FACTORS INFLUENCING SOUTH AFRICAN INTERNET USERS PURCHASING A PRODUCT OR SERVICE ONLINE By Ashwin Mohanlal Submitted in partial fulfillment for the requirements of the Master in Business Administration from the School of Business, University of KwaZulu Natal Pietermaritzburg 2006 ABSTRACT ~ r-- l Of the various channels to market, one that has probably received the greatest attention and produced the highest expectations of impact and adoption is the Internet (Wright and Cl ark, 2-005: 1). According to Feher and Towell (1997), and Paul (1996), as cited by Vijayasarathy and Jones (1998: 322), the Internet promises a number of benefits to both businesses and cons~. _ Fl om a_ ~usiness perspective, the Internet can be a powerful medium to establish a " unique relationship with consumers (Pattinson and Brown, 1996: 31). For the consumer, the ~ Internet can be a valuable communication medium to facilitate controlled, non-linear search for up-to-date information, simulated product and service testing, and provide assistance with . '\ comparison-shopping and decision-making (Hoffman et ai, 1996: 26). I , ' v C~J The Internet has grown at an incredible rate. By March 2006, there were approximately 1 023 million Internet users worldwide (internetworldstats, 2006: 1). However, the Internet has n?! grown in South Africa at the pace that it has grown in first world countries such as America, . ..--­ Japan and the United Kingdom (internetworldstats, 2006: 1). According to Computer Industry v Almanac Inc (2005: 1), South Africa had 4 780 000 million Internet users in 2005. This is I approximately 0.5% of the worlds Internet users. / L- Global studies have been conducted on why Internet users purchase online, but not much information is available on why South African Internet users purchase online. Moreover, this limited inf0l111ation is mainly available only commercially. South African Internet research companies such as Webcheck, World Wide Worx and eMarketer generally charge between · R6000 and R14 000 (2005 Rand prices) for South African online shopping studies, which generally deal more with Internet usage, buying behaviour in terms of products and services purchased, online shopping trends and to a limited extent factors that influence South African Internet users purchasing online. [Due to South Africa's diversity and unique situation III terms of its economy (what is coriiinonly referred to as it's digital divide), the factors that influence South African Internet f ( \,// \ users purchasing online may not be the same as the factors influencing Internet users from , other countries purchasing online. - 1 - In order to investigate the factors that influence South African Internet users purchasing online, the following research objectives were identified: , ) '/ /< ) \ -..' J /' \., \..../ ; • -( . < Primary Research Objective / I ~ - I To identify factors that influence South African Internet users purchasing a product I I or service online. • Secondary Research Objective Number 1 To determine the significance of the identified factors that influence South African Internet users purchasing a product or service online, • Secondary Research Objective Number 2 To determine the relative importance of the identified factors that influence South African Internet users purchasing a product or service online. , f ~~ /f 'v A questionnaire (provided in Annexure One) was developed to investigate the above research objectives and was distributed, via e-mail.to 437 employees of Ninham Shand (Pty) Ltd. A response rate of 269 was achieved. The research found that the following factors were rated important to the sample purchasing online: (1) the price of the product or service being purchased; (2) the convenience to the Internet user; (3) the experience as an Internet user; (4) the web site layout; (5) the ease of use of the web site; (6) the brand of the product or service; (7) the type of product or service; (8) the availability of online information on the product or service; (9) the method of payment; and (10) the web site security features. From the above factors, the web site security features was ranked as the most important factor influencing respondents purchasing a product or service online, the ease of use of the web site was ranked as the second most important factor and the web site layout was ranked as the third most important factor influencing respondents purchasing a product or service online. Based on these findings, it can be concluded that the results from this study can contribute to the body of knowledge on online consumer behaviour theory and knowledge of South African Internet users. ''''-. - 11 - DECLARATION This dissertation was prepared in support of the partial fulfillment for the requirements of the Master in Business Administration, from the School of Business, University of KwaZulu Natal. The entire dissertation, unless specified in the text, is my own work and has not been submitted in part, or in full to any other university. ~06-0q- // Ashwin Mohanlal Date - 111 - ACKNOWLEDGEMENTS This dissertation was completed as the result of the guidance, encouragement and help received from numerous people and organisations. I wish to convey my sincere thanks and appreciation to: - Ninham Shand Consulting Services; Mr Chris Grobberlar for his input in developing the questionnaire; Professor Debbie Vigar Ellis, for her advise and guidance throughout this dissertation; and To my family and friends whose support and encouragement was invaluable. -IV - CONTENTS PAGE 1. INTRODUCTION ...... .... ................................. ...................... ................... ..... .......... 1 1. 1 Background ... .. ... ... ........... ... ........... ..................... .... ... .. .. .................. ... .... .................. 2 1.2 Motivation ...... ... ........... ... ......... .... ... ... .... ........... ............. ...... .. .............. ........ ... .... ... ... 3 ..... l .3 Problem Statement ... .. ..... ...... .. .... ... ..... ..... .... .... .... ..................... ..... ........................... 3 1.4 Research Objectives and Hypotheses .. ................................. ... ....... ....... .................. .4 1.5 Study Area ... .............. .. ......................... ..... ................ .... ... .. .. ..................................... 7 1.6 Research Methodology .. ............................ ... .................................... ......... ............ ... 7 1.7 Dissertation Structure .............. ... ..... .... ............................ ....... ...... ... ...... ............... ..... 8 1.8 Summary ... ...... ... ............... ... .......... .... .. ... .. .. .... .... ..... ....... ..... ..... ..... .. .. .. ......... ............ 9 2. THE HISTORY AND GROWTH OF THE INTERNET .................. ....... .... .... .... ... 10 2.1 Introduction .... .................................................. ............ ....... ..................... .... ..... ... ... 10 2.2 The Beginnings of the Internet.. .. .. ... .... .................................................................... l 0 2.3 Growth of the Internet ...... .................................... ........... ......................................... 16 2.4 Electronic Commerce ....... ..... ..... ......... ........................................ ... .. ....... .............. ... 17 2.5 Online Retailing ... ... .... ..... .. ........ ....... .. .... ... ....... .... ....... .... ... ... .... ... ............ ..... ...... .... 19 2.6 T h e Internet III. S OUt11 Afflc' a .. ... ... ....... ... .. ........ .. ..... ...... .... ... ...... ....... ........ .. ...... .. .. ... 20' 'S! i>'\j 2.7 Summary ..... ....... .. ................................. .... ..... .... ................. .. ......... .......... ................ 29 3. CONSUMER BEHAVIOUR .................... ......................................... ....... ............... 30 3.1 Introduction ....... .......... .. ... ... .............................................. ...... ........... ...... .... ... ......... 30 3.2 An Overview of Consumer Behaviour.. ... ... .. ................. ...................... ....... .... .. ..... .. 30 3.3 Factors Influencing Traditional Consumer Behaviour.. ... ...... .. .... ... ....... .......... .... .... 31 3.4 Types of Decision Making Processes ..... ..... ..... .. ... .. .... ......... .... ..... ...... ....... .. ....... ... 39 3.5 A Consumer Behaviour Model for Internet Buying ....... .. .............. .... .......... ......... .45 3.6 Summary ... .... ... ........... .... ............. ...... ......... ................. .. .. ..... .......................... .... ... .. 49 4. FACTORS INFLUENCING INTERNET USERS PURCHASING ONLINE ..... .. 50 4.1 Introduction ............................... ..................... ............................. ......... .. ......... ... ... ... 50 4.2 The Price of the Product or Service Being Purchased ...... .... ... ..... .. .... ... .. ..... .. ....... .. 50 4.3 The Convenience to the Internet User. ... ... .. ... .......... .. .......... ........... .. ..... ... .. .... .... .. ... 52 • 4.4 The Experience as an Internet User ..... ... ... .... .. ......... .... ... .. .. ... ... ........... ..... ... ... .. ... ... 54 - v- CONTENTS PAGE ~ 4.5 The Web Site Layout ..... ... ..... .............. ... ........................................ ......... .... ............ 56 4.6 The Ease of Use of the Web Site .. ..... .. ............................................... ..................... 57 4.7 The