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CHAPTER1: INTRODUCTION
1.1
BACKGROUND
E-commerce is business transactions undertaken through the Internet for goods or services,
including online shopping,
online banking, online payment, online stocks, and online travel
reservation (Reddy and Iyer 2002). It has grown rapidly since the mid-1990s (Reddy and Iyer
2002) and is an important means of conducting business (Tian and Stewart 2007). According
to an estimation by Online Retail Forecast in 2012, online shoppers in the United States will
spend $327 billion in 2016, an growth of 45 per cent over 2012 and 62
per cent growth over
2011 (Mulpuru 2011). There are many reasons given for the growth of e-commerce over
recent times, including for example, its size as a source of information, increasingly
becoming much more user friendly and more accessible and less expensive (Bonn
et al.
1999). Today, e-commerce has penetrated into the national economy, social services,
all areas
of people's lives, from the basic necessities of daily life to all industry.
Online shopping has increased rapidly over the past several decades not only in the world but
also in China in particular (Clemes
et al.
2013). In the past few years, the Internet has
emerged as a vibrant marketplace for consumers and sellers of various goods and services in
China (Gao and Bai 2014). According to a report published by China Electronic Commerce
Research Centre (CECRC) (2014), the total online retail market (B2C and C2C) in China
reached $225 billion by June of 2014 and is expecting to reach $368.2
billion at the end of
2014, almost doubling over 2013. Business-to-Customer (B2C) online retail sales were
$12.67 billion in 2010, $29.46 billion in 2011, $63.65 billion in 2012, and $122.57 billion in
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2013 (iResearch 2013). The data indicate that China’s online shopping is growing and will
continue to grow. Therefore, the research conducted in this area would have the potential to
contribute to a better understanding of this rapidly increasing market and to online shopping
in general.
Despite increased Internet usage and rapid growth of online shopping (China
Internet
Network Information Centre 2012), transactions via online channel still constitute a very
small percentage of total China retail sales (Jin 2012). The CECRC (2014) reported that
online retail sales represent only 6.8 per cent of total retail sales of commodities in 2013,
which implies that even though online shopping continues to break new records every year,
the popularity of offline shopping far overshadows that of online shopping (Kim
et al.
2012a).
The reasons underlying the relatively small percentage of online retail sales when compared
with the offline retail sales created by the traditional shopping are not clearly understood
(Kim
et al.
2012a), thereby still requiring investigation by practitioners in the marketing field.
Furthermore, within all the e-commerce network applications,
the increase rate of online
shopping for physical goods usage ranks at the bottom in China (CECRC 2012). For example,
in 2013, the annual growth rate of online payment ranks first, followed by travel reservation,
and then followed by online stocks and online banking. The last one is online shopping. The
low annual increase rate of online shopping may be caused by an insufficient grasp by online
vendors of the complexity and dynamics of e-business, obstacles to web access and online
banking, inadequate
supply and delivery systems, and privacy and security concerns of online
consumers, which have been already explored (Soopramanien and Robertson 2007, Hong and
Thong 2013). Nevertheless, there might be other potential reasons from the different
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perspectives that can offer a better explanation, which have not yet been fully investigated in
China (Wu
et al.
2014).
From the
standpoint of online vendors, selling goods and services via the Internet that is
capable of accommodating various kinds of products and services is argued to have enormous
potential. However, the fact reported by online vendors is that people browse the Internet
more for information than for buying online (Hoffman
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