Understanding consumer online shopping behaviour from the perspective of transaction costs

1.2 RESEARCH GAPS 
The extant TC studies have emphasized the significance of TCs in influencing organisational 
structures and strategies (Barney and Hesterly 2006, Steenkamp and Geyskens 2012, Verbeke 
and Kano 2013). This is because TCs play an important role in predicting organizational 
structure, achieving sustainable competitive advantages, and managing inter-organizational 
relationship (Rindfleisch and Heide 1997, Williamson and Ghani 2012). A closer look at the 
TC literature shows that most studies have focused on the firm level rather than individual 
consumer level (Pitt and Foreman 1999). Although there is a growing call for a paradigm 
shift in marketing from market focus to customer focus, TCs from the customer perspective 
has received far less attention. Generally, consumers not only look for value superiority in 
products and services, but also affordable and reasonable costs to obtain the value (Kleijnen
 

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et al.
2007). Surprisingly, costs perceived by consumers during the transaction have largely 
been neglected by managers although the impact of consumer perceived TCs on business 
success in substantial. From an academic point of view, understanding how perceived TCs of 
online shopping affect consumers’ online behaviour is an important research topic that needs 
further theoretical and empirical attention (Liang and Huang 1998).
Within the limited literature on consumer TCs, researchers (Shim
 et al.
2001, Lam
 et al.
2004) 
conceptualize the different types of TCs consumers incur, such as search cost, switching cost, 
learn cost, psychological cost, time cost, and information asymmetry cost, etc. The 
conceptualizations of TCs for consumers are not consistent across studies. Furthermore, as 
the online environment is complicated and e-commerce has notable differences compared to 
traditional marketplace, the TCs occurred in traditional markets may not be the same as those 
of online markets. However, prior studies in online shopping have provided few clues in 
relation to the TCs faced by online consumers. In fact, online consumer TC research is beset 
by conflicting conceptualizations of consumer TCs (Liang and Huang 1998, Teo and Yu 
2005, Yen
 et al.
2013, Wu
 et al.
2014). As such, serious issues are raised with regard to what 
constitute consumer TCs in online shopping contexts. This makes it imperative to conduct an 
in-depth study on the components of TCs facing consumers in online environment.
Past research has different ways of investigating factors which impact online purchase 
behaviour, and there is no consensus on the theoretical models employed to describe and 
predict online purchase behaviour (Li and Zhang 2002). The consumer behaviour literature 
tends to focus largely on psychological factors. Although this approach has provided 
interesting insights, little attention has been directed at how economic factors, particularly, 
the costs faced by consumers in transactions explain consumer’s actual online purchase 

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behaviour. In addition, much of the past literature centres on the impact of the benefits for 
consumers in transactions (Kim 2012). Surprisingly, prior studies have not applied the 
concept of TCs to examinations of actual online purchase behaviour; but TCs may provide a 
useful context in which to identify and explain criteria for consumer’s online purchase. This 
area represents a key opportunity for explaining online actual purchase behaviour based on 
the analyses of TCs.
The importance of customer loyalty is well documented in the consumer behaviour literature 
and customer loyalty toward an online vendor is recognized as a significant factor in retaining 
current consumer (Reichheld
 et al.
2000, Urban
 et al.
2000). In an online context, consumers 
can easily switch to another service provider since they can access to information easily and 
have lower searching costs, etc. compared to consumers in the brick-and-mortar offline 
context. Thus, it is imperative for online vendors to take measures to improve customer 
loyalty and retain customers. Customer loyalty is conceptually different from the initial 
purchase (Harris and Goode 2004, Balabanis
 et al.
2006). For online vendors, initial purchase 
means customer acquisition and they can transform potential customers into actual customers, 
whereas customer loyalty means customer retention and they can transform existing 
customers into loyal customers. During the post-purchase phase, customers have more direct 
knowledge about online vendors and their products, based on which they decide whether to 
stay loyal or not toward the online vendors. Most e-commerce research has emphasized the 
initial purchase behaviour or initial purchase intention of online customers (Koufaris 2002, 
Chu and Lu 2007, Ranaweera
 et al.
2008). By contrast, research on online customer loyalty is 
insufficient and there is a lack of research investigating impacts of consumer TCs on loyalty. 
Much focus on customer loyalty has been devoted to understanding the direct effects of other 
factors, such as perceived value (Yang and Peterson 2004), trust (Harris and Goode 2004), 

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and store characteristics (Ganesh
 et al.
2010) on loyalty formation in the online channel. The 
extant literature demonstrates very little about how TCs perceived by consumers influence 
their decisions to be loyal to an online store after they have had some purchase experiences 
from the online store. Given the paucity of academic research on the effects of TCs on 
customer loyalty, more research in this area is needed. 
To date the pioneering work on online consumer behaviour offers little guidance on what 
antecedent factors affect consumer TCs of online shopping. Indeed, the literature review 
reveals an absence from the TC theory literature of any focus on the examination of the 
simultaneous antecedents of consumer TCs. Some scholars (Sholtz 2001, Teo and Yu 2005, 
Yen
 et al.
2013) argue that there is a need to find out what factors are responsible for 
consumer TCs. From a managerial perspective, understanding factors affecting TCs 
perceived by the consumers becomes essential in achieving superior value for the vendors 
(Chircu and Mahajan 2006). This is because, when viewed through a managerial lens, 
understanding what causes the consumer TCs provides managers with guideline to reducing 
and managing TCs, and thus offering value to customers. As such, a comprehensive set of 
antecedent variables of TCs associated with online shopping need to be investigated from the 
consumer standpoint, to better understand consumers’ perception of TCs and further help 
online vendors effectively allocate their resources to reduce the TCs perceptions of online 
shoppers. 
Finally, while the phenomenal rise of e-commerce in developing countries is well 
documented, the academic literature investigating online consumer behaviour in these 
countries is relatively underdeveloped and dominated by western perspectives utilizing U.S.A 
based samples. Particularly, most prior studies of TCs are strictly confined to the context of 

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developed countries (Liang and Huang 1998, Teo and Yu 2005), such as the USA and 
Singapore; yielding findings that would otherwise not be generalizable in the context of a 
developing economy, such as China, in which the business environment for online shopping 
is constrained by different sets of cultural factors (Hofstede 1980). Since there is limited 
understanding on the consumer TCs of online shopping in China, more insightful 
investigation is imperative in explaining consumer TCs and their impacts on online behaviour.