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XAVIER INSTITUTE OF MANAGEMENT

BHUBANESWAR

STUDYING THE CUSTOMER BEHAVIOUR IN E-RETAILING

SRM PROJECT

Course Instructor: Dr. Prahlad Mishra

Submitted By
Section E Group 7
Abhipsha Sahoo - UM16254
Aswath S B - UM16258
Deepali Agarwal - UM16264
Kanika Dhall - UM16270
Lipsa Lenka - UM16274
Rashmi Agarwal - UM16284
Vignesh G - UM16306
Aayush Gautam - UM16308
CONTENT

1. Abstract
1. Introduction
2. Literature Review
3. Objectives
4. Methodology
5. Findings
5.1 Univariate
5.2 Bivariate (Cross Tables)
5.3 Multivariate
6. Conclusion
7. Appendix
8. Bibliography
ACKNOWLEDGEMENT

We wish to express our profound gratitude to our faculty, Dr. Prahlad Mishra for enriching
us with the curriculum and for his inspiring guidance, constructive criticism and valuable
insights throughout the course of the project.

We would also like to thank all the participants who helped us by completing our survey
and thus giving us required sample data for our research project.

We would be grateful to everyone who has been a source of inspiration and guiding light to
us throughout the project, without whose encouragement this project would not have been
completed.
ABSTRACT

Online shopping or e-shopping is a form of electronic commerce which allows consumers to


directly buy goods or services from a seller over the Internet using a web browser. The study
focuses on online shoppers preferences and problems on various online shopping marketers.
Survey method is used for collecting primary data. A survey is conducted for the study through
self developed questionnaire. The study area is from people belonging to the country India,
with a sample size of 135 respondents, out of which 35% are males and 65% are females.

In earlier days people used to go to different shops before purchasing as they didn't have a
great deal of easy access to information on products. Due to the development of World Wide
Web it has now become easy to access the products available worldwide without wasting
time, money and other resources apart from helping environment.

The mean age of the respondents is around 27 years. Through univariate analysis, we
analysed the gender diversity, occupation distribution, annual income and monthly spending
activity of buyers and categories of product people preference for online mode of shopping.
With the help of cross tables, we got the distribution of male female ratio as per age range
and the relation between customers monthly spending and their annual income and
occupation type.

Using factor analysis, customers buying behaviour or experience in e-retailing is divided into
three factors or latent variables, i.e Delivery related factors, Order Procedures and
Differentiation factor. Among the respondents, people gave more importance to delivery
related procedures.

And with the help of cluster analysis, by using the demographic variables, the target group
was divided into three clusters. We concluded that Annual income and occupation are
primary differentiating factors between the groups of respondents. On these clusters, factor
analysis was done.
INTRODUCTION
The Indian population is estimated to be 1.27 billion currently, urban population being 889
million and rural population being 128 million. Among them, internet penetration has
reached to only 300 million, urban population being 218 million and rural being 72 million.
The internet usage is growing rapidly in India and is estimated to be well over 500 million
internet users by 2018. With the advancement in technology and the increased internet
usage, commerce has been majorly adapted to the internet age and E-commerce came to
be in the picture.

Ecommerce Electronic commerce, commonly known as e-commerce, is a type of industry


where the buying and selling of products or services is conducted over electronic systems
such as the Internet and other computer networks. Electronic commerce draws on
technologies such as mobile commerce, electronic funds transfer, supply chain
management, Internet marketing, online transaction processing, electronic data interchange
(EDI), inventory management systems, and automated data collection systems. Modern
electronic commerce typically uses the internet and recently using smartphone applications.
The importance of Ecommerce is quite prominent to all developing nations. It has varied
impact on our economy,

Telecom companies to generate 48,000 Crore Additional Revenue.


Indian e-commerce industry will spend $950-1,900 million. By 2017-2020 on
infrastructure, logistics and warehousing.
This indicates an addition of 6-12% to the space available in form of organized
warehousing in India and almost 25-50% of all the incremental addition of
consumption driven warehousing.
The growth of e-commerce industry has a huge potential in the country translating
into huge gains for the manufacturing industry, infrastructure and jobs.
Size of the e-retail industry is poised to be $10-20 billion by 2017-2020.

With such a significant economic impact, it is necessary to gauge the consumers buying
behavior from Ecommerce. What is perhaps most fascinating in this explosion is the shift in
the profile of Internet Users. The last 100 million users will be drastically different from the
first 100 million users on multiple dimensions; they will be older, more rural, more female,
more mobile-led, and more vernacular. The government and telecom carriers have already
taken up the responsibility under the Digital India initiative and will have to play a more
proactive role to ensure that the current universal coverage of 2G networks in urban areas is
replicated in the villages by 2018, considering that 20 percent of rural India continues to be
deprived of this vital piece of infrastructure. A similar improvement will be required in the
penetration of 3G and 4G services, which are presently largely confined to tier-I and tier-II
cities. Consumer behaviour does not solely apply to physical stores today as ecommerce has
become more and more prevalent.

Online shopping has grown in popularity with consumers due to the efficiency, speed and
convenience it provides. As such, retailers and e-tailors alike must apply the psychology of
marketing in order to satisfy customer needs and grow their sales. Identifying how online
buyers think and feel about where they hangout online can help marketers improve existing
campaigns and flesh out strategies that can reach consumers better. Thus by analysing the
buying behaviour the company policy makers will be able to better judge the market and
accordingly take important business decisions for the following reason.

To increase profits by boosting sales.


Companies will know what type of products to include in their portfolio so as to
maximize the consumer purchase.
As the market trend is ever changing, it is important to look at the target segment to
be clear of who their future customers are and what type of buyers they are.
Plenty of business forecasting could also be done by studying the consumer buying
behaviour.

Because of the above stated reason we decided to do a research on the Ecommerce


consumer buying behavior. There are different types of Ecommerce, business to business,
business to consumer, and consumer to consumer. For our study we have considered
business to consumer segment of the Ecommerce. The factors that influence the buying
behaviour can be classified into two major categories.

The external factors are the ones beyond the control of the people who are making the
actual purchase. They can divide into five sectors: Demographics, socio-economics,
technology and public policy, culture, sub- culture, reference groups, and marketing.

Internal factors are personal traits or behaviours and include attitudes, learning, perception,
motivation, self-image, and semiotics.

Apart from these, security and privacy plays a very important role while considering buying
decisions. The internet as such has these issues inherently and the global Ecommerce giants
are fighting major battle against such issues. There have already been many studies
regarding the buying behaviour of consumers and we had decided to go further in depth to
analyse more about the current situation. Here are a few results which have been found by
other studies which helped us with our analysis and further decisions.

93% of consumers have taken into account the visual appearance of the product
while buying making buying decisions.
Having a audio/video visual on the product page increased buying conversion rate by
12.62%
When the forced user registration was removed, sales of online products increased
by 45%.
Amazon found for every 100 milliseconds that look for loading the page,, there was a
1% decrease in the buying conversion rate.
PayPal has 79% higher buying conversion rates than other Ecommerce sites.
On adding a 100% Money Back Guarantee tag to the products, there was a 3%
increase in the conversion rate.
The average online cart abandonment rate was 68.63% as of 2015.
51% of the Ecommerce users were using mobile phones to buy products.
Online product reviews every year helped the products sales to increase by 18%.
By adding testimonials to each product online, the sales were made to increase by
34%.
Engaged customers are 6 times more likely to try a new product or service
75% of smartphone users abandon those online Ecommerce sites that dont use a
mobile application.
40% of shoppers prefer discounts on purchases over loyalty programs that are
available for each website.
Free shipping was an important factor for 43% of the buyers, without which they
would abandon the purchase.
Regular customers spend 67% more within 3 years than the first six months.
43% of online shoppers found new products that they have never used before.
66% of the buyers were committed to a product if it as termed environment friendly.
93% of online shoppers like to shop at local retailers.

Adding to the statistics stated above we decided to research on several other factors which
affect which affect the buying behaviour of consumers. We have bought in factors related to
demography, geography, the different challenges the consumers face while making buying
decisions, the different personal interests, various customer inhibitions, Ecommerce site
preferences based on the product, etc. We have collected data from different Ecommerce
users, a fitting sample population, and have forecasted the results to their entire
population. We have used several statistical tools analyzes the data and come up with
detailed inferences.
OBJECTIVES
5. FINDINGS
Sample A total of 135 responses were captured
taking into consideration gender, income,
age diversity, occupation and purchasing
behaviour.
Data collected
Survey Questionnaire

5.1 DEMOGRAPHIC PROFILE

Descriptive Statistics of Age Distribution of Respondents


The mean age of the respondents is around 27 years and standard deviation is around 9
considering the minimum age to be 19 and maximum age to be 72.

Gender Diversity:

Gender Diversity in the sample


Occupation:

Occupation Number Percent (%)

Student 50 37%

Service (Govt) 7 5.2%

Service (Private) 65 48.1%

Business 1 0.7%

Self employed 4 3%

Others 8 5.9%

Occupation Distribution in the sample

Annual Income:

Annual Income Number Percent (%)

Less than 3 Lakhs 53 39.3%

3-6 Lakhs 53 39.3%

6-9 Lakhs 13 9.6%

9-12 Lakhs 6 4.4%


Greater than 12 Lakhs 10 7.4%

Income Distribution in the sample

Marital Status:

Do You Shop Online:

Online Shopping Preference


Spending per Month through E-retailing:

Monthly spending Number Percent (%)

Less than 2000 39.4% 50

2000-4000 35.4% 45

4000-6000 11.8% 15

6000-8000 4.7% 6

8000-10000 3.1% 4

Greater than 5.5% 7


10000

Monthly Spending of the sample


Categories often shopped in:

Different categories of frequent shopping

Mode of Payment:

Preferred mode of payment


Bivariate relationship : Cross Tables

Male Female ratio in the total sample

Age (years) /
Gender count male % female % Total

<20 4 1 25% 3 75% 4%

21-25 4 1 25% 3 75% 4%

26-30 85 60 71% 4 29% 78%

31-35 5 1 20% 4 80% 5%

36-40 1 1 100% 0 0% 1%

41-45 1 1 100% 0 0% 1%

45-50 1 1 100% 0 0% 1%

50+ 8 6 75% 2 25% 7%

Total 68% 32% 100%

Inferences:

78% of our sample is from age group 26-30 years, out of which 71% are
males and 29% are females.
Of the total sample, 68% are males and 32% are females.
How much do you spend on E-Retail per month (Rupees) * Annual Income (Rupees)
Crosstabulation
Annual Income (Rupees) Total
Less % 3 % 6 % 9 % Greater %
than Lakhs Lakhs Lakhs than 12
3 to 6 to 9 to 12 Lakhs
Lakhs Lakhs Lakhs Lakhs
How Do not use E- 3 37.5% 0 .0% 2 25.0% 1 12.5% 2 25.0% 6.0%
much do retailing
you Less than 2000 20 40.0% 25 50.0% 4 8.0% 0 .0% 1 2.0% 37.6%
spend
on E- 2000 to 4000 21 47.7% 17 38.6% 2 4.5% 3 6.8% 1 2.3% 33.1%
Retail 4000 to 6000 5 33.3% 4 26.7% 3 20.0% 2 13.3% 1 6.7% 11.3%
per
month 6000 to 8000 2 33.3% 2 33.3% 1 16.7% 0 .0% 1 16.7% 4.5%
(Rupees) 8000 to 10000 1 25.0% 1 25.0% 0 .0% 0 .0% 2 50.0% 3.0%
Greater than 10000 1 16.7% 2 33.3% 1 16.7% 0 .0% 2 33.3% 4.5%
Total 53 39.8% 51 38.3% 13 9.8% 6 4.5% 10 7.5% 100.0%

E-retail spending per month

Inferences:

Out of the total, 37.6% spend less than Rs 2000 per month on E-
Retailing.
o Out of this 37.6%, 50% people have annual income between Rs 3
lakhs to 6 lakhs and 40% people have annual income less than Rs 3
lakhs.
33.1% of the people spend between Rs 2000 to Rs 4000 per month on E-
Retailing.
Majority of the people (39.8%) belong to income slab of less than Rs 3
lakhs, followed by 38.3% people belonging to income slab of Rs 3 lakhs
to Rs 6 lakhs.
Spending By Occupation

How much do you spend on E-Retail per month (Ru

Occupatio
Develop Self
Busine ment Free Home Homemak Emplo
ss % sector % lancer % Maker % er % Retd % yed
How Do not 1 12.5 0 .0% 0 .0% 1 12.5 1 0 .0% 1
much Spend % %
do on E-
you Retailin
spend g
on E- Less 0 .0% 1 2.0% 0 .0% 0 .0% 0 .0% 0 .0% 1
Retail than
per 2000
month 2000 to 0 .0% 0 .0% 1 2.3% 0 .0% 0 .0% 0 .0% 1
(Rupe 4000
es) 4000 to 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 1
6000
6000 to 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 0
8000
8000 to 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 1 25.0 0
10000 %
Greater 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 0 .0% 0
than
10000
Total 1 .8% 1 .8% 1 .8% 1 .8% 1 .8% 1 .8% 4

Inferences:

47.7% of our sample works in service sector (Private) followed by 37.9%


as students.
37.9% of the people spend less than Rs 2000 per month on E-Retail,out
of this 37.9%, 2% people work in Development sector, 2% are self-
employed, 56% people belong to service sector (private), 36% are
students, 2% are teachers and 2% are unemployed.
Appendix:

SPSS Output
FACTOR ANALYSIS

Factor analysis is a statistical process that is used to explain the variability among observed,
correlated variables in terms of a potentially lower number of unobserved variables called factors. It
is used to uncover relationship patterns underlying a large number of phenomenon.

A study was conducted to find Customer Experience in E-Retailing. A questionnaire was floated and
we received 135 responses spanning different demographics. The following were the manifest
variables specified in the Likert scale (scale of 1-5) while preparing questionnaire.

1. Quality
2. Delivery time
3. Size and specification issues
4. Customer service and after sales support
5. Discount
6. Option for rescheduling
7. Brand
8. Ease of cancelling order
9. Refund policy
10. Ease of placing order
11. Product variety
12. Ease of payment procedure

THE following where the observations using factor analysis

While doing analysis, Varimax rotation is used. The factors are extracted by specifying the number of
latent variables required (5 in this case). In rotational component matrix, the factor loadings cut off
value is given as 0.50. The KMO value is 0.822 while implies the Samples are adequate to conduct
the required analysis.
Order Procedures Delivery related factors Differentiation factors

P.V 23.35% P.V 22.067% P.V 13.946%

Option for rescheduling (.712) Quality(.790) Discount(.788)

Ease of cancelling order (.753) Delivery Time(.603) Brand(.671)

Refund policy (.592) Size and specification issues(.773) Product Variety(.597)

Ease of placing order(.755) Customer services and sales


support(.757)

Ease of payment procedure(.676)

INTERPRETATION:

In factor analysis, the Manifest variables are grouped into three Latent variables (factors) - Delivery
related factors, Order Procedures and Differentiation factor. The factor analysis covers a variance of
59.363%. From the analysis, while using E-commerce websites people give more importance to
Order procedure related factors and covers 23.35% of variability and give least preference to
Differentiation factors of the product while purchasing which covers 13.946% variance. The quality
of delivery, The ease of order placement, ease of payment procedure, Options for cancellation of
order and rescheduling the order are the variables that influence the customers having pleasant
experience in E-retailing.
CLUSTER ANALYSIS

We have done cluster analysis to identify target groups who form separate clusters while doing
online shopping in E-retailing. We have considered the demographic variables to form the clusters.

Clusters 1 2 3

AGE 20 to 29 50 to 59
20 to 29

OCCUPATION Students Service (private) Business

ANNUAL Less than 3 lakhs 3 to 6 lakhs 6 to 9 lakhs


INCOME(Rs)

MARITAL STATUS Single Single Married

Here we can see that Annual income and occupation are primary differentiating factors between the
groups of respondents.

Cluster 1: Among the sample respondents, Unmarried People Between age 20 to 29, pursuing
education and having annual income of less than 3 lakhs constitute 40.15% of the sample. These
respondents have similar buying behaviors. So the student community who are dependent on other
source of income have similar buying behavior and are differentiated from others who are employed

Cluster 2: Among the respondents, Unmarried People Between age 20 to 29, employed in private
enterprises having annual income of 3 to 6 lakhs constitute 52.18% of the sample. These respondents
have similar buying behaviors

Cluster 3: This cluster comprised of married, self-employed business respondents earning annual
income of 6 to 9 lakhs and having medium education who contributes 7.57% of the respondents.
So, now should attempt to separately analyze the above groups of respondents for the major
motivating factors that influence customer behavior and experience in E-retailing.

FACTOR ANALYSIS FOR THE CLUSTER 1 :

Order Procedures Differentiation Delivery related factors Delivery and after sales
Factors support

PV 22.864 % PV 18.88% P.V 17.15% PV 17.44%

Discount(.775) Product variety (.799) Quality(.702) Ease of cancelling


order(.865)

Option for Ease of payment Customer Support(.835) Delivery time(.665)


rescheduling(.619) procedure(.819)

Brand(.717) Size and specification


issues(.594)

Ease of placing
order(.728)

Refund policy(.543)

After doing factor analysis for the cluster 1 got from cluster analysis, We realize that these
respondents give higher importance to order procedure related manifest variables. Customers give
importance to if the order can be placed easily with proper discount and also proper refund policy.
After that Differentiation factors, delivery factors and delivery and after sales support follow the
next order of importance respectively. They cover total variance of 76.44%
FACTOR ANALYSIS FOR THE CLUSTER 2:

Order procedures Delivery related factors Product differentiation


factors

P.V 29.89% PV 23.07% P.V 15.38%

Delivery time(.570) Quality(.639) Discount(.755)

Option for rescheduling(.568) Customer Support(.719) Brand(.794)

Ease of Cancelling order(.838) Refund policy(.709)

Ease of placing order(.858) Size and specification


procedures(.835)

Ease of payment
procedures(.786)

After doing factor analysis for the cluster 2 got from cluster analysis, we realize that these
respondents give higher importance to order procedure related manifest variables. If the order can
be placed easily with proper payment procedures with cancelling and rescheduling options, then
they are mostly preferred by this target group. After that delivery factors Differentiation factors
follow next order of importance respectively. They cover total variance of 68.24%
FACTOR ANALYSIS :
CLUSTER ANALYSIS
Factor Analysis on Cluster 1
Factor Analysis on Cluster 2