factors influencing the types of products and services purchased over the internet

Factors influencing thetypes of products andservices purchased overthe Internet

Ian Phau and

Sui Meng Poon

Introduction

Following the commercialisation of the

Internet in the USA, many Asian countries

have since begun promoting the use of the

Internet by setting up state-run Internet

service providers (ISP) and implementing

policies to encourage educational institutions

and business to go online. The market

forecast is that Singapore will experience a

sharp increase in Internet and World Wide

Web (WWW) usage towards the end of the

century. It is expected to increase from

198,773 users in 1998 to 1,341,050 users in

2001 whereby 17.3 per cent and 34.3 per cent

respectively will buy via the Net. The overall

electronic commerce would also increase

from US$20.97 million to US$855.43 million

for the same period of time. As consumer

confidence grows with the familiarity of

electronic commerce and secure online

transactions, we will see an increase in overall

e-commerce expenditure for the Asia Pacific

region. The study also predicts that the

overall electronic commerce trade will reach

US$16,538.18 million in 2001 for the Asia

Pacific region.

However, the attitudinal effects of in-home

shopping via the Internet have received little

direct research attention so far. Related

research has dealt primarily with the more

traditional direct modes of shopping, such as

mail/phone shopping (Settle et al., 1994), or

more restrictive forms of electronic shopping

such as videotex and television shopping

(Eastlick and Liu, 1997). As electronic

commerce over the Internet increases, it will

become more important that Internet

marketers or cyber mall operators have some

basis to better market their products or

services over the Internet. The more the

Internet shopping malls' marketers

understand the underlying reasons for

differences in the consumer choices, the more

effectively and profitably they can serve their

markets. As such there is an inherent need to

investigate the nature and perceptions of

shoppers, and the suitability of different types

of products and services with respect to

Internet buying in Singapore and to a larger

extent the Asia Pacific region.

The authors

Ian Phau ([email protected]) is at Henley Management

College, Henley-on-Thames, UK.

Sui Meng Poon is at Surrey European Business School, UK.

Keywords

Electronic commerce, Internet, Shopping,

Consumer behaviour, Singapore

Abstract

Presents the findings of an empirical investigation of

Internet shopping in Singapore. Specifically, Internet buying

behaviour is compared between potential Internet buyers

and non-Internet buyers. It was found that the classification

of different types of products and services will significantly

influence the consumer choice between a retail store and

Internet shopping mall. The types of products and services

that are suitable for selling through the Internet are also

identified. Generally, products and services that have a low

outlay, are frequently purchased, have intangible value

proposition, and relatively high on differentiation are more

likely to be purchased via the Internet. Based on the analysis

and results obtained from the study, some recommendations

are presented to retailers who are interested in selling their

products via the Internet.

Electronic access

The current issue and full text archive of this journal is

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http://www.emerald-library.com

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Internet Research: Electronic Networking Applications and Policy

Volume 10 . Number 2 . 2000 . pp. 102±113

# MCB University Press . ISSN 1066-2243

Literature review

The Internet as a marketing channel

It has been reported in prior research that many

factors influence the choice between a retail

store and the in-home shopping method such as

mail/phone order and the Internet. Some of

which include socio-economic and

demographic factors (Cunningham and

Cunningham, 1973; Kono and Buatsi, 1984);

perceived purchase risk (Spence et al., 1970 and

Prasad, 1975); product type and distribution

methods (Akaah and Korgaonkar, 1989 and

Reynolds et al., 1977); personal traits or

characteristics (Cunningham and Cunningham,

1973) and shopping or delivery time (Arora,

1991 and Sharma et al., 1983). Other factors

include intrusiveness; confrontation and

contact control (Brezen

et al., 1987); manufacturer or brand reputation

(Akaah and Korgaonkar, 1989); type and

source of the offer (Korgaonkar, 1984;

Reynolds et al., 1977); price and refund or

exchange privileges (Arora, 1991). When

in-house shopping is extended to the Internet

shopping malls, these factors will be more

apparent. As a marketing channel, the Internet

has both unique characteristics and

characteristics that are shared with other

marketing channels. For instance, it has the

ability to store large amounts of information at

different virtual locations and provide

information to the consumers on demand.

There is also the advantage of a physical

distribution medium for certain goods (for

example, software) with relatively low entry and

establishment costs for sellers. As such, some

frameworks have been developed to help us

understand the process of online marketing.

Welz (1995) illustrates many of these issues

and proposes that online marketing should be

perceived as five components namely:

(1) promotions;

(2) one-to-one contact;

(3) closing;

(4) transaction; and

(5) fulfilment.

The first component, `̀ promotions'' refers to

advertising and creating awareness for users to

learn about the products. For `̀ one-to-one

contact'' the Internet allows for asynchronous

contact via other methods such as e-mail and

discussion groups and these can be used to

develop a relationship with a customer. The

third component `̀ closing'' involves setting the

price and closing the deal. While this can be

achieved through a collection of e-mail

messages, Internet buying is more like ordering

from a catalogue. Conversely, there is an

electronic record of the sale and the deal struck.

The fourth component `̀ transaction'' refers to

the payment for goods. Until recently, such

transactions were difficult over the Internet.

Increasing numbers of companies are

introducing systems to enable secure credit card

transactions on the Internet. Finally,

`̀ fulfilment'' involves the delivery of goods.

Delivery online is restricted to digital products

such as electronic books and software.

Fulfilment includes not only shipping, but also

effective electronic order processing.

In the same vein Peterson et al. (1997)

propose another model of Internet buying.

They perceive that the marketing activities can

occur through three types of channels:

distribution, transaction and communication

channels. The function of the distribution

channels is to facilitate the physical exchange of

products and services. Transaction channels

generate sales activities between buyers and

sellers. Finally, communication channels enable

the exchange of information between buyers

and sellers.

Putting these frameworks together, the

Internet comes across as a flexible, interactive,

and efficient medium through which economic

parties can communicate. The potential that it

offers for efficiency improvements in channel

functions will vary across different types of

intermediaries. However it is not without

caveats. Some appeals may not be able to be

transcended across the Web page.

Products sellable through the Internet

One weakness of the Internet is that it can

realistically reproduce only two of our five

senses, namely, sight and sound. One cannot

feel, smell or taste products that are advertised

on the WWW. This limitation will restrict the

kind of products that are sellable on the

Internet. Stern (1995) suggested that products

that make use of the hypermedia advantages of

WWW would be suitable. For example,

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Volume 10 . Number 2 . 2000 . 102±113

although the WWW appeals only to the sight

and sound of customers, this capability is

sufficient for customers to sample a certain

category of products. CDNOW! (http://

www.cdnow.com), for instance, offers buyers a

short audio clip on the music or songs available

for sale. One can even purchase art pieces

online by viewing the uploaded pictures (http://

www.kspace.com/).

Despite multimedia presentations, shopping

on the Internet is no substitute for the leisure

experience associated with conventional

shopping. Resnick (1995) claims that `̀ sellers of

mainstream goods who think they will succeed

on the Internet simply because they're making

purchasing more important conveniently miss

the point ± shopping at their sites must be fun to

attract customers''. In some context however,

Internet shopping can be inherently attractive

when compared to normal shopping. For

example, in retailing CDs, it is normal for the

buyer to go through lists of catalogues and

browse through racks of discs during purchase.

In the Internet CD store, a good database

management can provide easy access to this

information. A further benefit to the customer

is that it can be done at the comfort of the home

and at a time conducive to the buyer.

The suitability of the Internet for marketing

to consumers depends to a large extent on the

characteristics of the products and services

being marketed. It is therefore necessary to

explicitly consider product and service

characteristics when evaluating the impact of

the Internet. This can be done by formally

incorporating a product and service

classification into any analysis.

Peterson et al. (1997) suggested a

classification system in which products and

services are categorised along three dimensions:

(1) cost and frequency of purchase;

(2) value proposition; and

(3) degree of differentiation.

Goods vary along the first dimension from low-

cost, frequently purchased goods (e.g.

consumable products such as milk) to high-

cost, infrequently purchased goods (e.g.

durable products such as stereo systems). In

general, when purchase fulfilment requires

physical delivery, the more frequent the

purchase and the smaller the cost (e.g. milk),

the less likely there is to be a good `̀ fit'' between

a product or service and the Internet-based

marketing.

Goods vary along the second dimension

according to their value proposition, that is, if

they are tangible and physical or intangible and

service related. Internet-related marketing is

particularly well suited to certain types of

intangible or service-related goods (i.e. those

based on digital assets). To the extent that the

value proposition is intangible, the greater the

frequency of purchase or use of a good, the

greater the advantage of the Internet as a

transaction and distribution medium.

The third dimension reflects the degree to

which a product or service is differentiable. In

particular, it reflects the extent to which a seller

is able to create a sustainable competitive

advantage through product and service

differentiation. Internet-related marketing can

result in extreme price competition when

products or services are incapable of significant

differentiation. However, when products or

services are capable of significant

differentiation, the Internet can serve as an

effective segmentation mechanism for guiding

buyers to their ideal product or service. Table I

reflects the three dimensions together with

examples of products and services.

Empirical research in Singapore

The Internet shopping experience is also

captured in a study conducted by Temasek

Polytechnic in January 1998. Out of 1,800

respondents, only about 16 per cent of the

respondents had ever bought from the Internet.

Most of the respondents are young, between the

ages of 15 to 29, and over 74 per cent are single.

About 86 per cent viewed the Internet shopping

as either positive or neutral. The survey also

revealed that 15 per cent of the cyber-buyers

cited that, gifts, novelties, flowers and hampers

are the most popular category. Only 2 per cent

of the respondents chose the footwear category

as one of their most frequently purchased

categories. In addition, the study also shows

that convenience (32 per cent) was the most

important element in cyber-shopping followed

by the merchandise (22 per cent) itself. Another

19 per cent said that the promotion offered

would affect their purchase decision and only

12 per cent cited impulsive buying as their

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purchase. Of those who did not buy, it was

noted that 26 per cent of the non-cyber-buyers

stated that they preferred the real-life shopping

experience, that is, shopping in the store.

However, 44 per cent of them were worried

about the merchandise quality (18 per cent),

security in Internet shopping (15 per cent) and

trustworthiness of the company (11 per cent).

The survey suggests that the public is

generally positive towards cyber-shopping but

they do not purchase often in the Internet. They

usually buy through the Internet due to

convenience, wider merchandise selection and

promotional offers. Generally, they prefer to

purchase items with no sizing requirements.

Summary and research objectives

Previous research on in-home shopping has

certainly provided some understanding of the

in-home shoppers. However, most are done

using Western samples (For example, Aldridge

et al., 1997; Eastlick and Lotz, 1999; White and

Manning, 1998). Although there is an

increasing growth of electronic commerce in

Singapore and the Asia Pacific region, research

in this region is still conspicuously deficient. To

date, only one cross-national study has been

uncovered. This compares Internet strategies

between Japanese and US banks. Simeon

(1999) found that the contrasting approaches to

Web design information and service delivery are

due to cultural and institutional differences.

With this evidence, it can be assumed that

shoppers from different cultural and national

backgrounds may have influenced Internet

purchase intention. Further, Johnston and Johal

(1999) highlight that the Internet has developed

into a heterogeneous, dynamic and antagonistic

population and thus is an interesting subject for

cultural analysis. While the attempt to build on

Hofstede's cultural model offers some

directions, empirical studies involving Asian

culture are still deficient. The study conducted

by Temasek Polytechnic has shed some light on

generalising some of the demographic and

attitudinal attributes of Singapore Internet

shoppers. However, some questions remain

unanswered. For instance, how different are

cyber shoppers across different nations and

cultures? Do we have a `̀ global'' tribe of cyber

shoppers? Does Internet shopping differ

significantly by product types?

What is lacking is the specificity of a

framework in which strategists, marketers and

academics alike, can draw useful information to

generalise the buying behaviour of cyber-

shoppers. Building on Peterson et al.'s (1997)

classification of product and services, the

consumer choice between a retail store and

Internet shopping mall may be influenced by

the type of products and services offered.

Furthermore, price, frequency of purchase,

product tangibility and differentiation may be

factors affecting the mode of purchase.

Building on the preceding discussion, the

following hypotheses are proposed:

H1: Product and service type classification

will significantly influence the

consumer choice between a retail store

and Internet shopping mall.

H2a: Products and services that are relatively

expensive and infrequently purchased

are more amenable to be purchased via

the Internet.

H2b: Products and services that have

intangible value proposition are more

amenable to be purchased via the

Internet.

Table I Product classification

Dimension 1 Dimension 2 Dimension 3 Products and services

Low outlay, frequently Value proposition tangible or physical Differentiation potential high Wines, soft drinks, cigarettes

purchased goods Differentiation potential low Milk, eggs

Value proposition intangible or Differentiation potential high Online newspapers and magazines

informational Differentiation potential low Stock market quotes

High outlay, infrequently Value proposition tangible or physical Differentiation potential high Stereo systems, automobiles

purchased goods Differentiation potential low Precious metal ingot of known weight and purity

Value proposition intangible or informational Differentiation potential high Software packages

Differentiation potential low Automobile financing, insurance

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H2c: Products and services that are relatively

high on differentiation are more

amenable to be purchased via the

Internet.

Research methodology

Research instrument

The questionnaire was divided into two sections:

Section A of the questionnaire consisted of a list

of questions that gathered the demographic

variables of the respondents. In addition, one

question was designed to find out the likelihood

of the respondents in making purchases over the

Internet. Respondents were asked to indicate

their intention to buy over the Internet on a six-

point scale (1 = very unlikely and 6 very likely).

Based on a median split approach, we could then

classify the respondents into two groups, namely

potential Internet buyers (i.e. willing to consider)

and non-Internet buyers (i.e. not willing to

consider).

Section B of the questionnaire asked the

respondents to indicate how likely they were to

purchase each of the 20 listed products through

the Internet on a five-point scale (1 = very

unlikely, to 5 = very likely). The list was

adopted from Peterson et al.'s (1997)

classification of product and services. The

sample products were classified into various

categories according to costs, purchase

frequency, product tangibility and

differentiation. The Appendix reflects the entire

list. In addition, the respondents were also

asked directly on their preference on each of the

classification parameters, i.e. cheap-expensive,

frequently-infrequently purchase, intangible-

tangible, low-high differentiation.

Data collection

A pilot test to check on the readability and

reliability of the survey instrument was

conducted before the official data collection. A

total of 280 electronic mails were sent out with

a link to the Web site where the questionnaire

was displayed. The population coverage of the

questionnaire included the general public (20

per cent), students (23 per cent), and

employees of public and private organisations

(37 per cent) and patrons of some commercial

electronic commerce Web sites (20 per cent).

The overall response rate was around 60.6 per

cent, which yielded a total of 183 usable

questionnaires. Hence, the effective response

rate was 55.4 per cent. This is considered

adequate for analysis and reporting (Babbie,

1990).

Of those who gave usable information, 85

were females. The average age of the

respondents was 23.4, and their average weekly

Web use was 6.06 hours. A total of 47

respondents had purchased products over the

Internet while 136 had never tried before.

Using the median split approach, 70.5 per cent

of the respondents were classified as potential

non-Internet buyers, while 29.5 per cent were

classified as potential Internet buyers. The most

likely purchased categories of products were

CDs, online videos/music, online paid

subscription to financial reports and stock

market quotes and computer software.

Findings and analysis

The results of products that are likely to be

purchased through the Internet are tabulated in

Table II. The results show that the means of

most products were higher for Internet buyers

than for non-Internet buyers. Independent

samples t-tests reveal that some products were

found to be significantly more likely to be

purchased by Internet buyers than non-Internet

buyers. These include flowers, online paid

subscription to newspapers and financial

information, online videos/music, computer

software, consultancy services, car loans and

insurance. Conversely, there were also some

products found to be significantly more unlikely

to be purchased by Internet buyers than non-

Internet buyers. These include milk, eggs and

vegetables.

To better understand the influence of each of

the product attribute, namely low outlay and

frequently purchased versus high outlay and

infrequently purchased, tangible or physical

versus intangible or informational, and low

differentiation versus high differentiation, the

data was recoded according to each product

attribute as shown in Table III.

Paired sample t-tests were then conducted to

evaluate the consumer receptiveness of each

product class. The results are shown in Table IV.

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Significant differences in each of the product

classes were found. Low outlay and frequently

purchased goods are better received than high

outlay and infrequently purchased goods.

Similarly, intangible or informational goods are

better received than tangible or physical goods,

while products with high differentiation are more

suited to be sold on the Internet than products

with low differentiation.

In general, the analysis suggested that

computer-related products (with the exception

of flowers) could be marketed through the

Internet. This could be due to the high

technology orientation of the Internet users.

Also, the Internet medium can become the

delivery medium for software. Thus a software

package can be delivered digitally and be used

by the customer literally in minutes. Another

reason is that the Internet enables online trial of

such products. Internet buyers, for example, are

able to try out the demonstration version of

computer software, or be given trial periods of

the online newspapers or video/music, before

making a purchase decision. This reduces

uncertainty in purchase decision and stimulates

purchases.

It also appears that products and services with

low outlay, frequently purchased, tangible or

physical, and with a low differentiation

potential, i.e. category B products, are

unsuitable for selling through Internet in

Singapore. In fact, both Internet buyers and

non-Internet buyers had relatively low purchase

intentions for such goods. Expensive items such

as cars, stereo systems and jewellery are also not

suitable to be sold over the Internet. These

products require more than visual inspection.

For example, a car needs to be test-driven and a

jewellery piece needs to be physically examined

by the potential buyer in order to appreciate its

value. In general, the analysis suggests that

products capitalising on the advantages of the

Internet are more likely to be bought through

the Internet.

Discriminant analysis

To analyse the relationship between the

product categories and shopping behaviour,

discriminant analysis was applied to predict the

relationship between the product categories and

Internet buying. The data on product categories

was summed accordingly so as to obtain the

Table II T-tests of products between non-Internet buyers and Internet buyers

Non-Internet buyer Internet buyer p-value

Products Mean Standard deviation Mean Standard deviation (two-tail)

Wines 1.9922 1.2593 2.3148 1.3150 0.121

CDs 3.2713 1.3214 3.6111 1.3929 0.120

Flowers 2.6822 1.4251 3.4815 1.3138 0.001*

Milk 1.9535 1.3685 1.4074 1.0003 0.009*

Eggs 1.9845 1.3919 1.5556 1.2079 0.050*

Vegetables 1.8140 1.2548 1.4074 1.0003 0.036*

Online newspapersa 2.9845 1.5461 3.6667 1.3318 0.005*

Online videos/music 3.0930 1.4222 3.7037 1.2074 0.006*

Online financial informationa 3.0388 1.4969 3.7963 1.2190 0.001*

Stock market quotes 3.0078 1.5537 3.4444 1.4879 0.081

Weather information 2.8915 1.5270 3.2407 1.7149 0.175

Stereo systems 1.8140 1.1711 1.9630 1.2733 0.445

Automobiles 1.5581 0.9430 1.4074 0.5993 0.279

Jewellery 1.7752 1.2577 1.9074 1.1205 0.504

Gold, silver ingots/bars 1.4729 0.8011 1.5741 0.9635 0.465

Pigs/cows, livestock 1.4109 0.8625 1.3704 0.7842 0.767

Computer software 2.8760 1.3694 3.8889 1.1271 0.000*

Consultancy services 2.3643 1.3047 2.9630 1.3593 0.006*

Car loans 1.9845 1.0968 2.4630 1.5627 0.019*

Insurance 1.8915 1.0770 2.5370 1.4885 0.001*

Notes: 1 = very unlikely, 5 = very likely; apaid subscription; *significant at p 5 0.5

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composite scores for each product category.

The samples were again divided into two parts

the analysis sample (70 per cent) and the

holdout sample (30 per cent). The analysis

sample was used to estimate the discriminant

function while the holdout sample was used to

validate the discriminant function. A two-group

discriminant analysis was used where a

dichotomous variable was created to separate

the respondents into potential Internet buyers

and non-Internet buyers. A median-split was

applied in which 100 respondents were

identified to be non-Internet buyers while 37

were grouped as Internet buyers.

The data were analysed using the SPSS

program DISCRIMINANT function, adopting

a stepwise procedure. At each step, the variable

that minimised the overall Wilks' Lambda was

entered. The eigenvalue was 0.227 and Wilks'

Lambda = 0.815. The procedure indicated

product Category A (0.533), Category B

(±0.438), Category E (±0.765), Category F

(0.418), Category G (0.435), and Category H

(0.330) as the six discriminating product

Table III Recoding of product data

Product attribute Categories data to be drawn from

Low outlay and frequently purchased goods Category A ± wines, CDs, flowers

Category B ± milk, eggs, vegetables

Category C ± online newspapers, videos/music, financial reports

Category D ± stock market quotes, weather information

High outlay and infrequently purchased Category E ± stereo systems, automobiles, jewellery

Category F ± gold, silver ingots/bars, pigs/cows, livestock

Category G ± computer software, consultancy services

Category H ± car loans, insurance

Tangible or physical Category A ± wines, CDs, flowers

Category B ± milk, eggs, vegetables

Category E ± stereo systems, automobiles, jewellery


Intangible or information Category C ± online newspapers, videos/music, financial reports




High differentiation Category A ± wines, CDs, flowers

Category C ± online newspapers, videos/music, financial reports

Category E ± stereo systems, automobiles, jewellery


Low differentiation Category B ± milk, eggs, vegetables




Table IV Paired sample t-tests on product class

Product class Mean Standard deviation P-value

Low outlay and frequently purchased 2.6885 0.7934

High outlay and infrequently purchased 2.0012 0.76880.000*

Tangible or physical 1.9826 0.7046

Intangible or informational 2.8640 0.99500.000*

Low differentiation 2.0650 0.6938

High differentiation 2.6364 0.80670.000*

Notes: 1 = very unlikely; 5 = very likely; *significant at p 5 0.5

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categories between the Internet and non-

Internet buyers. The highest p-value was only

3.962 6 10-4 (the unstandardised coefficients

are shown in parenthesis). The group means

(centroids) of the discriminant function is -

0.274 for non-Internet buyers and 0.814 for

Internet buyers. The results give us the

following estimated discriminant function:

D = ±1.942 + 0.533 Category A ±

0.438 Category B± 0.768 Category E + 0.418

Category F+. 0.435 Category G + 0.330

Category H.

To determine the predictive accuracy, a

classification matrix was constructed. The

discriminant function had correctly classified

68.1 per cent of respondents in the analysis

sample and 68.8 per cent in the holdout

sample. The proportional chance criterion was

employed to assess the usefulness of the

function. Cpro was found to be 60.57 per cent,

which is lower than both the prediction

accuracy of 68.1 per cent for the analysis

sample and the 68.8 per cent for the holdout

sample. Therefore, the prediction accuracy was

considered acceptable (Hair et al., 1995) and

validated the usefulness of the discriminant

function. Table V presents the statistical details.

The relative importance of the predictors can

also be obtained by examining the structure

correlation of the discriminant function

obtained from the analysis. As a result, products

in Category G were most successful in

differentiating Internet buyers from

non-Internet buyers while products in Category

E had the least discriminating power. Category

G are essentially products and services that are

relatively expensive, infrequently purchased,

have intangible value proposition, and relatively

high on differentiation are more amenable to be

purchased via the Internet. Table VI presents

the statistical details.

Discussion

The findings of this research help to profile a list

of products that are suitable for sale in an

interactive electronic shopping medium. In so

doing, it assists marketers in introducing and

promoting certain products that have more

success potential in this mode of retail. Generally,

the preceding section on the findings cohere very

well with Peterson et al. (1997) hypotheses that

Internet-relating marketing is more suitable for

intangible or service-related, as well as high

differentiation goods. Conversely, the hypothesis

that the greater the frequency of purchase and the

smaller the cost, the less likely there is to be a

good `̀ fit'' between a product or service and the

Internet-based marketing is not supported. As a

summary, Table VII provides the results of the

hypotheses testing.

Certainly, at least within the Singapore context,

expensive goods like automobiles, jewellery, and

stereo systems are not ready for Web selling. The

monetary risks involved in buying these products

are too great. These products also require more

than visual inspection. This reflects some of the

Table V Classification resultsa, b

Predicted group membership

Non-Internet buyer Internet buyer Total

Original cases selected

Count Buyer Non-Internet buyer 70.0 31.0 101

Internet buyer 12.0 22.0 34.0

Percentage Buyer Non-Internet buyer 69.3 30.7 100.0


Cases not selected

Count Buyer Non-Internet buyer 20.0 8.0 28.0


Percentage Buyer Non-Internet buyer 71.4 28.6 100.0


Notes: a68.1 per cent of selected original grouped cases correctly classified; b68.8 per cent of unselected original grouped cases correctlyclassified; Cpro = p2 + 1 ±p)2 where p = proportion of individuals in group 1; (1±p) = proportion of individuals in group 2

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findings in prior studies (such as Eastlick, 1991;

Shim and Mahoney, 1991) whereby perceived

risk tends to impede the adoption of non-store

retailers such as online shopping systems.

Furthermore, Internet shopping is generally still

unfamiliar to most Internet users, and there exists

a certain amount of uncertainty regarding the

retailers' trustworthiness and credibility. Relating

this to prior studies, Eastlick and Lotz (1999)

found that their US sample of non-adopters of

Internet shopping generally have higher negativity

towards this mode of shopping as compared to

adopters. While it is difficult to generalise this to

the current sample, it is not surprising that the

findings of this current sample reflect similar

concerns.

Category B products, which are those with

low outlay, are frequently purchased, tangible

or physical, and with a low differentiation

potential, are unsuitable for selling through the

Internet in Singapore. This is because these

products are easily available in the

neighbourhood shops at low prices. Moreover,

these products are usually bought when the

need arises and very little search for pre-

purchase information is needed. This seems to

reflect the findings of White and Manning

(1998) whereby more consumers are more

likely to buy food and drinks from retail outlets

(75.2 per cent) than through online sources

(29.7 per cent).

For a consumer wishing to experience the

merchandise prior to purchase, Internet-based

marketing would seem to be a poor substitute for

traditional retail channels, where the good is

available for inspection. However, a consumer

might use a traditional retail channel to

experience the merchandise and then revert to an

Internet-based channel when acquiring it.

Additionally, as a communication channel, the

Internet will be increasingly able to offer

perceptual experiences that far transcend verbal

descriptions of goods. Pictures of flower bouquets

or fruits can be presented in great detail, and

music from a compact disc can be sampled

online. When products are capable of significant

differentiation, the Internet can serve as an

effective segmentation mechanism for guiding

buyers to their ideal product or service. For

example, consider a prospective buyer in the

market for computer virus protection software.

Searching on the Internet enables the prospective

buyer to obtain information on various competing

products, possibly sample the products for free,

and select the one that best meets his or her

requirements. Compared to conventional

retailing, such detailed search and personal

sampling would be costly. Finally, for frequently

purchased goods, in which a consumer has

considerable personal experience, the Internet

may serve as an effective communication and

transaction medium since the perceived risks

would be very much reduced.

In general, the analysis suggests that products

capitalising on the advantages of the Internet

are more likely to be bought through the

Internet. Electronic retailers should therefore

focus on computer-related products, or

Table VII Summary of results of hypotheses

Hypothesis Description p < 0.05

H1 Product and service type classification will significantly influence the

consumer choice between a retail store and Internet shopping mall

Supported

H2a Products and services that are relatively expensive and infrequently purchased

are more amenable to be purchased via the Internet

Not supported

H2b Products and services that have intangible value proposition are more amenable

to be purchased via the Internet

Supported

H2c Products and services that are relatively high on differentiation are more

amenable to be purchased via the Internet

Supported

Table VI Structure coefficients of the discriminant function

Variables Structure coefficients

Category G 0.662

Category H 0.524

Category A 0.471

Category C 0.409

Category D 0.317

Category B ±0.314

Category F 0.170

Category E ±0.014

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products which allow trial sampling or those

that are high on information content. Examples

of these include computer software, CDs,

online newspapers, online videos/music, online

financial and stock information.

Since the search costs for product

information through the Internet are low,

buyers can easily compare similar products

across different Web site companies with a click

of the mouse. As Internet buyers value

convenience, electronic retailers should keep

their Web sites open 24 hours a day and

equipped with an online ordering mechanism

for easy impulse buying. Thus buyers can easily

obtain pre-purchase information and compare

products at any time of the day to make

immediate purchases.

The study also advocates that retailers carry

familiar brands and speciality products, a point

highlighted in Eastlick and Lotz's (1999) study.

It is logical to infer that Internet buyers will

prefer well-known brands, as they are confident

of the quality assurance. Otherwise, buyers may

easily switch to another Internet shopping mall

since the search costs are low.

Another way of providing a wider range of

merchandise is by pooling the resources of

different electronic retailers to establish a virtual

shopping mall. A virtual shopping directory that

classifies the retailers according to the products

offered will make it easier for the buyer to shop.

Since the shopping mall is virtual, new retailers

can also be easily added to the mall.

Alternatively, electronic retailers selling similar

or complementary products could form a

specialist shopping mall. For instance, a one-

stop travel Web site could be established that

links up all the travel agencies, providing

comprehensive information on the various

destinations, travel tips, hotels, tour packages,

as well as offering online booking of tours,

flights, or hotels. It can even take a step further

to facilitate business-to-business transactions

between the various tour agencies, hotels and

airlines. The Internet buyers can then browse

through all the products via a single Web site.

This will help generate more hits at the Web site

because it provides convenience to the buyer, a

factor that is highly valued as shown in the

earlier study.

The main managerial implication of this

study is that only certain profiles of goods are

suitable for an interactive environment in

Singapore. Peterson et al.'s (1997) classification

framework of goods sold in the interactive mode

is still at its infancy in Western studies, thus

direct comparison of this study with others is

not possible. However, some inference has been

drawn with relevant and related studies

wherever feasible. Through the comparisons

discussed in the preceding sections, it appears

that there are a number of similarities in terms

of shopping motivation and the appropriateness

of goods sold over the Internet. While Simeon

(1999) concluded that there are significant

differences between Japanese and US Web-site

strategies, Internet shoppers may well exhibit

several demographic and psychographic

similarities. This trait is captured in the concept

of the Internet as a virtual cultural region as

suggested by Johnston and Johal (1999).

Certainly, more cross-national studies have to

be conducted to achieve a more conclusive

finding.

What can be concluded however, is that the

design of the Internet shopping environment

must be able to deliver potential advantages

over other alternative shopping formats such as

retail stores. `̀ Convenience'', a factor

commonly cited in Eastlick and Lotz (1999)

and the study conducted by Temasek

Polytechnic (1998) has to be dealt with caution.

While goods such as gifts (for instance, flowers

and cards) fall into this category for both

studies, Category B products should not be

assumed to achieve similar responses from

Singapore and the Western samples.

Geographically, Singapore is a very densely

populated country whereby neighbourhood

shops are within easy reach, with many within

walking distance. This may not be true in the

rural areas of the Western countries with more

diverse geography. This probably explains why

Amazon Bookstore is less popular and

successful in Singapore. In the same vein, it

may be possible to generalise the findings of this

study across other Asian countries of similar

social and economic development such as Hong

Kong, Taiwan and Japan. However, less

developed economies such as Indonesia and the

Philippines may not reflect the same responses

due to a lower exposure of the Internet and thus

the adoption of interactive shopping may be

severely restricted. In short, marketers must

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demonstrate to non-Internet consumers that

interactive shopping is convenient, safe and

simple to use.

Conclusion

This study has presented empirical findings of

Internet shopping in Singapore comparing the

Internet and non-Internet buyers. Product and

service type classification will significantly

influence the consumer choice between a retail

store and the Internet shopping mall. In

addition, the types of products or services that

are suitable for selling through the Internet were

also identified. In summary, the products and

services that have a low outlay, are frequently

purchased, have intangible value proposition,

and are relatively high on differentiation are

more likely to be purchased via the Internet.

Based on the analysis and results obtained from

the study, some suggestions were made for

retailers who are interested in selling their

products via the Internet.

A number of limitations are apparent. First,

the convenience sample based on a quota,

rather than a truly random sample. Some

selection bias may still have intruded the

results. Second, the selection of image items is

elicited from previous research on both mail/

phone order marketing and on purchase

decision making for retail store shopping goods

in Settle et al. (1994). Limitations on the survey

response task precluded the use of more than

eight items, and those included were judged to

be the most likely to influence the Internet/retail

shopping medium purchase decision. Future

research should try to eliminate these issues to

provide more generalisable and useful results.

Studies should also be extended to find out

whether products with higher brand awareness

would enjoy better sales in Internet purchase

compared to retail store purchase. The other

obvious lead will be to replicate this study in

Western and other Asian cultures to make

explicit comparisons.

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Appendix

Table AI Classification of products

Product

categories Description

Products included

in questionnaire

Category A Goods that have a low outlay frequently purchased

tangible or physical and have a high differentiation

potential

Wine

CDs

Flowers

Category B Goods that have a low outlay frequently purchased

tangible or physical and have a low differentiation

potential

Milk

Eggs

Vegetables

Category C Goods that have a low outlay frequently purchased

intangible or informational and have a high differentiation

potential

Online newspapers

Online videos/music

Financial reports

Category D Good that have a low outlay frequently purchased

intangible or informational and have a low differentiation

potential

Stock market quotes

Weather information

Category E Goods that have a high outlay infrequently purchased

tangible or physical and have a high differentation

potential

Stereo systems

Automobiles

Jewellery

Category F Goods that have a high outlay infrequently purchased

tangible or physical and have a low differentiation

potential

Gold, silver ingots/bars

Pigs/cows, livestock

Category G Goods that have a high outlay infrequently purchased

intangible or informational and have a high differentiation

potential

Computer software

Consultancy services

Category H Goods that have a high outlay infrequently purchased

intangible or informational and have a low differentiation

potential

Car loans

Insurance

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factors influencing the types of products and services purchased over the internet

Documents