesis are as follows:

R.Q.1: Does trust, prior online purchase experience, return policy, and faster delivery
time influence online purchasing decision of home appliances?

R.Q.2: Do demographic variables age, gender, income level and education level of
consumers impact online purchase?

1.3 Objectives of the Study

The major objective of the study is to investigate the factors affecting changing
consumer behaviors towards online shopping during COVID-19 Pandemic Change.
Specific objective of the study is,

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➢ to examine the influence of trust, prior online purchase experience, return
policy and faster delivery time on customer online purchase decision of home
appliances.
➢ to determine the significant effect of demographic factors of the customer on
online purchase decision among Nepalese.

1.4 Significance of Study

There are a large number of individuals who are online at whatever time they desire;
they all are a potential shopper in the online market. Understanding consumer
behaviour is essential for a company to find success for its current products as well as
new product launches. Every consumer has a different thought process and attitude
towards buying a particular product. If a company fails to understand the reaction of a
consumer towards a product, there are high chances of product failure.

1.5 Scope of the Study

This study is exploring the relations between variables that affect the online purchase
decision during the time of covid 19.. Understanding of variables such as price,
quality, brand name and societal status if are able to help further understand how
these variables affect the choice making of consumer. This study helps the present
Marketing Managers to better reposition their online purchase decision or home
appliance.

1.6 Hypothesis of the Study

Based on the review of existing literature, the following null and alternative research
hypotheses are developed.

H1: There is no significant relation between trust and online purchase decision during
the time of covid 19
H2: There is no significant relation between previous purchase experience and online
purchase decision during the time of covid 19
H3: There is no significant relation between return policy and online purchase
decision during the time of covid 19

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H4: There is no a significant relation between fast delivery time and online purchase
decision during the time of covid 19.
H5: There is no a significant relation between webpage response and online purchase
decision during the time of covid 19.

1.7 Conceptual Framework

For developing an in-depth understanding of changing consumer behavior toward

online shopping a framework have been build, based on previous research as well as
the review of existing literature on the topic. As noted earlier, online Purchase can be
simply understood as the use of online stores by consumers up until the transactional
stage of purchasing. Previous research on the topic has as many as fifteen independent
variables that affect online purchase. Along with age, income level, gender and
education level, for convenience and clarity purpose this particular study will focus on
the five major independent variables shown below in figure 2.1, which affects online
purchase decision during the time of covid 19.

Independent Variables Dependent Variable

Trust
Prior Purchase Purchase decision
Experience
Return Policy
Webpage Response
Delivery Time
Age
Income
Gender
Education

Level

Moderating Variables
1.8 Definition of terms

Consumer Behavior:

Donal Rogan (2007) explains the relationship between consumer behaviour and
marketing strategy. He states that “strategy is about increasing the probability and

11
frequency of buyer behaviour. Requirements for succeeding in doing this are to know
the customer and understand the consumer’s needs and wants.”

Chisnall (1995) points out that human needs and motives are inextricably linked and
that the relationship between them is so very close that it becomes difficult to identify
the precise difference which may characterize them. People may buy new coats
because it protects them against the weather, but the areal underlying dominant need
may be to follow the latest fashion trend. Buyers’ characteristics are important
theories from Kotler and Armstrong (2007) and it explains the way that the consumer
interprets and receives stimuli from advertisements. The decisions of consumers are
influenced by a number of individual characteristics that are linked to the consumer’s
specific needs (Kotler & Armstrong, 2007).

Electronic Commerce:

This term is used in business activities and transactions where shoppers can find
sellers, products and services information over the Internet as well as buy products
and services by means of telecommunication networks (Lin, 2003; Ngai and Wat;
2002; Strader and Shaw, 1997; Turban, Lee, King, and Chung, 2000).

1.9 Limitation of the study

The following are the major limitation of the study:
 The research will be based on the purchase decision of consumer within the
Kathmandu valley. The population as well as the sample will be limited
within the reach of the valley so the outcomes will represent the purchase
decision of the respondent within the valley.
 The outcomes of the study may not be generalized because of the sample size.
The sample size taken the study cannot be made general because of limited
sample size 200.
 The response will be collected; taking into consideration some limited
variable so there is prospect of further research in the topic with additional
variables.

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1.10 RESEARCH METHOD
Descriptive research design will be used for the study.

1.10.1 Research Tools

The research tools after collection of data are:-

(i) Standard Deviation

(ii) Co-relation analysis

(iii) T-test to test level of significance at 5%

1.11 Outline of the Report

The whole research is divide into five major chapters which include Chapter One:
Introduction, Chapter Two: Literature Review and Conceptual Framework, Chapter
Three: Research methods, Chapter Four: Analysis and Results and Chapter Five:
Discussion, Conclusion and Implications. Chapter One: Introduction

This chapter provides basic information related to the research topic and outline of the
study. This chapter showcases background of the study, statement of the problem,
objectives of the study, significance of the study, limitations of the study and
operational definition.

Chapter Two: Literature Review and Conceptual Framework

This chapters provides the related findings, definitions, and the related words on the
related topic from other researchers, journals, and already published articles which are
very much essential for the successful completion of the research work. This chapter
also includes theoretical framework that shows the relationship between the
dependent and independent variables.

Chapter Three: Research Methods

The research design and methodology is the planned methods used while conducting
the research that helps a research report to achieve its findings and conclusions. This

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chapter includes information on research design, data analysis methods, questionnaire,
population and sample size, sampling techniques, data collection instrument,
administration of instrument and the sources of data.

Chapter Four: Analysis and Results

After the collection of data, it is very much essential to analyze the findings. This
chapter includes presentation of data and analysis of the findings using diagrammatic
tools like pie-chart and bar-chart, mathematical and statistical tools and descriptive
analysis.

Chapter Five: Discussion, Conclusion and Implications.

This is the final chapter of the research work. This chapter revolves around the
summarized report of whole work and focuses on concluding the work highlighting
the major findings. This chapter also includes recommendations and provides
guidelines for the prospective users, readers and future researcher/s. In addition, an
extensive references and appendix are presented at the end.

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 REFERENCES

Blech, J. (2008). The Relationship among e-Retailing Attributes, e-

Satisfaction and e-Loyalty. Management Review: An International Journal , 3 (1), 23-
45.
Constantinides, M. Z. (2004). The Impacts of E-SCM on the E-Tailing
Industry: An Analysis from Poter's Five Force Perspectives. Procedia - Social and
Behavioral Sciences , 58, 1047 – 1056.
Corbitt, J. (2003). E-commerce growth in Nepal– Let’s talk facts. (2018).
Retrieved from Internet World Stats: http://bishalbhattarai.blogspot.com/2012/09/e-
commerce-in-tourism-in-nepal.html
Gao, K. (2005). Relationship between Website Attributes and Customer
Satisfaction: A Study of E-Commerce Systems in Karachi. World Journal of Social
Sciences , 2 (2), 13 - 23.
Hollensen, J. (2004). Trustworthiness in electronic commerce: the role of
privacy, security, and site attributes. Journal of Strategic Information Systems , 11,
245– 270.
Issarapaibool, L. (2013). Gender differs: assessing a model of online purchase
intentions in e-tail service. International Journal of Service Industry Management , 16
(5), 416-435.

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