Understanding consumer online shopping behaviour from the perspective of transaction costs

 
6.2.1.6 Reputation of Online Store 
The study also points to the relationship between reputation of online store and TCs (H2d) by 
showing that reputation is negatively related to perceived TCs (
β
= -.074, p < .01). This result 
reveals that the better the reputation of the online store is, the lower the online shoppers’ 
perception of the TCs associated with the transaction process. A number of studies have 
demonstrated the role of company reputation in value creation for customers and firm 
performance improvement (Roberts and Dowling 2002, Cretu and Brodie 2007, Trueman
 et 
al.
2012). Unlike much of the existing literature, this study takes a different approach to 
uncovering the relationship between online store reputation and TCs which are opposite to 
transaction value. It is among the first to test empirically the relationship between online store 
reputation and online TCs. It extends the extant literature by demonstrating a negative effect 
of online store reputation on TCs.
For those online stores which have established their online branding and possess positive 
word of mouth (WOM), assurances regarding their ability, integrity and goodwill largely 
alleviate consumer concerns (Qureshi
 et al.
2009). Consumers may not need to expend 
additional time and effort ascertaining the trustworthiness of information and products 
provided by online stores if they generally purchase low cost products online. In this sense, 
the reputation of online store is a powerful weapon that helps to minimize TCs. 
6.2.1.7 Perceived Convenience 

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Consistent with Teo et al. (2004), the study finds a significant and negative relationship (
β
= -
.087, p < .001) between perceived convenience and TCs associated with online purchase 
(H3a). This result indicates that the more the convenience perceived by consumers, the lower 
the TCs that they will sense during the online transaction process. It suggests that 
convenience offered by online stores such as powerful search engines, product samples and 
easy comparison of online prices can significantly allay TCs of online buying.
Empirical research (Childers
 et al.
2001, Prasad and Aryasri 2009, Ranganathan 2012) 
supports the view that Internet shopping increases search efficiency through the abilities to 
shop at home, by eliminating such problems as fighting traffic, facing irritating sales people, 
long checkout lines, and parking space problems, while offering single-stop shopping that 
eliminates travel to and from a variety of stores, which in turn reduces the time and effort for 
shopping, and finally reduces the costs of acquiring pre-purchase product information as well 
as the costs of completing the whole online transaction. A comparison study conducted by 
Teo et al. (2004) reports that consumers in the U.S. perceive more convenience of online 
shopping than those in China. As explained, U.S. consumers spend less time searching for 
online products and monitoring their online purchase due to better IT infrastructure and faster 
connection speed. Additionally, the costs in buying overseas products for consumers in China 
are usually high because of the high U.S. dollar exchange rate as well as shipping charges 
involved, thereby negating the convenience of online shopping.
Several researchers (Bhatnagar
 et al.
2000b, Kuo
 et al.
2011, Jiang
 et al.
2013) state that 
convenience of online shopping is manifested in the complete, accurate, timely, and 
customized information available in online environments that is likely to influence online 
decision-making process. To smooth the online transaction process, they assert that sites 

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should provide all the information needed to make an informed decision: product 
specifications, prices, in-stock availability, delivery time, reliability, return guarantees and so 
on. The more the information is applicable to consumers, the less time and effort they would 
expend on information search and the more likely they will perceive lower TCs in online 
shopping. In contrast, if they often encounter information that is unavailable or limited in 
scope, their experience may be negatively affected (Zhou 2012). This will result in the feeling 
of a lack of convenience of online information search or purchases.
Similarly, Kim and Li (2009b) and Gao and Bai (2014) maintain that the accurate, relevant 
and up-to-date information offered by online vendors will reduce consumers’ time and effort 
expended on information search, and enable customers to make fair and fast comparisons, 
thereby improving their perception of convenience of online shopping. As a result, online 
shoppers’ perceived search and evaluation costs will be dramatically reduced. However, if the 
information is inaccurate, irrelevant or out-of-date, it may undermine consumer experience as 
consumers need to expend more time on information scrutinizing and apply more mental 
resources to accomplish the purchase task (Richard
 et al.
2010), finally leading to an increase 
in the total perceived TCs.
 
6.2.1.8. Privacy and security concerns 
It is hypothesized that privacy and security concerns are positively related to the perceived 
TCs (H3b). However, the result shows that the relationship is insignificant (
β
= .048, p > .05). 
Extensive literature has regarded invasion of privacy and security as a major concern of many 
Internet users (Wirtz
 et al.
2007, Tsai
 et al.
2011, Yeh
 et al.
2012b, Hong and Thong 2013). 
Particularly, Yeh et al. (2012b) indicate that buyers perceive increased uncertainty when they 
have concerns about the seller’s ability or willingness to protect their private information 

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from improper use which could result in financial loss or deception. Consequently, the 
information security concerns of some potential buyers may be more acute in a B2C online 
shopping context. 
Surprisingly, no evidence in this study is found to support the significant and positive effects 
of privacy and security concerns on online shoppers’ perception of TCs, suggesting that 
privacy and security concerns may not be a driver of TCs among current online shoppers. 
One possible reason is that online shoppers can only passively accept the privacy policy and 
security statement imposed by online stores. They neither have control in altering the policy 
nor are highly involved in participating in the policy designing. In either case, they lose 
interest in participating and discussing the privacy policy, and would gradually become less 
concerned about the privacy and security issues.
Moreover, if consumers do not pay much attention to the privacy and security protection in 
the physical world, they may be less likely concerned about the privacy and security issues in 
the online environments due to apathy or lack of knowledge. This is an interesting finding 
which echoes Yang and Fang’s viewpoint (2004) that consumers may pay less attention to 
security issues if they have never experienced problems of privacy and security invasion.
The unexpected finding can be also explained by the fact that recent advancements in security 
technology have led to changes in consumer’s perception about the online security (Chung 
and Shin 2010). Alternatively, Teo et al. (2004) claim that consumers in China often pay for 
products purchased online upon delivery of the goods due to low credit card penetration in 
China. Such a phenomenon might have lessened the concerns of consumers regarding the 
security and privacy issues involved in online shopping.

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Additionally, another reason for the insignificant relationship may be that while privacy and 
security concerns may significantly influence trust, their effects on TCs may be limited. 
According to Wolfinbarger and Gilly (2003), security and privacy concerns pose significant 
influences on consumer trust in a professional-looking website. This means that due to the 
lack of protection with respect to online privacy and payment security, it would be difficult 
for consumers to build trust in the site. The lack of trust would constitute a real psychological 
barrier to online shopping. This implies that privacy and security concerns directly affect trust 
development, but their direct effects on perceived TCs may be damped by other factors (e.g., 
mediators). Trust may serves as the mediator in the relationship between privacy and security 
concerns and TCs, but this needs to be tested and verified in future research.