CONSUMERS' BUYING BEHAVIOR ON ONLINE SHOPPING: AN UTAUT AND LUM MODEL APPROACH PDF

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 1 CONSUMERS’ BUYING BEHAVIOR ON ONLINE SHOPPING: AN UTAUT AND LUM MODEL APPROACH Research Presented to the Faculty of Senior High School Polytechnic University of the Philippines Quezon City In Partial Fulfillment Practical Research I Research Adviser Prof. ...

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES CONSUMERS’ BUYING BEHAVIOR ON ONLINE SHOPPING: AN UTAUT AND LUM MODEL APPROACH

Research Presented to the Faculty of Senior High School Polytechnic University of the Philippines Quezon City

In Partial Fulfillment Practical Research I

Research Adviser Prof. John Robert F. Isip

Researchers Legaspi, Angelo J.

Delos Reyes, Miyaka Rhinoa

Binco, Marilyn

Juan, Angela Marie

De Guzman, Jubelyn

Rivera, Khrizsa Mhay

Decoy, Beverly MARCH 2018

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES CHAPTER I: THE PROBLEM AND ITS SETTING Introduction Online shopping began when Michael Aldrich „invented‟ it. Using videotex, a two way message service, it revolutionized businesses. We now know this as e-commerce. Electronic commerce, also known as e-commerce, is activities that relate to the buying and selling of goods over the internet (Webster 1993). This field of e-commerce has a steady fast pace growth in the Philippines. The Electronic Commerce Act (ECA) or Republic Act No. 8792 was signed into law on 14 June 2000 by President Joseph Ejercito Estrada. The law gave legal recognition to electronic forms of data messages, documents, signatures, transactions, storage of information. It provided penalties for access of data without consent, piracy, hacking, and other violation. Provisions on DTI‟s authority, under Section 29 of R.A. 8792, gave the DTI the authority to direct and supervise the promotion and development of e-commerce in the country with relevant government agencies. This field of commerce has a steady fast pace growth in the Philippines (Department of Trade and Industry Philippines). Lazada is a major ecommerce presence not just in the Philippines, but across Southeast Asia. Backed by German startup machine Rocket Internet, the site offers a wide range of items, including fashion apparel, electronics, car accessories, and home appliances. Lazada has agreed to allow retail giant SM Investments, the company of the Philippines‟ richest man Henry Sy, to use the store to sell its merchandise. Lazada also operates in Indonesia, Singapore, Malaysia, Vietnam, and Thailand, and has raised a whopping US$686 million in total disclosed funding so far. There are different types of e commerce which are known as the following: Business to

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Consumer (B2C), Business to Business (B2B), Consumer to Consumer (C2C), Peer to Peer (P2P), and Mobile Commerce. B2C is where the business sells goods or services directly to the final costumer without going through any middleman. In B2B, both buyer and seller are business while consumers conduct transactions with other consumer without any kind of involvement from business in C2C. P2P is used by people who share computer content like files and software with each other like the online torrent website, kat.cr. Meanwhile, mobile commerce is a form of commerce that uses mobile devices to conduct transaction (Slideshare and blue media). This activity works when a customer orders products or services online and validates it using online payment. Then, the e-merchant also validates it and transfers the order files to the logistic platform. The logistic platform receives and processes the orders transferred by the e-merchant. The logistics crew prepares the orders to be delivered to the costumer (www.ca-logistics.com). A customer has three different payment methods known as card payment, alternatives payment, and digital wallets. Using the card less payment the shopper purchases goods or services using their credit or debit credit online. Second, alternative payments method simply do not rely on cards (e.g. online bank transfers, checks, direct debits, invoices mobile carrier billings, offline cash payments (cash on delivery and cryptocurrencies)) Third, digital wallets allow shoppers to associate their credit cards or other alternative payment methods to a virtual wallet (ex. PayPal). Consumers can they pay using stored money in their wallet or instantly pay with their virtual card or alternative method (www.about-payments.com) This research aims to define Filipino consumers‟ buying behavior on online shopping using the Unified Theory of Acceptance and Use of Technology (UTAUT), as well as the

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Lazy User Model (LUM) of Solution Selection. The focus of this paper is to identify what affects the buyers‟ decision making in both technology usage and in user selection. Background of the Study Online shopping has thus far tended to be a niche business - highly successful in selling digital products such as shares, software and, increasingly, music and films, it has been less successful in persuading the purchasers of "traditional" goods such as cars, clothes, toiletries, or household appliances to forsake their physical retailers and move into cyberspace. (Swatman & Chin 2004). According to Oxford Dictionary, online shopping is the action or activity of buying goods or services over the Internet. This type of shopping is a continuous and growing trend globally. By means of the term “globally”, the Philippines had no escape with it. Websites like Lazada, Zalora, OLX, Shop This Easy, Ayos Dito, Widget City, Keekay.ph and Goods.ph proves online shops‟ popularity in the country. Recent statistics from Statista stated that the revenue of the Philippine‟s e-commerce market amounted to US$ 1,237 M (Php 62,346,500) last year. The market penetration reached 32.2 percent. An estimated total of 33.81 M users are recorded. Meanwhile, electronics and media serve as the largest segment with a market volume of US$543 M (Php 27,367,900,000). This year, estimated revenue of the country‟s e-commerce will strike to US$ 1,491 M (Php 75,148,500) with the same largest segment as last year. The number of users is expected to hit 37.75 M with an increase of 1.42% market penetration. By 2022, it is predicted to continuously grow with 53.8 M users with market penetration of 46.95% and total revenue of US$ 2,169 M (Php 109,321,000).

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES With the growth of e-commerce in the country, it is important to understand the factors why people resort to online shopping than the traditional one. People relied on the internet on a daily basis may it be on social media platforms or the gadget application. Many studies were produced during the past years, some of which are pertaining to information systems usage behavior (i.e. theory of reasoned action, technology acceptance model, theory of planned behavior, and social cognitive theory). But not only the information systems and technology itself should be given focus but the user himself. Statement of the Problem This study aims to find answers on how online shopping affect people's behavior in terms of buying. Does he/she tend to be more sensitive when it comes to checking the quality of products? What are the key factors that motivate consumers to buy online? How does he/she build his/her trust with the online seller? Why people prefer buying online? Despite of dangers in online shopping, why do most people nowadays choose online shopping over the traditional way? How does an online shopper choose where to buy online? What are the advantages of online shopping to shoppers? In what ways does technology contributes to online shopping? How does it help in making online shopping more popular worldwide? Theoretical Framework Unified Theory of Acceptance and Use of Technology (UTAUT) For its framework, this study uses Unified Theory of Acceptance and Use of Technology (UTAUT), which identifies four direct determinants and four key moderators that influence behavioral intention to use a technology. The following determinants are namely: performance expectancy, effort expectancy, and social influence while the four key

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES moderators are known as age, gender, experience and voluntariness (Venkatesh, Morris, Davis, & Davis, 2003). Performance expectancy is defined as the degree to which an individual believes

that using the system will help him or her to attain gains in job performance. The influence of performance expectancy on behavioral intention will be moderated by gender and age, such that the effect will be stronger for men and particularly for younger men (Venkatesh, Morris, Davis, & Davis, 2003, pp. 447-450). Figure 1: UTAUT Model This determinant tells that people are more likely to use and accept technology as he believes it will help improve his performance. Effort expectancy is defined as the degree of ease associated with the use of the system. The influence of effort expectancy on behavioral intention will be moderated by gender, age, and experience, such that the effect will be stronger for women, particularly younger women, and particularly at early stages of experience (Venkatesh, Morris, Davis, & Davis, 2003, p. 450). It implies that people will have the intention to adopt the technology Senior High School Department

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES due to the idea of having to require less effort and to encounter less difficulty. Social influence is defined as the degree to which an individual perceives that important others believe he or she should use the new system. The influence of social influence on behavioral intention will be moderated by gender, age, voluntariness, and experience, such that the effect will be stronger for women, particularly older women, particularly in mandatory settings in the early stages of experience (Venkatesh, Morris, Davis, & Davis, 2003, pp. 451-453). Since women are likely to treat others‟ opinion as important, it was theorized that they are more affected by social influence. Facilitating conditions are defined as the degree to which an individual believes that an organizational and technical infrastructure exists to support use of the system. The influence of facilitating conditions on usage will be moderated by age and experience, such that the effect will be stronger for older workers, particularly with increasing experience (Venkatesh, Morris, Davis, & Davis, 2003, pp. 453-454). The three determinants of the intention to use a new information technology are performance expectancy, effort expectancy and social influence. A fourth construct, facilitating conditions, is a direct determinant of the actual use, but cannot be used to predict behavioral intention (Vermaut, 2016-2017). The model is an effort to consolidate and unify eight earlier models on technology system usage (theory of reasoned action, technology acceptance model, motivational model, theory of planned behavior, a model combining the technology acceptance model and the theory of planned behavior, model of personal computer utilization, innovation diffusion theory, and social cognitive theory) (Tétard & Collan, 2009). Lazy User Model (LUM) of User Selection

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Aside from UTAUT, this study also make use of the Lazy User Model (LUM) of User Selection which states that a user has a set of possible solutions to use in fulfilling his needs (also known as user needs). The user‟s distinguished possible solutions are limited due to

his circumstances (user state). LUM enables the user to make a choice of solution that requires the least effort (Tétard & Collan, 2009). The effort mentioned in this model may be pertaining to energy, money and time wasted in a possible solution. Each individual may also have different levels of effort on the same solution selected. Figure 2: LUM Model For example, a worker plans to buy Christmas gifts for his family (user need) but he does not have enough time since his schedule is occupied by work (user state). He has three set of possible solutions. First, he may go with his free time or day-off. Second, he may ask other people to buy the gifts for him. Third, he can purchase the gifts online.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Figure 3: Example Situation Before choosing the best solution, we should analyze the given possible answers. The worker may go with his day-off but it will be a disadvantage for him. The time to be spent on traffic and waiting on lines are definitely longer since there is a Christmas rush. Another possible solution is to ask others in buying the gifts. There is a chance that what the other person buys is not what the worker wanted or what he thinks is suited to the receiver of the gift. In this case, the last possible solution is to purchase online. The worker does not need to go out to beat the Christmas rush traffic and the long lines at shopping malls. He also does not need to ask others because purchasing online lets him choose the goods himself. He will be able to check what he wanted to buy as a gift with the least effort and is also convenient for him. PROPOSED THEORY USING UTAUT AND LUM We ought to relate the online shopping industry‟s consumer behavior in the technological aspect using UTAUT while consider the consumers (user) in LUM. Both theories focuses on different things but this research intends to point out their direct connection by investigating each theory thoroughly with regards to Filipino online shoppers.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Figure 4: Proposed Theory The direct determinants (performance expectancy, effort expectancy, social influence and facilitating conditions) and key factors (gender, age, experience, voluntariness of use) which was stated on UTAUT help determine the best solution out of the set of possible solutions defined by the user need and is limited by the user state mentioned on LUM. This proposed theory states that a person will use and accept technology if it helps him choose the solution that requires the least effort. In the prior example, it is also possible to say that the worker‟s set of possible solutions was filtered with the criteria that either: a) It will not harm his performance in his job and maybe help him perform better; b) It will take him less time and effort to avoid conflict with his work; or c) It is a solution that was influenced by other people‟s opinion; and d) There are facilitating conditions supporting the solution. Scope and Limitations This study is conducted primarily for the purpose of identifying the consumers' behavior towards online shopping and how it affects them. It seeks to know the key factors that motivate consumers to buy online. The main source of data was through an interview with 15 respondents. This study is limited only on the online consumers, ages 16-43 years old that have experienced and tried shopping online. The location of who the interviewers had interviewed is not exceeded in the borders of Luzon. The interviews were conducted within three days and the information for the related literatures and studies were three months. The limitations of this study are the interviewee have limited responses and did not have brief explanations for their answer. Significance of the Study The study defines the consumer's buying behavior on online shopping. The study Senior High School Department

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES talks about, what are reasons why people preferred to buy online rather than buying in traditional way. The benefits of studying consumer's behavior have significant bearing on marketing and public relations decisions. Studies focusing on consumer behaviors yield important information and insight into what consumers are thinking. With these insights, marketing and public relations firms may enhance their particular marketing campaigns to successfully connect with consumers. This study will not only help to understand the past but even predict the future. The significance of this study is for the online marketers who are obligated in terms of online buying and online consumers. Marketers should know the services that they can offer to meet the satisfaction of a buyer. Marketers also should know what are the factors or the things they need to make people pursue their products. This study aims for the benefit of entrepreneurs who are planning to start online business. It will be very beneficial for online marketers to use this study in order for them to have better knowledge regarding the behavior of their potential customers. By means of knowing the factors that affecting the consumer's buying behavior towards online shopping, the online sellers may come up with the idea of improving their services, in order to have lots of customers. The findings of this study will be a great benefit to the online retailers considering that its population is increasing as the online shopper increases. As this study aims to discover the consumers' attitude and behavior towards online shopping, retailers would have knowledge on what to improve regarding their service and products. Furthermore, this study would be very beneficial to the researchers as this study would provide them information

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES about the online shopping if it certainly convenient or not. This study will help online shoppers to know if they really need to buy products online, if they really have no time to buy products in traditional way. This study will open each and everyone‟s mind to know the true reasons behind the growing population of online shoppers. Purpose of the Study The focus of this research is mainly about the Filipino consumers' buying behavior towards online shopping and how does the impact of using technology affects their standards with regards in choosing what medium of acquiring goods and services they will prefer to use. Having the Unified Theory of Acceptance and Use of Technology (UTAUT) and the Lazy User Model (LUM) of Solution Selection, as reference, the focus of this paper is to identify the key factors that motivate consumers to shop online. Due to the immense growing population of online shoppers in the Philippines, this study aims to determine the influence and contribution of technology to consumers‟ buying behavior in terms of online shopping. For example, how much does traffic jam contributes as to why Filipinos likes to shop online nowadays. We want to discover why Filipinos prefer to shop online than do traditional shopping knowing that there are danger they might encounter such as privacy invasion, fraud or scam. Aside from identifying the key factors affecting Filipinos‟ buying behavior, this study also aims to find and analyze the connection between the models of UTAUT and LUM in order to create an idea which focuses on the user‟s perception in online shopping by means of using technology. The outcome of this study may help in providing better knowledge on how the wider influence of technology affects the consumer's behavior specifically in terms on online

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES shopping. Using this study, a reader will be able to comprehend why online shoppers take risks in acquiring goods and services through using the Internet despite of its negative feedbacks. Lastly, through reading this research, the reader especially those who doesn‟t have proper knowledge about e-commerce, will be able to clearly understand the concept of online shopping and why does it seem so beneficial or convenient to its customers.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES CHAPTER II: REVIEW OF RELATED STUDIES LITERATURE Review of Related Literature E-commerce is becoming the „new normal‟ in Southeast Asia, as consumers in th...