Understanding consumer online shopping behaviour from the perspective of transaction costs

Most prior empirical online shopping research studied consumer purchase behaviour and post-purchase behaviour from the perceived benefit/value perspective. However, few efforts have attempted to employ the cost concept to analyse consumers’ online behaviour. Researchers in psychology, marketing, and organizational behaviour have applied the transaction cost (TC) construct to study how the TCs influence the managers’ decision-making process at the organizational level. At the individual consumer level, TC consideration has become increasingly important in affecting the way consumers choose shopping channel and vendors in their daily lives. Nevertheless, little research attention has been devoted to understanding how the individual consumers’ online purchase and post-purchase behaviours are affected by their perceived TCs. This study therefore represents a point of departure in that it brings in TCs to explain online behaviour at the individual online shopper level. By extending TCs from traditional shopping to online shopping, this study develops an integrative model of consumer TCs associated with shopping at an online store, based on which hypotheses regarding the salient antecedents and consequences of consumer TCs were developed. The research was undertaken in China, in which the economy, particularly the online shopping industry, has been increasing rapidly. China has also a unique cultural and institutional setting when compared to other countries although existing research based on China is limited. This research is therefore expected to shed light on consumer TCs of online shopping within the Chinese context. Data for the study was collected using an on-street survey conducted on a face-to-face basis in one economically developed city and one economically less-developed city randomly selected from the pool of coastal cities and inland cities of China, respectively. Hypotheses were tested using structural equation modelling (AMOS 20.0) and multiple group analysis. Results of the study indicate that consumer TCs consisting of pre-, contemporaneous-, and post-TCs are derived from three major aspects, namely consumer-related characteristics, online store- and product-related characteristics, and online channelrelated characteristics. The consumer-related characteristics, including Internet access availability, perceived Internet expertise, and online buying frequency, are found to negatively affect consumer TCs. The online store- and product- related characteristics, consisting of e-service quality and reputation of online store, can significantly lower consumer TCs. In the last category of online channel-related characteristics, the results confirm that privacy and security concerns increase consumer TCs whereas perceived convenience largely reduces consumer TCs. As for the consequences of consumer TCs, online purchase behaviour and customer loyalty are found to be directly affected by TCs. Further, the results reveal that though TCs have direct and negative effects on customer loyalty, part of their effects is conditional on their ability to reduce customer satisfaction. That is, though lower TCs in online purchasing activities could help gain customer loyalty, such relationship is subject to the mediating effects of customer satisfaction in online shopping. Additionally, results of the study imply that as consumers’ inherent attributes, consumer’s risk-bearing propensity confounds the effects of TCs on customer loyalty, and perceived enjoyment of online shopping moderates the effect of TCs on online purchase behaviour. Finally, the results suggest that the different product categories affect TCs itself as well as the effects of the antecedents on TCs. Product categories further influence the relationships between TCs and subsequent online behaviour. This study advances the consumer behaviour literature by taking a new perspective of TC mechanisms in online consumers’ decision-making. It offers deeper theoretical and empirical insights into online purchase and post-purchase behaviour by explicating the role of TCs at the individual consumer level and exploring a comprehensive set of antecedents of TCs. This study also has important practical implications. From the consumer’s perspective, this research brings benefits to individual consumers by informing them about the advantages of online shopping which can reduce their time and cognitive effort expended on shopping and consequently lower their TCs of online shopping. In addition, the research findings provide online vendors with a deeper understanding on the allocation of resources and capabilities in achieving minimum consumer TCs and inducing favourable behavioural outcomes.