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3.6.2 Consequences of Consumer TCs
Consumer TC economizing affects consumer choice of vendors (Liang and Huang 1998,
Chintagunta
et al.
2012, Yen
et al.
2013), and the specific form of the choice depends on the
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situation. In an initial transaction, the consumer’s choice of an online vendor is a purchase
choice. After the consumer has some transactional experiences with the online vendor, the
“choice of vendor” means to choose to continue the exchange relationship with it (Teo
et al.
2004, Tyagi 2004), by continuing to purchase from it. In this study, customer loyalty is used
to capture a customer’s relational continuance with an online vendor. Loyalty involves a
deeper and longer exchange relationship.
3.6.2.1 Role of Consumer TCs in Online Purchase Behaviour
Previous researchers attempted to adapt TCT to consumer exchange and posited that TCs
determine the selection of transaction modes (Liang and Huang 1998, Teo and Yu 2005,
Chircu and Mahajan 2006). It theoretically explains why a transaction subject favours a
particular form of transaction over others. The basic principle of TCT is that people like to
conduct transactions in the most economical way. Specifically, the low TCs in certain
transaction mode will lead consumers to choose it while the high TCs in this transaction
model will entice consumers to choose other transaction mode. Assuming rational decision-
making, with all else being equal, consumers will choose a transaction mode that costs the
least among all the available choices (Sriram
et al.
1992, Cannon and Perreault Jr 1999,
Cannon and Perreault 1999). In this sense, TC economizing determines a consumer’s choice
of a transaction mode in which the consumer will conduct a transaction.
Given that there are two main transaction modes available for consumers to choose from,
shopping in a traditional channel and the shopping in an online channel, it is presumed that
low TCs in the online channel will encourage consumers to choose online shopping while
high TCs in the online channel will prompt offline shopping. Indeed, some consumers adopt
online shopping because it reduces the time and effort expended searching for product
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information and enhances transaction efficiency (Liang and Huang, 1998; Wu et al., 2012),
whereas some consumers refuse to adopt online shopping because they perceive high risks in
relation to online vendors’ opportunistic behaviour and uncertain external environment which
increase their perceived TCs of online shopping. Teo et al. (2004) found that TCs of both
consumers in the U.S.A and China negatively affect their willingness to shop online. Also,
Teo and Yu (2005) validate the findings that perceived TCs are negatively related to
consumer’s willingness to purchase online. As such, it is hypothesised that consumers who
perceive lower TCs of online shopping are likely to buy more items from an online store and
patronize it more frequently, whereas the rise of TCs would hinder consumers’ online
purchase at the online store, which is mainly reflected in the reduction in the purchasing
frequency and the total amounts of items bought online.
H4a. A customer’s perception of TCs associated with purchasing from an online store is
negatively related to his/her actual online purchase behaviour at the online store.
3.6.2.2 Role of Consumer TCs in Customer Loyalty towards an Online Store
In this study, customer loyalty is defined as a customer’s favourable attitude toward an online
vendor resulting in repeat buying behaviour and positive word-of-mouth (Anderson and
Srinivasan 2003). In online exchanges, Kim and Li (2009b) claim that TC economizing is
particularly important for online loyalty development. The rationale behind this proclamation
can be explained from two aspects.
Firstly, online consumers are endowed with relative ease of access to information compared
to consumers in the brick-and-mortar, offline context (Fan
et al.
2013a). It is easy for them to
make comparisons across competitive vendors (Jiang
et al.
2013). Thus, the importance of
price and other product information in determining customer loyalty as documented in the
146
literature is lessened. In contrast, the role of TCs manifested in time and effect expended
becomes more salient (Reichheld and Schefter 2000, Wu
et al.
2014, Yen
et al.
2013). The
notion of TC economizing interestingly is a cornerstone in customer loyalty (Kim and Li
2009b). Indeed, there is growing recognition that in the Internet age, consumers place a
greater focus on time and effort saving, with greater attention to TC economizing. Speed
becomes the measurement standard and time becomes a more scarce resource when it comes
to online shopping. According to a Greenfield Online survey, consumers choose online
shopping in order to save time (60 per cent) and avoid crowds (47 percent) (Tyagi 2004). On
this point, time and effort saving reflecting TC saving plays an imperative role in determining
continuance of future transactions.
Secondly, in an online setting, the difficulty of assessing the online vendor’s performance
puts a burden on consumers because they have to invest additional time and effort to closely
monitor the products and services provided by the online vendor (Bowen and Jones 1986).
Such transactional difficulty would increase TCs, leading to the emergence of switching
behaviour. Ultimately the increased TCs would hinder the establishment of customer loyalty.
As a result, the TC consideration becomes more salient in affecting the development of
customer loyalty toward an online store. When TCs are perceived to be high, customers
would not stay loyal toward an online store as they tend to choose the vendor who can
minimize their perceived TCs. Empirical evidence from Cannon and Homburg (2001) show a
direct relationship between customers’ procurement cost savings and their desire to increase
future transactions. Bharadwaj and Matsuno (2006) identify that low TCs influence customer
retention positively. Kim and Li (2009b) illustrate that loyalty of customers purchasing travel
products over the Internet are affected negatively by TCs. The foregoing discussion leads to
the next hypothesis:
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H4b. A customer’s perception of TCs associated with purchasing from an online store is
negatively related to his/her loyalty towards the online store.
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