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3.3 APPLYING TCT IN ONLINE SHOPPING
This section discusses the applicability of using TCT as an integrative theory to explain
online consumer behaviour and the conceptualization of TCs associated with online shopping.
It consists of three parts. In the first part, relevant evidence will be provided to demonstrate
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that TCT is a viable theory to explain consumer online behaviour. To justify that TCT is
applicable to explain consumer online-purchase and post-purchase behaviour, two issues
need to be addressed. Firstly, an issue pertaining to whether consumer TCs exists in an online
setting will be discussed. For almost all of the products consumers purchase, they have to
bear some costs which are inevitable regardless of purchasing from online or traditional
stores. Secondly, based on the proposition of the original TCT, the study argues that it is
reasonable to employ TCs to explain consumer shopping choices. Thus, in light of these two
justifications, the study suggests that consumer TCs can be applied to explain their online
choices regarding whether to buy from an online store and stay loyal towards the online store
in future.
In the second part, the notion that TCT can be viewed as the comprehensive integration of
TPB and TAM will be reinforced. It is contended that TPB and TAM can be well understood
from the perspectives of TCT. In the third part, the conceptualization of consumer TCs
associated with online shopping will be proposed to address what constitutes consumer TCs
of online shopping.
3.3.1 The Explanation of TCT on Online Consumer Behaviour
“Everything you buy costs you twice, once for the good itself, and once for the transaction.”
“The Economics of Waiting” (Forbes, 1996, pp 127).
In the literature, traditionally TCT is used to determine whether a transaction is conducted
within a firm, in a market, or in a hybrid governance structure (Rindfleisch and Heide 1997).
That is, TCT is mainly applied at the firm level of decision-making regarding a transaction
(Ellram
et al.
2008, Liu
et al.
2012). However, that does not mean that TCs only exist in firm
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level transactions. In fact, TCs exist everywhere except in completely Communist societies
(Coase 1992) or in one-man Robinson Crusoe economies (Cheung 1992). TCs are described
as the costs of running the economic system (Arrow 1969). They are the economic
counterpart of friction in a machine (Williamson 1975). It is estimated that interactions – the
searching, coordinating, and monitoring that people and firms do when they exchange goods,
services, or ideas – may account for as much as 35-40 per cent of the economic activity (GDP)
of an economy (North 1990).
Similarly, a study by McKinsey Company (Butler
et al.
1997) shows that TCs represent over
a third of the costs associated with the economic activity in the United States. Thus, not only
do firm-firm interactions involve TCs, but human-firm interactions (even human-human
interactions) also involve TCs. Inevitably, then, TCs are a part of consumer exchanges (Tyagi
2004). For almost all of the products people consume, they have to incur the monetary, time,
and hassle costs of going to a store, waiting in line, making a payment, sometimes
customizing the product to our own requirements before using it, sometimes learning how to
use the product properly, and finally using the product itself. Therefore, at the individual
level, TCs still exist.
Consumers, like firms, are assumed to economize with their scarce resources. A recurring
problem in the TC literature is whether transactions should be handled internally or through
markets (which can be conceptualized as the buy-or-made problem) (Williamson 1981a).
Similarly, consumers are confronted with many buy-or-make decisions such as ‘shall I paint
the house myself or shall I hire a painter?’ The outcome of such a decision will, among other
things, depend upon the alternative value of the time needed for this task, i.e., opportunity
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costs, and the market price of the service. This has its clear parallel in the TC approach as
applied to firms.
All kinds of shopping activities, both in traditional and online environments, involve certain
element of risks, due to uncertainties faced by the decision maker. Part of the uncertainties
stems from the information asymmetries between sellers and consumers, as consumers may
not have all the required information to make the purchase decision. The risks and
uncertainties in the transaction process are also augmented by the mode of shopping medium
interface (Huang
et al.
2014). Researchers have found that shoppers who have high levels of
perceived risks in online environments due to information and other limitations (Miyazaki
and Fernandez 2001, Biswas and Biswas 2004, Yeh
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