Browsers or Buyers in Cyberspace?

An Investigation of Factors Influencing

Electronic Exchange
1. Vanitha Swaminathan
1,*
,
2. Elzbieta Lepkowska-White
2,*
,
3. Bharat P. Rao
3,*

Article first published online: 23 JUN 2006
DOI: 10.1111/j.1083-6101.1999.tb00335.x
Issue
Journal of Computer-Mediated Communication
Volume 5, Issue 2, page 0,December 1999

Abstract
In its current form, the Internet is primarily a source of communication, information and
entertainment but increasingly also a vehicle for commercial transactions. An understanding
of reasons for purchasing on the World Wide Web is particularly relevant in the context of
predictions made regarding electronic shopping in the future. In the paper, we focus on
some of the antecedents to electronic exchange in the online context. In particular, what are
some of the factors influencing online purchasing behavior? What is the role of privacy and
security concerns in influencing actual purchase behavior? How do vendor and customer
characteristics influence consumers' propensity to engage in transactions on the Internet?
We analyze secondary data from an e-mail survey. The study has implications for both
theory and practice. The findings extend our knowledge of factors influencing marketing
exchange from the traditional setting to the internet context. In addition, the findings
regarding factors enhancing the propensity to shop online have implications for internet
retailers seeking to enlarge their online customer base.


Introduction
The Internet has emerged in the recent past as a dynamic medium for channeling
transactions between customers and firms in a virtual marketplace. The growth of the Web
has been phenomenal, and there has been a corresponding growth in commerce on this
robust platform. Varying estimates of its impact on online retail and shopping abound, and
the estimates point to dramatic growth. It is projected that online shopping will grow from
$11 billion in 1999 to $41 billion in 2002 (National Retail Federation, 1999). The US
Commerce Department citing a study by Forrester Research suggests that online retail
trade ranging from $7 to $15 billion in 1998 will reach anywhere from $40 billion to $80
billion by 2002 (US Department of Commerce, 1999).
(1)

Many companies are already online, exploring and shaping this new opportunity.
Amazon.Com offering more than two million titles of books and CDNow are prime examples
of companies that are successful in the online space as evidenced by their stock market
capitalizations (Zwass, 1999). According to the Travel Industry Association of America (TIA),
the number of Americans using the Internet to plan vacation or travel grew from 10% in
1996 to more than 25% in 1998 (Kate, 1998).
The rapid growth of this new medium poses intriguing questions for academic research. To
date, researchers have focused on the role of the Web as an information and
communications medium (Hoque and Lohse 1999; Lynch and Ariely 1998; Alba et. al
1997; Hoffman, Novak and Chatterjee 1996; Berthon, Pitt and Watson 1996; Hoffman and
Novak 1995). Berthon, Pitt and Watson (1996) introduce the concept of conversion
efficiencies of a Web site, which refers to the rate at which browsers are converted into
buyers. While a number of authors have examined factors that may influence shopping on
the internet, (e.g., Alba et al. 1997; Palmer 1997), much of this research is primarily
conceptual in nature. Hoque and Lohse (1999) examine the impact of user interface design
on information search costs in electronic media. Very little empirical research exists on
issues relating to shopping on the internet.
In order to examine the various alternative shopping formats, a brief comparison of Web
retailing with traditional retail, TV in-home shopping, catalog shopping on various
dimensions of variety, trialability, asynchrony and interactivity is enclosed in Table I. As can
be seen in the Table, the internet retailer offers the benefit of asynchrony, i.e., the internet
retailer is available for shopping any time of the day or night, and the benefit of interactivity.
The disadvantages are the inability to sample the product and the limited variety in terms of
merchandise.
(2)

Variety Trialability Asynchrony Interactivity
Full Retail High High Low High
TV Moderate Low Moderate Low
Catalogs Moderate Low Moderate Low
Web Moderate Low High High
Table 1. Transaction Types Compared
Scant research exists which examines factors influencing purchasing over the internet, an
issue which is particularly relevant in the context of predictions regarding electronic
shopping in the future. In particular, the following questions are of interest to the
researchers: (1) What factors influence online purchasing behavior?; (2) What is the role of
perceived risk in online purchasing on actual purchase behavior?; (3) How do differences in
customer characteristics influence their decisions to shop online?
Our primary objective of this study is to investigate factors influencing commercial
transactions in the online environment. To address this issue, we develop a model
examining the factors influencing electronic exchange. The model will be tested on a
sample of internet users. Some of these internet users are likely to exhibit a greater
propensity to shop online. Therefore, the purpose of this study will be to examine factors
influencing buying among internet browsers. In the following section, the model used in this
study will be described and the hypothesis for each antecedent developed. Following that,
the data analysis is presented. Finally, results, conclusions and directions for future
research are presented.

THE CONCEPTUAL MODEL
It has been long known that the exchange process is central to the concept of marketing
(Sheth and Parvatiyar 1995; Morgan and Hunt 1994; Dwyer, Schurr and Oh 1987; Bagozzi
1975, 1974). The exchange system has been conceptualized as a set of social actors and
their relationships to each other, and as the endogenous and exogenous variables affecting
the behavior of the social actors in those relationships (Bagozzi 1974). The theory of
exchange has evolved into the theory of relational exchange. Relational exchange theory or
relationship marketing has a number of proponents and has been frequently used in the
past studies (Morgan and Hunt 1994; Sheth and Parvatiyar 1995). Although the relational
exchange literature primarily focuses on the determinants of long-term buyer-seller
relationships, some of the concepts from the earlier literature on exchange (Bagozzi 1975,
1974) and the recent work in the relationship marketing area can be drawn upon in
identifying factors influencing the likelihood of electronic exchange.
The fundamental exchange model (Bagozzi 1974) views the exchange process as a social
influence process. Among the characteristics identified in the social exchange model as key
antecedents of exchange are social influence, social characteristics of actors and third party
effects. Thus, in the context of electronic exchange, the characteristics of the consumers
and the vendors should affect the propensity to engage in a transaction. For instance, in
regards to consumers, Sheth and Parvatiyar (1995) suggest that consumers' sociological
orientations may play an important role in increasing the propensity to engage in
relationships. We investigate the role of consumer characteristics by examining the
consumers' shopping orientations as an antecedent to the likelihood of electronic exchange.
In regards to vendors, literature on relationship marketing recognizes the role played by
trust (Morgan and Hunt 1994; Moorman, Deshpande and Zaltman 1993). Trust is defined as
confidence on the part of the trusting party that the trustworthy party is reliable, has high
integrity and is associated with such qualities as consistency, competency, honesty,
fairness, responsibility, helpfulness and benevolence (Morgan and Hunt 1994). Vendor
characteristics were chosenbased on these factors.
Finally, perceived risk has been identified as a key antecedent to relationship commitment
in past studies (Sheth and Parvatiyar 1995). In this research, the perceived risk is referred to
as the overall perceived security of transactions in an online environment and it is not
specifically related to a single vendor. The notion of perceived risk as a key antecedent to
consumer behavior has been established in the past and may be a primary factor
influencing the conversion of browsers to buyers (Bauer 1960). Connected with this issue is
consumers' concern for privacy, e.g., Bloom, Milne and Adler (1994). This research suggests
that consumers may not be willing to give out information on the Internet since they may be
afraid that their private information may be sold to someone else and this may prevent them
from engaging in e-commerce. We posit that perceived security of transactions and concern
for privacy are two other antecedents to electronic exchanges.
The model of antecedents to electronic exchange is presented in Figure I. The model shows
the likelihood of electronic exchange as the focal construct of interest influenced by
consumer and vendor characteristics, concern for privacy and perceived security of
transactions. For the purpose of this study, we define electronic exchange as past
purchasing behavior measured in two ways: (1) number of occasions when a WWW user
makes an electronic purchase and (2) the total amount spent online in the last six
months.
(3)
The data in this study was analyzed at the individual level. In the next section,
each antecedent presented in the model is described and formal hypotheses are
developed.

Figure I. Factors Influencing Likelihood of Electronic Exchange

Vendor Characteristics
We define a vendor as any seller who seeks commercial electronic exchange with an
Internet user. This should not be confused with electronic service providers like Netcom or
America Online who provide computer time for a fee. A retailer with a home page on the
WWW, like JC Penney, which provides users with the opportunity to shop over the
computer is therefore classified as a vendor. Consumers evaluate these vendors before
they enter into electronic exchanges and therefore, the characteristics of these vendors play
an important role in facilitating an exchange. These vendors have to be superior to other
vendors in alternative shopping modes in order to be noticed and contacted by consumers.
We identify the following vendor characteristics as important in the context of electronic
transactions: (1) reliability, (2) convenience in terms of services offered, and (3) the
perceived price competitiveness and easy access of information offered by Web vendors in
comparison to alternative shopping modes.
Reliability is related to the construct of trust. Trust is defined as, a willingness to rely on an
exchange partner in whom one has confidence, (Moorman et al. 1993, p.82) and as
confidence that the other party is reliable, honest, consistent, competent, fair, responsible,
helpful and altruistic (Morgan and Hunt 1994). Luedi (1997, p.22) argues that vendors should
fulfill transactions by reliably and securely supporting the full spectrum of electronic
commerce from promotional pricing to secure payment handling. The trust in a vendor is
likely to affect the consumers' perception of vendor's reliability and is therefore identified as
an antecedent of an electronic exchange.
H1a: The greater the perceived reliability of Web vendors compared to other vendors, the
greater the likelihood of electronic exchange.
The perceived convenience offered by Web vendors is a significant factor in influencing the
decision to purchase at home. Shopping convenience is acknowledged to be the primary
motivating factor in consumer decisions to buy at home (Gillett 1976). Studies of catalog and
telephone shoppinghave indicated the role of convenience-orientation as a significant
predictor of in-home shopping behavior (Gillett 1976; Reynolds 1974). Shopping
convenience includes the time, space and effort saved by a consumer and it includes
aspects such as an ease of placing and canceling orders, returns and refunds, timely
delivery of orders (Gehrt, Yale and Lawson 1996).
H1b: The greater the perceived convenience of using Web vendors compared to other
vendors, the greater the likelihood of electronic exchange.
Price competitiveness of an online vendor in comparison to other online vendors should
promote Internet purchases. Previous research suggests that the Internet provides
consumers with information that allows for price comparisons (Zellweger 1997). Alba et al
(1997)states that the Internet increases price comparisons and intensifies competition
among the online vendors who try to attract potential buyers.
H1c: The greater the perceived price competitiveness of Web vendors compared to other
vendors, the greater the likelihood of electronic exchange.
Finally, the wealth of useful information that is readily provided on the Internet by a vendor
is likely to enhance electronic transactions (Zellweger 1997). Zellweger (1997, p. 13) states
that buyers become extremely frustrated especially when pages contain irrelevant
information.Luedi (1997 p.22) argues that successful Internet marketers should attract and
retain consumers by providing personalized and compelling content coupled with a sense of
community relevant to them. This suggests that buying might be the result of encouraging
browsers to repeat visit the site. Consumers might consider richness of information as a
vendor-specific characteristic. This information may in itself be a reason to return to that
vendor. Further, with technologies like personalization used in conjunction with detailed
product information, the switching costs of moving to another vendor are increased after the
first positive shopping experience at the vendor. Therefore, it is proposed that:
H1d: The greater the perceived usefulness of information of Web vendors compared to
other vendors, the greater the likelihood of electronic exchange.

Perceived Security of Transactions and Concern for
Privacy
One of the most important and pressing concerns for businesses on to the Internet deals
with the level of security in transactions. Many companies are going online, not because of
strategic reasons, but due to strong lobbies that push for such an interface with the outside
computer world. Most current commercial Web Pages provide consumers with various
options to place orders for the products advertised. These include addresses, toll-free
numbers, and in many cases, a provision for sending credit card information. Unscrupulous
use of such sensitive information cannot be ruled out. Despite advances in Internet security
mechanisms like SHTTP, cryptography, and authentication, customers are still concerned
about using an impersonal transaction medium for secure transactions. Online retailers
have to make concerted efforts to allay these fears by offering clear guidelines to
consumers on their online security and privacy policies, limits of consumer liability in the
case of fraudulent transactions, and offer alternate payment mechanisms through toll-free
phone numbers, customer representatives, etc. if necessary. Still, perceptions of
unsatisfactory security on the Internet is one of the primary reasons hindering online
purchasing (Zellweger 1997; Communications of the ACM, April 1999, p.80).
Risk is faced by individuals when a decision, action or behavior leads to different outcomes
(Bem 1980). When an individual's action produces social and economic consequences that
cannot be estimated with certainty, the individual encounters risk (Zinkhan and Karande
1991). Risk relates to situations or problems (Bem 1980; Dowling 1986), overall product
categories or brands (Dowling and Staelin 1994) or persons' attitude to risk (Zinkhan and
Karande 1991). In our context, two types of risk are especially relevant:(1) person's overall
risk taking propensity and (2) the perceived risk of online transactions. The perceived
security of online transactions varies based on the specific payment procedure. For
instance, the perceived security of giving credit card information directly over the Web is
likely to be different from the risk of setting up a third party account and using that account
number in transactions.
H2: The greater the perceived security of transactions in an online medium, the greater the
likelihood of electronic exchange.
Connected with this issue are consumers' concerns about the use of their private
information by organizations when engaging in Internet activities (Business Week, April 5,
1999). Various surveys show that online shoppers are concerned about privacy
(Communications of the ACM, April 1999, p. 80). Rohm and Milne (1999) confirmed the
finding that privacy is an important issue to the Internet users although other research on
direct mail suggests that privacy may not be of such great importance to consumers (Milne
and Gordon, 1993).
Alternative payment procedures might offer convenience, but offer a limitation to customers
who are concerned about transmitting personal information, e.g., credit card numbers,
online. P3P and other privacy protocols also represent the initial steps in the evolution of
technical standards to combat privacy abuse. We refer the reader to Cranor, et al (1999) for
a comprehensive analysis of consumer attitudes to online privacy, technological solutions,
and the current debate on privacy issues. (Cranor et al, 1999).Given the current recognition
of privacy as a major issue in electronic commerce, we propose that consumers propensity
to engage in shopping over the internet is lower if they are concerned about privacy of
information.
H3: The greater the concern for privacy, the lower the likelihood of electronic exchange.

Consumer Characteristics
The relationship marketing literature suggests that consumer characteristics, eg.,
sociological orientation, plays an important role in a consumers' propensity to engage in the
Internet transactions (Sheth and Parvatiyar 1995). The retailing literature also suggests that
consumer characteristics are important indicators of the probability of making purchase
decisions on the Internet. In his pioneering study,Stone (1954) suggested that shopping
behavior has social-psychological origin and classified shoppers into four types: economic
shopper, the personalizing shopper, the ethical shopper and the apathetic shopper. Another
typology was identified by Stephenson and Willett (1969) who grouped consumers into
recreational, convenience and price oriented shoppers. Two additional categories that is
psychosocializing and name-conscious shoppers were added by Moschis (1976). Bellenger
and Korgaonkar (1980) suggest that consumers can be classified into recreational and
convenience shoppers. They suggest that the recreational shopper is motivated by the
social aspects of shopping. Past research suggests that the Internet is less attractive to
consumers who value social interactions since it allows for very limited interactions relative
to other retail formats such as department stores (Alba et al 1997).
(4)
Therefore, it is
hypothesized that those consumers who are primarily convenience shoppers are more likely
to shop online than those that seek social interaction.
H4a: The likelihood of electronic exchange will be greater among convenience shoppers.
H4b: The likelihood of electronic exchange will be lower among shoppers seeking social
interaction.
DATA
This study uses secondary data based on an e-mail survey conducted by the Georgia
Visualization and Usability Center at Georgia Tech of approximately 5000 respondents. The
respondents were invited to participate in the e-mail survey through announcements on
Internet related newsgroups (e.g. comp.infosystem, www.announce, comp.internet.net-
happenings, etc.), banners randomly rotated though high-exposure sites (e.g. Yahoo, CNN,
Excite, Webcrawler, etc.), banners rotated through advertising networks (e.g., DoubleClick),
announcements made to the www-surveying mailing list, a list maintained by GVU's WWW
User Surveys composed of people interested in the surveys, and announcements made in
the popular media, e.g., newspapers, trade magazines,
(http://www.gvu.gatech.edu/user_surveys/survey-1998-10/#methodology). A $ 100 cash
incentive was given to approximately ten randomly chosen respondents. One of the
limitations of this survey is that respondents are not chosen in a random manner. In order to
ensure a random sample, it is essential to have a list of all users of the Internet such that
respondents may be chosen randomly using probability sampling. Since such a list is not
available, a non-probabilistic sampling procedure described above is used. This may result
in self-selection bias and reduce our ability to generalize to the population at large.
However, most surveys have some element of self-selection bias due to the refusal by
certain respondents to participate in a survey. It is acknowledged that the sampling
procedure may be a limitation of the current study but also believe that the insights derived
from an empirical analysis of the topic outweigh the limitation imposed by the sampling
procedure.
The survey, conducted in 1998, involved data collected in questionnaires addressing each
topic: vendor characteristics, security of transactions, concern for privacy, customer
characteristics and purchasing behavior. The data available in various databases was
matched using an ID number given to each consumer. Of the 5000 respondents that
responded to the individual questionnaires, only 428 had completed responses to all the
topics. In other words, the final sample size after merging data sets was 428. A description
of the respondents in the sample in terms of their age, education, income and gender is
presented in Table II. The respondents were qualified to include those who are users of the
internet for collecting information and browsing. Some of these respondents use the internet
for purchasing. Approximately 15% of the respondents hardly ever purchased anything
online.
Variable Percentage(Sample Size=428)
Gender 28.3%
Female 71.7%
Education 7%
High School 2%
Vocational 27%
Some College 39%
College 19%
Masters 4%
Doctoral 2%
Variable Percentage(Sample Size=428)
Other
Age 4.4%
1620 12.4%
2125 16.1%
2630 15.9%
3135 12.9%
3640 10.3%
4145 9.6%
4650 8.9%
5155 9.5%
>55
Income 2.3%
Under $10,000 5.1%
$10,000$19,000 7.2%
$20,000$29,000 13.3%
$30,000$39,000 11.4%
$40,000$49,000 21.7%
$50,000$74,000 12.9%
$75,000$99,000 13.3%
Over $100,000 12.6%
No Answer
Table 2. Descriptive Statistics
Assessing Discriminant Validity of the Scale: In order to assess the discriminant validity of
the entire scale, a factor analysis was conducted and those factors with an eigenvalue
greater than 1.0 retained. This analysis resulted in eight factors. Items with loadings greater
than .50 were identified and used in naming the factors. The results from this analysis
showed that the factors that were identified corresponded with the various constructs that
were measured, e.g., vendor characteristics, privacy, security and customer characteristics.
The results of this are presented in Table III. A detailed analysis of each of these factors
follows.
Vendor Privacy1 Privacy2 Security Privacy3 Privacy4 Customer Privacy 5
Vendor(Q1) 0.64 0.09 0.16 0.07 0.00 0.08 0.15 0.14
Vendor(Q2) 0.73 0.05 0.03 0.00 0.00 0.10 0.13 0.00
Vendor(Q3) 0.73 0.08 0.13 0.05 0.07 0.01 0.19 0.11
Vendor(Q4) 0.53 0.09 0.13 0.06 0.02 0.08 0.26 0.03
Vendor(Q5) 0.66 0.04 0.12 0.05 0.19 0.10 0.01 0.02
Security(Q6) 0.01 0.14 0.07 0.85 0.15 0.03 0.03 0.04
Security(Q7) 0.08 0.15 0.03 0.85 0.03 0.04 0.05 0.05
Privacy(Q8) 0.13 0.64 0.02 0.13 0.09 0.08 0.16 0.07
Privacy(Q9) 0.01 0.82 0.05 0.02 0.15 0.09 0.02 0.14
Privacy(Q10) 0.03 0.74 0.06 0.10 0.39 0.07 0.03 0.16
Privacy(Q11) 0.12 0.61 0.12 0.15 0.19 0.04 0.12 0.30
Privacy(Q12) 0.07 0.07 0.69 0.08 0.17 0.01 0.16 0.05
Privacy(Q13) 0.00 0.08 0.74 0.04 0.12 0.02 0.03 0.06
Privacy(Q14) 0.00 0.07 0.59 0.17 0.10 0.15 0.07 0.43
Privacy(Q15) 0.10 0.34 0.02 0.15 0.72 0.10 0.11 0.02
Privacy(Q16) 0.01 0.11 0.04 0.00 0.86 0.11 0.04 0.07
Privacy(Q17) 0.08 0.06 0.15 0.31 0.24 0.57 0.19 0.18
Privacy(Q18) 0.05 0.01 0.09 0.05 0.08 0.85 0.03 0.09
Privacy(Q19) 0.04 0.07 0.07 0.01 0.05 0.25 0.07 0.80
Privacy(Q20) 0.08 0.18 0.48 0.05 0.10 0.31 0.30 0.32
Social(Q21) 0.06 0.04 0.12 0.01 0.00 0.03 0.79 0.16
Vendor Privacy1 Privacy2 Security Privacy3 Privacy4 Customer Privacy 5
Convenience(Q22) 0.25 0.08 0.06 0.05 0.07 0.11 0.49 0.15
Table 3. Factor Analysis of Scale Items
Vendor Characteristics (VENDOR)
a
. Vendor characteristics were operationalized using a 5-
point agree-disagree scale 2. To evaluate vendors characteristics, the following scale items
were used: (1) vendor perceived reliability - respondents expressed their opinion to the
statement World Wide Web vendors are more reliable, (2) perceived convenience of using
Web vendors - respondents expressed their opinion to the two statements'(a) It is easier to
place orders placed with World Wide Web vendors, and (b) It is easier to contact World
Wide Web vendors, (3) price competitiveness - respondents expressed their opinion to the
statement World Wide Web vendors offer better prices, and (4) access to information
respondents expressed their opinion to the statement' World Wide Web vendors offer more
useful information about the choices available.
The factor analysis of the scales showed that all vendor characteristics load on one factor
with an eigenvalue greater than one. The reliability of the entire scale was 0.69. The vendor
characteristics of respondents were averaged to form one score. Since all the
characteristics of the vendor related to the vendors' superiority over others (in regards to
reliability, price, information provision or convenience) the construct was named superiority
over other vendors.
Perceived Security of Transactions (SECURITY)
b
. Theperceived security of transactions
was operationalized using a 4-point scale with the following two items: (1) In general, how
concerned are you about security on the Internet? and (2) How concerned are you about
security in relation to making purchases or banking over the Internet? The correlation
between these two items was 0.57.
Concern for Privacy (PRIVACY1-PRIVACY5)
c
. The privacy scale items used in the survey
consisted of 13 items. A factor analysis of the scale items used in the survey indicated that
the privacy items loaded on five factors. These five factors emerged which seemed to map
onto various aspects of privacy, i.e., use of information, anonymity, perception of direct
marketing, privacy laws and control over information. The items which had factor loadings of
greater than 0.5 were retained. The reliability coefficients for the first two subscales were
.727 and .536. The correlation between items in the last two subscales were .499 and .411.
Customer Characteristics (SOCIAL INTERACTION and CONVENIENCE)
d
. In order to
assess whether customers are motivated by convenience or the social interaction
associated with shopping, two questions were posed. The first question asked the
respondents whether they preferred dealing with people during shopping (One of the
reasons I have not shopped on the Web is that I prefer to deal with people). The second
question asked whether convenience affected their choice of the shopping mode (One of
the reasons I shop on the Web is convenience). Both were dummy variables that were
coded 1 if the response was a yes and 0 otherwise.

Likelihood of Electronic Exchange (PUR)
Likelihood of electronic exchange was based on past purchasing behavior on the Web and
measured in two ways (1) as number of electronic purchases and (2) the total amount spent
online in the last six months. The means and standard deviations of the scale items along
with detailed descriptions are presented in Table IV.
Factors and Scale Items
Means and
Standard
Reliability
Vendor Characteristics (a) (5-point scale ranging from strongly disagree to strongly agree)
1. World Wide Web vendors are more reliable 3.380 (1.037) .690
2. World Wide Web vendors offer better prices 3.666 (0.986)
3. World Wide Web vendors offer more useful information about the choices available 2.764 (0.993)
4. It is easier to cancel orders placed with World Wide Web vendors. 3.387 (0.965)
5. It is easier to contact World Wide Web vendors 3.357 (1.137)
Perceived Security of Transactions and Concern for Privacy (b)Perceived Security of Transactions (SECURITY)
6. In general, how concerned are you about security on the Internet?
7. How concerned are you about security in relation to making purchases or banking over the internet? 3.030 (1.016) .567
(4-point scale ranging from not at all concerned to very concerned) 3.156 (0.959)
Concern for Privacy (c) (5-point scale ranging from disagree strongly to agree strongly) USE OF INFORMATION
(PRIVACY1)

8. Web sites need information about their users to market their site to advertisers 2.631 (1.286) .727
9. Content providers have the right to resell information about its users to other companies 4.332 (1.055)
10. A user ought to have complete control over which sites get what demographic information 4.191 (1.145)
Factors and Scale Items
Means and
Standard
Reliability
11. Third party advertising agencies should be able to compile my usage behavior across different web sites for direct
marketing
4.393 (1.015)
ANONYMITY (PRIVACY2)
12. I value being able to visit sites on the Internet in an anonymous manner 2.049 (1.207)
13. I ought to be able to visit sites on the internet in an anonymous manner 1.489 (0.782) .536
14. I would prefer internet payment systems that are anonymous to those that are user-identified 1.979 (1.182)
DIRECT MARKETING (PRIVACY3)
15. I like receiving mass postal mailings that were specifically targeted to my demographics 3.990 (1.197) .499
16. I like receiving mass electronic mailings 4.666 (0.699)
PRIVACY LAWS (PRIVACY4)
17. There should be new laws to protect privacy on the Internet 2.324 (1.370) .411
18. There should be laws to protect children's privacy 2.462 (1.466)
CONTROL OVER INFORMATION (PRIVACY5)
19. I ought to be able to communicate over the Internet without people being able to read the content. 2.806 (1.707 .090
20. I support the establishment of key escrow encryption where a trusted party keeps a key that can read encrypted
messages
1.224 (0.578)
Customer Characteristics (d)
21. SOCIAL INTERACTION: One of the reasons I have not shopped on the Web is that I prefer to deal with people
(Yes=1/No=0)
.105 (.307)
22. CONVENIENCE: One of the reasons I shop on the Web is convenience (Yes=1/No=0) (5-point scale ranging from
very uncomfortable to very comfortable)
.825 (.380)
Table 4. Variables and Scale Items
Variables and Scale Items
Number of Scale
Items
Mean S.D.
1. a the complete questionnaire available at: http://www.gvu.gatech.edu/user_surveys/survey-1998-10/graphs/graphs.html#shopping.
Variables and Scale Items
Number of Scale
Items
Mean S.D.
2. b and c the complete questionnaire available at: http://www.gvu.gatech.edu/user_surveys/survey-1998-10/graphs/graphs.html#privacy
3. d the complete questionnaire available at: http://www.gvu.gatech.edu/user_surveys/survey-1998-10/graphs/graphs.html#general
4. 1 reliability is assessed using Cronbach's Alpha when more than 2 scale items are present; otherwise the numbers reported refer to a
correlation coefficient.
Purchase Behavior (PUR 1) (d) 1 2.593 0.983
23. On average, how often do you make online purchases from Web-based vendors?
(5-point scale ranging from hardly ever to at least once a day)
Purchase Behavior (PUR 2) (d) 1 2.960 1.091
24. What is the total amount you spent on purchases through vendors on the World Wide Web during the past
six months?

(4-point scale ranging from $0 to $500 or more)

MODEL DEVELOPMENT
The constructs described above were measured using various scale items that were
reduced to various dimensions using factor analysis. The variables were averaged for each
factor and the averages were used as input for each construct. We use multiple regression
analysis to estimate the model. The model to be tested is of the following form:


RESULTS
Main Model
Two models for each indicator of likelihood of electronic exchange were estimated. The
results with frequency of Web shopping (Model 1) the total amount spent online in the last
six months (Model 2) as the dependent variables are presented in Table V. The explanatory
power of the models, as indicated by adjusted R2 for Models 1 and 2 is 10% and 13%
respectively.
Variable Model 1 Model 2
1. * significant at p<.01
2. ** significant at p<.05
3. # significant at p<.10
INTERCEPT 0.724 (.459) 2.066* (.526)
VENDOR .219* (.069) .097 (.079)
SECURITY .089# (.055) .024 (.063)
PRIVACY1 .018 (.063) .130# (.072)
Variable Model 1 Model 2
PRIVACY2 .003 (.061) .064 (.070)
PRIVACY3 .067 (.060) .064 (.070)
PRIVACY4 .037 (.041) .126* (.047)
PRIVACY5 .066 (.081) .040 (.093)
SOCIAL INTERACTION .476* (.150) .639* (.172)
CONVENIENCE .552* (.123) .552* (.143)
Dependent Variable
PUR 1 *
PUR 2 *
Sample Size 427 423
R2 .12 .15
Adjusted R2 .10 .13
Table 5. Regression Statistics
Model 1 shows that perceived superiority of Web vendors positively affects frequency of
consumer shopping on the Internet (b1 = 0.22, p<0.01). Thus, reliability of a vendor,
convenience of placing orders and contacting vendors, price competitiveness and access to
information, have a positive influence on the number of purchases on the Internet. However,
Model 2 shows that these characteristics do not influence the amount of money spent on
the Internet.
The results of the study show that social interaction as a shopping motivation deters
consumers from shopping frequently (b1 = 0.48, p<0.01) and from spending money on the
Internet (b1 = 0.64, p<0.01).
(6)
These consumers are likely to treat the shopping experience
as a social experience. On the other hand, consumers who value convenience tend to use
the Internet to purchase goods frequently (b1 = 0.55, p<0.01) and they seem to spend more
money (b1 = 0.55, p<0.01) in the electronic transactions. Thus, the need for social
interaction negatively affects the propensity to engage in Internet transactions, and
convenience orientation positively affects the frequency and the size of purchases on the
Internet.
(5)

Interestingly, perceived security of transactions had a negative marginal effect on the
frequency of shopping on the Internet (Model 1) which means that consumers seem less
concerned about the security of electronic exchanges (p<0.1). The analysis of Model 2
shows that consumers are concerned about some aspects of information privacy.
Consumers who purchased more on the Internet seemed to be more concerned about the
creation of laws protecting privacy on the Internet (b1 = 0.13, p<0.01). Another dimension of
privacy, i.e., consumers' beliefs that marketers need information about them for marketing
purposes, had a marginal negative effect on the amount of money spend on the Internet
(p<0.1). Thus, it seems that consumers who spend more on the Internet have a tendency to
believe that marketers do not need more information about them to market their products.

Additional Analyses
To assess the relative contribution of each of the four variables, a stepwise regression
analysis was conducted on each of the dependent measures. The incremental R
2
for the
model with each additional variable included provides an assessment of the relative
contribution of each variable. According to this, in Model 1, convenience as a shopping
motive accounted for 7% of the variance explained, vendor characteristics accounted for
3%, social interaction accounted for 2% and security for 1% of the variance explained. In
the case of Model 2, with the total amount spent online as a dependent measure,
convenience as a shopping motive accounted for 7% of the variance explained, recreation
accounted for 4%, and privacy concerns such as use of information and privacy laws
accounted for 3% and 1% of the variance explained respectively. Thus, across both models,
with both frequency of shopping and amount spent online as dependent measures, it
appears that customer characteristics dominate all other variables in terms of variance
explained.
One of the factors that emerges significant in explaining the frequency of shopping on the
Web is vendor characteristics. Vendor characteristics is a summated scale including
reliability of a vendor, convenience of placing orders and contacting vendors, price
competitiveness and access to information. One important issue is the relative role of each
of these aspects in influencing frequency of shopping. In order to examine this issue, we
estimate five regressions with frequency of shopping as the dependent measure and each
vendor characteristic, e.g., reliability of a vendor, price competitiveness, access to
information, ease of canceling orders and contacting vendors. Each of these is incorporated
as an independent variable in a separate regression in the presence of other independent
variables such as security, privacy, social interaction and convenience. The results of these
regressions suggest that price competitiveness and ease of canceling orders were both
significant at the 1% level while reliability and access to information were significant at the
10% level. The only variable that did not emerge significant was the ease of contacting
vendors on the Web. In other words, all but one of the vendor characteristics was significant
in explaining the frequency of shopping on the Web. It is possible that the ease of
contacting vendors on the Web is similar across all vendors in the online environment.
The impact of customer characteristics suggests the possibility that there are distinct
segments of consumers who place emphasis on convenience versus the social aspects of
shopping. In order to investigate the characteristics of these segments, a logistic regression
was estimated. The results of these estimates are presented in Table VI. As shown in the
table, Model 1 and 2 included gender, age, household income and education as
independent variables. These variables were included primarily on the basis of previous
research which suggests that demographic variables that have an impact on internet usage
patterns (e.g., Hoffman, Kalsbeek and Novak 1996;Burke 1997) and on the basis of the
previous research relating demographic variables to shopping motivations in traditional
retailing contexts (Bellenger and Kargoankar 1980). Although some of these demographic
differences appear to be declining as internet usage is becoming more mainstream, it is still
interesting to examine whether these variables might account for differences in motivations.
In Model 1, the dependent variable was whether or not convenience was mentioned as a
reason for shopping or considering shopping on the Internet. Model 2 included the same
independent variables but the dependent variable was whether or not preference for dealing
with people was mentioned as a reason for not shopping or not considering shopping on the
Internet.
Variable Model 1 Model 2
1. * numbers in italics refer to odds ratios
2. * p<.01
3. ** p<.05
Dependent Variable Convenience Social Interaction * *
Intercept 4.356* (1.525) 3.485* (1.001)
Gender 1.450** (.619) .235 .737** (.310) 2.090
Education .039 (.163) 1.039 .524* (.130) 1.689
Variable Model 1 Model 2
Income .102 (.098) 1.107 0.203* (.078) 1.224
Age .030 (.079) .970 .038 (.067) 1.039
2 Log L 9.320** 32.229*
Sample Size 371 371
Table 6. Logistic Regression
The results of the logistic regression of these two models indicate that there is a significant
relationship between gender and social interaction as a shopping motive (b1 =-1.450,
p<0.05). Gender was a dummy variable with females being coded as a zero and males as a
one. The result suggests that males might be less motivated than females by social
interaction, a finding that confirms what is known about gender differences even in the
bricks-and-mortar setting. For example, the study by Bellenger and Kargoankar
(1980) suggests that the typical recreational shopper tends to be a female head-of-
household. The results from Model 2 suggest that convenience as a shopping motivation is
related to gender, education and income. The positive coefficient on gender suggests that
males are more convenience-oriented than females. The positive coefficient on education
(b1 =.524, p<0.01) and income (b1 =.203, p<0.01) suggests that convenience is a greater
motivator at higher levels of education and income. It is likely that these variables are
proxies for time-poverty. More research on profiling segments of consumers with different
shopping motives is necessary in order to promote online shopping as an alternative
shopping medium to various segments of consumers.

Implications of the Study and Future Research
This study has both theoretical and managerial implications. The study examines a model of
electronic exchange based on a theoretical framework proposed by Bagozzi (1975). The
factors examined in this study include vendor characteristics, security and privacy and
customer characteristics. By examining a sample of internet users, we are able to examine
the impact of these factors in converting existing users from browsers to buyers. The study
supports previous theoretical propositions that vendors should be reliable, offer competitive
prices, provide useful information on the Internet and easy to conduct services (Zellweger,
1997; Alba et al., 1997; Luedi, 1997;Palmer, 1997). The empirical findings suggest that
perceived vendor characteristics, particularly price competitiveness and ease of canceling
orders, affect the frequency of purchases on the Internet. The result regarding vendor
characteristics provides empirical support for the previous research regarding reliability of
an exchange partner (Morgan and Hunt 1994). It highlights the role of trustworthiness of an
exchange partner (Moorman et al 1993), thereby extending our knowledge of the importance
of vendor characteristics from the traditional to the internet domain.
Interestingly, this study shows an average consumer is not as concerned about the security
of electronic exchanges or privacy issues. The concern over security has decreased over
the years particularly with developments in internet payment systems that ensure
confidentiality. This finding supports previous research, that focused on privacy issues in
the context of direct mail, which indicated that consumers are not concerned about privacy
issues (Milne and Gordon, 1993). However, this study does show that consumers who
purchase frequently on the Internet are interested in creation of new laws protecting privacy
on the Internet. They also do not believe that marketers need more information about them
to successfully market products on the Internet. This has important implications both from a
theoretical and a managerial standpoint. From the theoretical standpoint, this result serves
to resolve the debate regarding the level of consumer concern regarding privacy issues
(Milne and Gordon (1993) versus Rohm and Milne (1999)). From the managerial standpoint,
marketers should be sensitive about privacy issues particularly the perception that
information is not necessary to enhance marketing of products on the internet.
Finally, this study shows that consumers who are primarily motivated by convenience are
more likely to make purchases online. Those who value social interactions are less
interested in the Internet use for shopping and thus shop less frequently on the Internet and
spend less money on e-commerce. This in itself is valuable because it suggests that
retailers have to fine tune their offerings, and provide very specific solutions to each
segment of customers at the aggregate level, and individual customers if possible. With
advances in personalization and customization, the notion of one-to-one marketing can be
realized. These findings should be valuable for marketers for the purpose of segmentation
and targeting their prospective buyers.
The result regarding the importance of convenience as a motivator of internet shopping is
interesting from the perspective of enhancing our understanding of shopping motivations in
the internet context. In addition, it also provides a basis for marketers to differentiate
themselves from competitors. The role of social interaction as a deterrent of internet
shopping is also an important result. While it may not be possible to mimic all the features of
a physical store and the ability of the physical world to provide unique shopping experiences
(Rao 1999), marketers should take advantage of developments such as discussion groups,
chat forums etc. in order to enhance the level of social interaction at various sites. This is
being achieved by some internet retailers who provide links to various discussion forums,
thereby tying in aspects of social interaction with visits to their Web sites. These
developments may go a long way in enhancing the level of social interaction during internet
shopping. Future research should focus on creating a typology of internet shoppers and
linking various demographic and psychographic variables with types of internet shoppers.
Such a typology along with a profile of the various internet shopper types may provide
actionable guidelines to marketers interested in targeting various segments of consumers.
It is important to note the limitations of this study. This research is based on an e-mail
survey and therefore a selection bias might have affected our findings. Only online
respondents participated in the study. Therefore, the self-selection bias may limit the
generalizability of the findings. Extensions of this study in other settings and using other
data collection methods should provide additional evidence to support and expand our
findings. An interesting future research could focus on the empirical comparison of factors
that affect online shopping versus more traditional formats of retailing. The results we
present here are an important step forward in enhancing our understanding of the future of
electronic commerce.
FOOTNOTES
1
Note that although rough estimates suggest that, while sales ordered and paid for online were
in the region of $11.0 billion, sales to consumers that were ordered online, but paid for off-line
were more than $15 billion. Further, the value of off-line orders influenced by the Internet was
approximately $51 billion (cite: Maryann Jones Thompson (1999), Only Half of Net Purchases
are Paid for Online,The Industry Standard, March 1, 1999.
URL: http://www.thestandard.com/metrics).
2
This is however, dependent upon the product category. Amazon.Com offers a vast selection of
books. In other cases, e.g., online grocery stores, there are limitations in the variety of products
that can be offered.
3
Note that the emphasis here is on commercial transactions implying monetary exchange. This
definition precludes those transactions where information is collected online but the transaction
is completed offline.
4
We acknowledge that online communities, discussion groups, and review boards (like the one
on Amazon.com), are mechanisms that are being employed by marketers to encourage social
interaction among consumers. These allow consumers to interact as they scan for information,
make buying decisions, or report feedback on their purchases. They definitely provide
incentives to customers to visit sites, and, if implemented properly, might do a better job of
turning browsers into shoppers.
5
Additional analyses were conducted to examine which of the vendor characteristics such as
reliability of a vendor, convenience of placing orders and contacting vendors, price
competitiveness and access to information had a greater influence. Results of these are
discussed in the next section.
6
Please note that social interaction was reverse-coded such that a positive coefficient indicates
a lower propensity to shop online.

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