Understanding consumer online shopping behaviour from the perspective of transaction costs

6.3.2 Practical Implications 
The results hold a number of interesting implications for individual consumers and 
practitioners with online retailing operations.
From the consumer’s perspective, this research brings benefits to individual consumers by 
informing them that there are many advantages of online shopping such as convenience, a 
broader selection of goods, cheaper prices, and easier product comparisons. These advantages 
can reduce time and cognitive effort spent on shopping and consequently lower consumers’ 
perceived TCs of online shopping. The study helps existing and prospective online shoppers 
to assess the benefits and costs associated with online shopping by looking at several 
antecedents of TCs. This research is also expected to make the consumers note that e-
commerce has become an important trend in the modern information technology society so 
that they should be more receptive to online shopping and should accept that there are other 
shopping options in addition to in-store traditional shopping.

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From the marketer’s prospective, the research findings have three major practical 
significances which provide online vendors with a deeper understanding on the allocation of 
resources and capabilities in achieving minimum consumer TCs and inducing favourable 
behavioural outcomes. Firstly, the TCs offers online vendors a guideline to identify what is of 
cost to customers and to reduce understanding what constitutes the overall TCs by tracing the 
cause of each cost dimension.
Secondly, the research provides online vendors with important enlightenment concerning 
which antecedent factors should be given closer attention to mitigating consumers’ perceived 
TCs. For example, e-service quality, online store reputation and product quality concern are 
important factors that e-marketers or online vendors need to pay more attention to. 
Accordingly, the online vendors should endeavour to provide superior e-service quality, build 
up a trustable brand, and offer products with excellent performance. Also, they need to 
provide detailed information about the products/services and make their websites visually 
appealing to entice consumers to buy on the shopping sites. By identifying antecedent 
variables influencing consumers’ beliefs about online TCs, online vendors can reduce the 
TCs more effectively.
Thirdly, it is important for online marketers to understand the influences of TCs on online 
behaviour of this new market to better cater to consumer needs. Liang and Huang (1998) 
suggest that sellers should first determine the TCs perceived by their customers and then 
address these costs in their marketing strategy. This advice appears particularly apropos when 
evaluating a new form of retailing such as the Internet. The model presented suggests that 
consumer online patronage, satisfaction and loyalty can be achieved through reducing TCs of 
online buying, thus the study offers a new insight that if e-marketers desire to induce online 

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purchase, cultivate customer satisfaction and nurture loyalty, they should develop marketing 
strategies to mitigate the customers’ perceived TCs that prevent current online shoppers from 
increasing patronage. In a word, online vendors’ knowledge of the antecedents of TCs and 
costs-related behavioural consequences provides a rich resource which is often untapped by 
online firms but should be used as an input into strategy decisions. The implications are given 
below in terms of prescriptions for online stores, which practitioners can adopt. 
In order to purchase online, consumers in China have to pay a high connection fee to Internet 
service providers (China Internet Network Information Centre 2012) and also buy computer 
equipment, which may be costly for them. Most consumers are still hampered by low 
bandwidth because of dial-up access. They also have to invest time to learn online shopping 
because the levels of computer- and Internet-related skills are relatively low in China. 
Accordingly, online vendors should be aware that their sites need to be understandable and 
easy to use by potential customers. Sophisticated outlays may sometimes need to be 
compensated by lucid designs which enable consumers to browse and transact more easily. 
Online vendors are advised to provide a wide variety of products and a ready availability of 
information at the click of a button because they can ease the task of information-acquisition 
and price-comparisons for buyers, which make online shopping a more convenient 
experience. Managers of online stores must ensure that their websites are not graphic 
intensive and can be loaded quickly even through low-speed connections. This will help to 
reduce consumers’ time expended on searching for product information, thereby increasing 
convenience and economic utility whilst reducing TCs. 
Consumers with certain Internet skills can easily transfer their previous skills to online 
shopping. On this point, site interfaces should be designed to be user-friendly, such as easy to 

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search for product information and easy to conduct payment, etc. Online vendors should try 
to eliminate consumers’ perception of specific human asset investment (e.g., acquiring 
knowledge and skills of online shopping) at the beginning of their transactions, because when 
consumers get the impression that they are required to invest a lot of specific assets, their 
perceived TCs of online shopping will rise and they will be reluctant to purchase at the 
shopping site. Thus, the online vendors should pay special attention to make the interface 
easy-to-use and ensure that online shopping procedures (e.g., placing an order and finishing 
the payment) are easy to learn and the transaction process is smooth, easy to complete and 
free of effort, especially for consumers with limited Internet expertise. If the shopping sites 
have a poor interface and are difficult to operate, customers may feel lack of control and 
perceive high costs of using them. Online vendors can emulate the interface design of 
reputable companies. 
This study indicates that consumers with high online buying frequency sense less TCs than 
those with low online buying frequency. Thus, online vendors should increase the transaction 
frequency with online shoppers in order to reduce their perceived TCs of online purchasing. 
The survey results from Teo and Yu (2005) show that online shoppers only compose 34 per 
cent of Internet users, and more than 50 per cent of Internet users have not experienced online 
shopping yet. Most of them are dissuaded by distrust in online shopping, which would hinder 
online transactions. To attract those potential customers, online stores could give consumers 
some incentive at their first-time purchase, such as free samples, gifts, or discounts. 
Consumers usually are more willing to try a new thing when they feel motivated. The first 
successful online buying experience will reduce their perception of TCs of purchasing goods 
from the online vendors, and will increase the likelihood that they will continue to buy online 
in future.

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Since product quality concern is one of the major factors incurring TCs of online shopping, 
online vendors need to pay particular attention to the ways and means of neutralizing its 
impact. Successful companies, such as Apple and eBay, have recognized the importance of 
customers’ product concern. For potential customers, being unable to examine the product in 
person leads to a host of problems, including whether clothing may not fit, software may be 
incompatible, or a purchase may be damaged during shipping. These potential problems may 
increase customers’ cognitive costs of online shopping. Any service an online vendor can 
provide to ease the cognitive costs of shopping online increases the customer’s perceived 
value of the product and finally reduces their perceived TCs.
For instance, they should make it clear to consumers about the descriptions of the products 
and warranty for products purchased,
such as a guarantee of satisfaction that allows for 
returns. Online vendors are advised to adopt a high level of 3D virtual technology where 
possible to enhance product examination and alleviate the difficulties in checking the product 
quality. They should endeavour to enhance information transparency with regard to the 
details of the products and terms and conditions on order cancellation and dispute resolution. 
Furthermore, they need to provide an explicit statement regarding the product return or 
refund if customers are not satisfied with the purchased products. Managers of online stores 
should recognise consumers’ right to return goods, within a specified time limit, without 
having to give a reason. Further, to minimize product quality concerns, online stores must 
provide consumers with details of their identity and physical location. These measures reduce 
consumers’ concerns about product quality and help them to check the quality of the online 
goods within a short time and with little effort.

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Another important technique for alleviating customers’ product quality concern is to 
incorporate social media into the product strategy. Social networking has changed the way 
marketers and managers communicate with their customers forever. Spend any amount of 
time online or at a coffee shop, and customers will find that they are surrounded by 
individuals who are leveraging the power of social networking to seek and share information 
about products and services that interest them. Social networking sites (e.g., Facebook, 
Twitter, Pinterest, LinkedIn, and YouTube) are full of product review information posted by 
customers, friends and family members. Product reviews posted by their friends or colleagues 
have more power in influencing their decision-making than the product information offered 
by the online vendors as consumers generally exhibit more trust in other people’s opinions 
than those of the online vendors. A positive product review can significantly reduce concerns 
over product quality (Frost and Strauss 2013). Thus, online vendors should encourage their 
customers to write positive product reviews on the social networking sites and those 
customers who continuously write about an online vendor and its products should be 
rewarded.
Drawing on the findings of the study, online vendors are advised to put more emphasis on 
improving e-service quality as it plays a crucial role in reducing consumers’ perceived TCs of 
online shopping. Indeed, the proliferation of information, products, and services available on 
the Internet means online vendors must find ways of differentiating their products and 
services in order to attract customers and to build long-term relationships. Online vendors can 
add meaningful and valued differences to distinguish their offering from the competition by 
investing more resources to ensure the superior e-service is provided.

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More specifically, online vendors should focus on strengthening their service quality by 
offering a reliable service, providing personalised service, and promptly responding to 
customers’ inquiries, because such components contribute considerably to consumers’ overall 
e-service quality perception. Some studies (Kuo 2003, Wolfinbarger and Gilly 2003) note 
that reliability is an affective determinant of web-based service quality, as such, to lower TCs, 
online stores are suggested to improve the indicators of reliability, such as capability of 
delivering products as promised, providing error-free transactions and strengthening 
performance as desired. Online vendors should also practice proper supply chain 
management to avoid long wait or delivery error, and must endeavour to deliver the agreed 
product as soon as possible. If customers can be assured of the reliable and consistent service 
they expect from online vendors, their perception of e-service quality will improve, which 
will lead to a decrease in their perceived TCs. 
Online vendors should be aware of the fact that if consumers have trouble getting prompt 
service from them, they might switch to alternative retail sites or simply abandon online 
shopping. Customers expect online vendors to promptly respond to their inquiries regarding 
product specifications, payment option, delivery method, order status, return policy and the 
like (Chea
 et al.
2012). Whether online vendors have the capability to provide prompt service 
when customers have questions/problems will affect their perception of overall e-service 
quality and TCs. According to Sousa and Voss (2012), one of the secrets behind online 
retailing success lies in the efficiency of reacting to the customers’ inquires and the changing 
business environment. Therefore, it is imperative for online vendors to improve 
responsiveness of their customer service.

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Online vendors are advised to take prompt communication with customers into account as it 
serves as an important input in reducing TCs. For instance, many businesses have been 
adding live chat support. Not only small and medium-sized businesses are recognizing the 
importance of providing real time customer service, but also corporates like Apple, SKY, 
Virgin Airlines, and many more are using live chat to be one step ahead of the competition. 
From a customer perspective, an online chat system provides them immediate access to help. 
Live chat is one of the best ways to get instant communication with a company. Wait times 
are often much less than a call centre and customers can easily multi-task while waiting. It 
has become not only the leading method for online support but also yields to the highest 
satisfaction rates among customers. An Oracle Global Consumer Trend study (2012) found 
that 90% of customers consider live chat helpful and an emarketer.com survey (2009) found 
that 63% are more likely to return to a website that offers live chat.
In fact, a Forrester 
research (Clarkson
 et al.
2010) showed that 44% of online consumers say that having 
questions answered by a live person while in the middle of an online purchase is one of the 
most important features a Web site can offer. Live chat has the ability to provide the 
convenient answers that customers want. The timely contact and smooth communication with 
the customers contributes to lowering perceived TCs and establishing a trust and long-term 
relationship between two parties.
In addition, consumers also expect the prompt delivery of products which acts as a strong 
value signal. In this sense, online vendors are suggested to work on developing efficient and 
fast logistics options to better meet customers’ needs of prompt product delivery. Online 
vendors who can provide better delivery services and well handle consumers’ inquiries and 
complaints will add credibility to themselves (Teo and Yu 2005). If online vendors cannot 
ensure service responsiveness, customers may doubt online vendors’ ability to present good 

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e-services to them, which may increase their perception of uncertainty and risk of online 
shopping. Providing prompt services to customers entails online vendors’ continuous effort 
and resource investment.
Another important implication of this study is related to personalization and online privacy.
As Internet technologies become increasingly sophisticated and web sites are able to deliver 
more targeted content, demand for personalization continues to grow (Gurau
 et al.
2003). Ho 
et al. (2011) and Luo et al. (2012) highlight that e-businesses need to necessarily inculcate the 
customer-orientation in their strategies and address issues encountered by consumers when 
browsing and purchasing at their websites and offer personalized solution to these issues. 
Many businesses use e-commerce to let consumers order customized versions of products. 
The idea is to delight customers by providing exactly what they want and need. 
Personalization helps companies gain distinct competitive advantages.
For example, at the Nike website, customers can design their own sport shoes. At the 
shoedsignstudio.com, women can design their own shoes that no one else owns and that are 
completely unique. Customers choose from a range of options to create something truly 
unique. The site provides more than 120 leathers and fabrics for customers to choose from, as 
well as some shoe designs that customers can mix and match to create their dream pair. The 
company’s value proposition is that customers can create their own styles not just to match 
their outfit but also to reflect their personality through their footwear. Another example is 
Blue Nile. It allows customers to create their own engagement rings, wedding rings, earrings, 
bracelets and necklaces. 

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Other simple methods of offering personalized service used by the big successful online 
vendors include greeting users by name and suggesting product offerings of interest based on 
previous purchases. For example, LeFeng.com is Chinese’s second biggest cosmetic website. 
A retuning customer to LeFeng.com gets an item with his name on it, such as “Hello, James. 
We have recommendations for you”. Clicking on the link reveals a list of items that James 
might be interest in examining, based on his previous purchases from LeFeng.com or those of 
similar buyers. By delivering personalized services, customers can enjoy the unique online 
shopping experience, perceive more benefits and fewer costs, and will be more likely to 
circulate positive WOM and favourable feedbacks. Thus, it is crucial for online vendors to 
consider personalized service offering as an important marketing strategy.
On the other hand, however, a vast amount of studies has documented that customers are 
afraid that the online vendors will sell personal information to other organizations without 
their knowledge of permission (Wu