Understanding consumer online shopping behaviour from the perspective of transaction costs

.
It follows that: 
H3b: A customer’s privacy and security concerns over online shopping are positively related 
to his/her perceived TCs associated with online shopping. 
Environmental uncertainty 
No business can isolate itself from the external environment. Environmental uncertainty of 
online shopping refers to the unpredicted changes in circumstances surrounding an online 
transaction and the difficulty in determining the potential impact of the external environment 
on decision makers (Rindfleisch and Heide 1997). It mainly creates an adaptation problem 
which arises when decision makers are limited by bounded rationality and have difficulty 
altering contractual terms to changes and adverse impacts in the external environment 
(Rindfleisch and Heide 1997). Accordingly, TCs arise which are associated with adapting to 
the uncertain external environment. In the online shopping context, the consumers’ perceived 
uncertainty of transaction environment generally comes from the concerns over the 
effectiveness of government regulation, credibility of media reports and reliability of online 
consumer reviews.
First of all, no country has developed comprehensive legislation regarding e-commerce. 
Government regulation in e-commerce in China market is likewise not complete, especially 

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the legislation on digital signatures, copyright and intellectual property, property right 
protection, consumer laws, and laws on taxes (Yang and Wang 2013). In such an immature 
environment, it is difficult to be assured that the existing laws and regulations are adequate 
for the protection of consumers’ interests (Connolly and Bannister 2006, Turban
 et al.
2009), 
thus potential consumers would encounter uncertainties and risks in online shopping (Cheung 
and Lee 2002, Connolly and Bannister 2006, Pavlou
 et al.
2007). For example, a lack of 
appropriate regulation on credit usage via credit cards and protection of credit card security 
would increase consumers’ perception of online risks and uncertainties, thus further hindering 
online purchase behaviour (Dabholkar and Sheng 2012, Hong and Cha 2013). Once problems 
occur due to insufficient protection by government regulations and laws, consumers would 
have to bear a cost of adaptation which would increase their perception of TCs in online 
shopping. 
Secondly, marketing scholars contend that media reports as an external environmental factor 
plays an important role in affecting consumer purchasing decisions (Hennig-Thurau
 et al.
2010). In the case of online buying, media reports provide consumers with guidelines for safe 
shopping via e-commerce and inform consumers regarding the most secure methods of 
payment over the Internet (Wei
 et al.
2009, Aljukhadar
 et al.
2010, McCombs 2013). 
Although they have aforementioned advantages, disadvantages that discourage potential 
online shoppers should not be ignored (Yannopoulou
 et al.
2011). According to the CECRC 
(2010), reports about fraud on the Internet are frequently contradictory. Some reports claim 
that the Internet is an extremely safe place to transact business while other reports 
demonstrate that fraud is a clear and present danger, and cybercrime is ubiquitous. For 
consumers, it would be difficult to determine which report is credible. In fact, there is an 
inevitable tendency for the media to sensationalize news reports by exaggerating any e-

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commerce security breach stories. By doing so, it attracts more readers/listeners/viewers. 
Since consumers are already very concerned about the intrinsic security of online transaction 
(Farrell
 et al.
2000), such an exaggerated report of online security breaches on television, 
radio and in the press would make potential consumers more reluctant to transact online. 
Therefore, the media report can be either beneficial or damaging to the adoption of online 
shopping by educating the public about it or exaggerating online fraud, respectively. In this 
respect, consumers find it hard to assess whether reports by mass media are authentic or 
exaggerated. Their costs of evaluating the quality of the media reports would increase, 
thereby raising the overall perceived TCs. 
In addition, the use of the internet as a venue for expressing opinions on products and online 
stores has become an important tool for potential consumers to evaluate the quality of online 
products and services (Chatterjee 2001). Online reviews would provide a trusted source of 
product and store information for some consumers (Lee
 et al.
2008, Lee
 et al.
2011b, Serra 
Cantallops and Salvi 2014). However, most online reviews are from strangers or are 
anonymous to receivers (Chevalier and Mayzlin 2006, Zhang
 et al.
2010, Mayzlin
 et al.
2012). Thus, in some cases, consumers would hesitate to trust the previous consumers’ 
comments. For example, a consumer who is also a competitor of an online vendor from 
which he /she bought products might give negative reviews to the online vendor in order to 
ruin its reputation. As malicious comments always exist, the credibility of online reviews is 
questionable (Lee 2009b). When facing a high level of uncertainty of the reliability of online 
reviews, consumers’ evaluation cost and monitoring cost would increase. Cheung et al. (2012) 
state that a favourable attitude will be formed when online reviews consist of understandable 
and fact-supported arguments which are more persuasive than reviews expressing subjective 
feelings and emotional comments. Pan and Chiou (2011) indicate that authentic reviews can 

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reduce the uncomfortable feelings of risk exposure and strengthen online shoppers’ 
confidence. Nevertheless, the problem is that consumers are limited by bounded rationality, 
and as such it is difficult for them to judge the quality of the reviews. To evaluate the 
credibility of online reviews, consumers would have to invest a large amount of time and 
effort. Therefore, the uncertainties of online reviews are likely to increase consumers’ 
perceived TCs.
Taking the above contentions and drawing on empirical findings, the following hypothesis is 
provided:
H3c: Environmental uncertainty of online shopping is positively related to a customer’s 
perception of TCs associated with online shopping.
 
3.6.1.4 Control Variable: Demographic Characteristics of Online Shoppers 
Although the researcher focuses on the influences of the antecedents derived from three 
dimensions of the online transaction on consumer TCs, it is recognized that individual 
differences (e.g., age, gender, education level and income level) also affect consumer 
perception of TCs of online shopping (Teo 2006, Byramjee and Korgaonkar 2013a, Yen
 et al.
2013). Therefore, in order to avoid such effects, this study includes the above four factors 
under the category of control variables. Controlling for these demographic characteristics, 
like age, gender, education and income level provides a stronger test of the theory developed 
in the model.