Abstract

An increasing number of customers are turning to the Internet to make their purchases, as a vast array of goods and services are now only a mouse click away. E-tailing clothes is even more challenging, with new e-tailers’ hoping to attract and retain satisfied online customers, are constantly creating new opportunities for them, and in order to do that they need to know what evaluative criteria customer’s use when selecting an e-tailer as well as what they will purchase online. Past research has provided some insight into what characteristics customers assess whilst making this choice. This report has not been without its limitations. Consequently, the present study utilizes a literature review, qualitative and quantitative research to identify the core customer behavior towards this channel, In addition, results of the analysis show that the type of product on offer and the web attributes (determinants) are predictors of customers’ attitude toward online shopping for clothing and their perception hence, providing an understanding of how they are responding to the new online buying opportunities.

1. Introduction

This research report is divided into 5 Chapters. Chapter 1 is meant to introduce the background of the research area with aims and objectives and focus of the study providing guidelines into subsequent chapters. This then will be followed with Chapter 2 having literature review of the matter giving an insight of the research area that will be referred, compared with the data collection and analysis will be made in Chapter 4. However, Chapter 3 will be discussed prior to the actual data collection as it is necessary to identify Research Methodology to be used for the research. Finally, Chapter 5 will have conclusions and recommendations with any limitations faced and with the mention of area for further research if any.

The expansion in electronic commerce (E-commerce) has been phenomenal, with most of today’s business transactions being conducted through the Internet. The emergence of this electronic retail (E-tail) market has been extraordinary. E-tailing is also a gaining popularity and changing the retail landscape, it is pervasive in what we thought of it six months ago is probably different to what we think of it today and also what we will think of it in six months time.

Customers’ decision making process has also altered greatly with the introduction of this medium and more so as an alternative channel for shopping. Online shopping concept has already caused a stir in the retail industry in the UK, as more people are opting to buy online due to various reasons, a vast array of goods and services are increasingly being made available now through a click of the mouse, creating a new experience and culture. Many retailers are already delivering high value, personalised products and services at a fraction of the cost thereby making it more low cost and also appealing to the consumers (Birch et al, 2000). The number of consumers shopping online has increased markedly, according to Jardine (1999) people have increasingly become price sensitive and often compare prices of goods both online and offline before making the final purchase, in turn increasing competition amongst the retailers. This is the general overview of the e-tailing concept, as understood by most of us.

However, the purpose of this study is to concentrate on the online clothing market in the UK specifically London, in order to determine predictors of customers’ purchase intentions for clothing products via this channel. E-tailing of clothing items online has always been debatable, especially since clothing are “feel-and-touch” products, and cannot be bought without engaging this sensory aspect, unlike other cognitive products like books, computer software, dvd’s and music which do not really require this. Nevertheless, customer’s tend to buy more clothing products when they perceive the features of the online store, such as a convenience and secure system of ordering and payment, returns policy, the focus on product display, and the offering of products that have a range of acceptable fits as opposed to a precise fit and most of all choice this are some of the most general attributes a customer considers whilst shopping online for clothes.

The attributes that enhance the online experience can be particularly influential for products such as clothing, which generally require physical interaction and evaluation prior to purchase. Web experience attributes can affect early decision making stages (search and pre-purchase evaluation) and influence purchase intent of the customer. With the current fragmented nature of the subject area and to keep up with the rapidly developing technology as well the customer attitudes, the author aims to build on the current body of knowledge, investigating and drawing together the key aspects which influence online shopping for clothes, so as to understand how the customers are responding to the new buying opportunities presented to them by the e-tailer’s in UK then concentrating on London where the survey was conducted by collecting data from a sample of participants, which aided in exploring the capabilities and further to determine consumer behaviour and customer relationship management patterns in relation to E-tailing, thus the research objectives being set as:

1. To explore the impact of e-tailing in London.

2. To determine customers attitude towards shopping online.

3. To investigate customers perception of shopping online for clothing in London.

In order to achieve the results of the set objectives, the author has explored the determinants the customer’s consider most important when making a purchase online and to what extent they create an impact on their perceptions. The first hand elements collated from the survey has helped to gain rich insights into customers’ behaviour and attitudes towards this channel. The secondary data which is covered in the second chapter under the literature review the author here has studied and explained the general E-tailing concept and picked relevant data to help understand the subject matter and provide a better insight into the field of e-commerce, covering a wider area (UK), then narrowing it down to specific location (London) which in turn has helped to achieve the set objectives and later also support the resultant findings in terms of the primary data collected via the survey by the author.

2. Literature Review

Xing (2001) stresses that “The emergence and explosive growth of e-commerce through online trading have ushered in a new era of retail business”.

2.1 The Commercialisation of the Internet

The Internet, once a tax-sustained and a government-regulated endeavour, is no longer restricted to non-commercial traffic. The early commercialisation of the Internet, in the mid – 1990s gave rise to the e-commerce phenomenon. The Internet population has since grown tremendously, as a result of its opening to the commercial traffic in 1991. Its utilisation has since become remarkably more wide and varied in businesses; the application of internet has grown rapidly over the last several years, due to its contribution of the ever evolving new information technology and its positive gains to the business organisations. Its use apart from being internal its’ also employed externally and its used more commonly referred to as E-business (electronic business) derived from such terms as “e-mail” and “e-commerce,” which is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners.

IBM was one of the first organisations to use the term E-business (electronic business) when, in October 1997, it launched a thematic campaign built around the term. Today, major corporations have reconsidered their businesses in terms of the Internet and its new culture and capabilities. Companies are utilising the Web to buy parts and supplies from other companies, to collaborate on sales promotions, and to do joint research, exploiting the convenience, availability, and world-wide reach of the Internet, using it successfully.

2.2 The E-tailing Concept

“The emergence and explosive growth of e-commerce through online trading have ushered in a new era of retail business” says Xing (2001). It was seen as a new channel for sale of products and services along with the traditional channels as well as a market penetration strategy for others. E-tail or E-retail the term, came into discussions or rather its origins as early as 1995, it’s an addition in the computing subject such as, e-mail, e-business and e-commerce. The business of e-retail has been defined as the sale of goods and services via internet or other electronic channels, for personal or household use by consumers (Harris and Dennis, 2002).

It’s more efficiently used as a marketing tool, which is integrated into traditional business strategies, and also being viewed as a new marketplace by existing businesses as well as new business ventures as the market place becomes more competitive and unpredictable, due to this, the growth of the electronic retail market has been rapid, significantly expanding reach in terms of people, location and range being variety of information, the World Wide Web has created benefits for both the marketers as well the consumers. For consumers, the Web can provide access to a wide range of products and services with low cost (Bakos, 1997), extensive and tailored information, at home convenience for product comparisons, enhanced interactivity (Cross and Smith, 1995), hence facilitating the formation of virtual communities for users with common interests.

E-tailing and E-trading operates in all four of the major market segments; business to business, business to consumer, consumer to consumer and consumer to business. Initially, much direct selling (or e-tailing) was taking place on the internet of computer-related equipment and software, one of the first to report successful sales in the millions of dollars directly from the Web was Dell Computer, there after other businesses started employing the concept in various fields from; Travel bookings, Holidays, Books, Clothing and other accessories, this has particularly grown in the Business to Consumer market segment directly or indirectly as a result of the wide usage of the internet. The Internet’s greatest commercial advantage is said to be the reduction in transaction cost that directly lowers the prices for consumer (Pavitt, 1997), and therefore E-tailing is said to be a low-cost, efficient way to display merchandise, attract customers, and handle purchase orders (Bellman, 2001).

2.3 Online shopping in the UK

Home shopping in various forms has been available to the consumer market for more than 100 years in the UK, paper catalogue being the first and the oldest form illustrated with Victorian ladies and do-it-yourself house kits a lot has changed since, in terms of improvements and choice, then came the emergence of home shopping television, however none has had the influence or the expected impact of shopping, as much as the World Wide Web. E-commerce has grown steadily in the UK since the early 1990’s. According to Exley (2006, cited in Haymarket, 2006) consumers have become comfortable shopping on the internet and e-tailing is clearly a part of retail’s future. He adds that e-tail does not have to replace traditional bricks and mortar stores, “all retailers need to do is to provide a good in-store experience” (Exley, 2006, cited in Haymarket, 2006).

“Since 2000, Internet shopping has soared by over 5,000% with UK consumers spending an astounding £200 billion during this period. Internet shopping is clearly the bright spot in the UK retail sector, but this industry is still young and has potential for further growth.” (Tina Spooner, director of information, Interactive Media in Retail Group (IMRG), cited in press release, May 2009). No doubt, online shopping is rising steadily in the UK (from a consumer’s perspective) as internet access has become cheaper, high street cyber café’s are increasing and Internet service providers (ISPs) have already eliminated subscription fees (Daniel, 2000). Furthermore as technology is set to get even more advanced, hand-held devices have become internet-enabled and nowadays most mobile phones connect to the web (Daniel, 2000). With all the above possible ways of shopping more customers are getting accustomed to the online shopping experience and utilising the new channel. This exceptional growth of Internet shopping is also driven by greater emphasis on customers’ efficient use of time, as well as the ever increasing number of computer trained customers, hence giving it a positive outlook and a further opportunity for growth to the existing and perspective e-tailers.

A wide range of products and services are available for the customers in the UK to buy online from a variety of retailers, which also gives them a better choice, so why would they go buy anywhere else? Although one reason may be convenience, sadly another is fraud; fraud poses the biggest threat to online shopping (Economist, 2004) but according to Pavitt (1997) consumer’s fear of shopping online is already resolved by the use of encryption technology.

Moreover, the security systems are rapidly improving by the day, further dispelling the notion which is perceived by a majority of people worldwide that online shopping is a risky business. For example, secure digital systems such as encryption tools, digital signatures and the guarantee about security or privacy concern provided by the e-tailers have reduced security inhibitors and thus have increased consumers’ willingness to visit or purchase from sites (Ah-Wong et al., 2001; Han and Maclaurin, 2002).

UK is the second largest e-taling market in Europe – like Germany, it combines a large consumer market with internet penetration above the European average (Datamonitor, 2002).

There are six leading online shopping companies that dominate the UK e-tailing market. These are; streetsonline.co.uk, Jungle.com, Amazon.com, Lastminute.com, Thomascook.com and Egg.com, all these providing a variety of products and services. What is the future of high street stores when most analysts agree that in five years time, online shopping could be worth £200billion? This does represent some form of concern to high street stores in the UK as a percentage or it could be of the sales they lose. Nevertheless according to Brewer (2006); cited in Haymarket (2007) the future is brightest for those high street stores that could adopt a multi-channel strategy. However, Murphy (2006); cited in Haymarket (2007) says that “we have the most vibrant, competitive high street in the world and high street shopping is one of our biggest leisure pursuits. Can high street shopping be our biggest leisure pursuits since they boast to sell a variety of diverse products in-store? It is therefore inconceivable that the future of retail would be solely online”, although the number of customers making purchases online is also on the rise in the UK as mentioned earlier in this report.

2.4 The extent to which e-tailing builds relationships

The impact of e-tailing will be felt differently and at different times by various retailers. In the context of buyer behaviour preferences (Daniel, 2000) says that e-tail is a transactional-sales medium rather than a relationship-building medium which means that e-tail cannot substitute personal contact such as customer service advisors, that makes it the most critical differentiation aspect to high street stores today.

This emphasises the need further research on the customer’s perception of e-tail, i.e. to what extent does e-tailing build relationships? If empirical research suggests that e-tailing is a transactional sales medium then ultimately there may be an opportunity for e-tail to focus building relationships with customers that will create the need for further research on how e-tail may be able to become a relationship-building medium. Personal contact with highly trained and motivated salespeople, the service factor is still the critical differentiator for such businesses, and on-line experiences have yet to match that or offer a suitable counter value (Quelch, 1999 cited in Maruca, 1999).

As Pavitt (1997) states that the impact of e-tail on high street stores may result in changes on three key fronts; “change in the nature of product offerings, customer buying patterns and its place in the value chain”. The changes in product offering may alter as a result of advances in digital technology. For example media products delivered via the internet or newspapers being published electronically, that would be a direct impact on high street stores (Pavitt, 1997). There is lack of empirical evidence to show what customer’s perceive of digital medium against physical goods, as an simple example, would customer’s prefer buying a DVD from a high street store, so as to get a feel of the physical aspect of this product as well as more information from the back cover of the DVD case, or from the Internet where information on the product is limited in two dimensional form.

“There will be a great deal of change in the value chain as well due to shrinkage in distribution channels”, (Bellman, 2001). E-tailing eliminates traditional chain of wholesalers, agents, and other intermediaries thus creating a new distribution model focusing on manufacturer to consumer direct that implies a great potential for savings (Bellman, 2001). Today, majority of the manufacturers do not want to take the responsibility of dealing with single customer queries, which is one reason why they sell their products through intermediaries even on the Internet. With lack of evidence it still remains to be investigated as to what extent is the internet an intermediary?

Another common question which arises in this case is; do e-businesses have any storage for products they advertise or do they order them directly from the manufactures or other traders as required? However, this can also be different in the case of businesses which use internet as a secondary channel for sell or distribution of their products, which they also sell in their physical store. Another issue that arises is to investigate potential shopper’s perception in relation to price. Smith et al’s (1999); cited in Lii and Lee (2005) indicated that online shoppers believe that online stores enjoy a cost advantage over traditional channels in terms of administrative cost, overheads and transaction cost. These features of the online retail channel add to the perception of online shoppers that prices generally tend to be much lower online than that of the high street stores. Considering this then, do customers shop online because they perceive it to be cheaper? If so then how and in what ways is online shopping cheaper compared to the high street stores where lots of products are reduced at competitive prices even at times with offers such as buy one get on free or a second product at half price, are always there. Is price an issue of concern or is it about building relationships? Would customers be willing to pay that extra price in exchange for good service, remains to be investigated? Good service may be classed by online shoppers such as providing a tracking system for their ordered goods, free return policy and delivery of the goods or a full money back guarantee on items that customers return which is in place with most e-businesses today.

With regards to customer’s online shopping behaviour, Brown (2000) states that a survey by BT found out that consumer’s choose well-known brands when shopping online and those consumer’s want to be served immediately, be remembered and treated as individuals. Therefore, in what ways can e-businesses build relationships? According to Kalyanarm and Winer, (1995); Chandrashekaran, (2001); cited in Lii and Lee (2005) prior studies have revealed that in the off line retail channels, customers may use the advertised original price as a frame for reference to assess the accompanying sale price. The resulting price comparison between the original price and the sale price makes the price promotion more appealing (Biswas and Blair, 1991; Grewal et al, 1996; cited in Lii and Lee, 2005). On the other hand on line retailing enables potential customers to have quick and easy access to price and other product attributes and information necessary for price evaluations. An example is amazon.co.uk website. The Internet has empowered on line shoppers to better detect price discrepancies and bargains (Balasubramanian, 1997; Bakos, 1997; Hoffman and Novak, 1997; cited in Lii and Lee, 2005).

Today Majority of e-tailers attract customers through promotion codes normally available through advertisement and marketing media from which customers, can usually claim some money off or some percentage of discount on their online shopping. What remains to be assessed is whether the promotional codes attract new customers and also retain existing customers to shop online? If e-tailers start providing regular promotion codes to new customers as well as regular customers with this, then will it add up to building a relationship?

2.5 Customers general online shopping preferences in the UK

On the basis of the objectives of this research, it’s crucial to investigate customers’ e-tail shopping preferences in the UK in general first, since ultimately perception leads to action. “When consumers are confronted by new forms of retail channels such as on line shopping, they may decide whether the difference between the on line shopping and off line shopping is significant to them. If the difference is perceived to be insignificant, customers may classify the two retail channels as the same. On the other hand, if the differences are perceived as significant, customers may classify the two shopping channels as different and make their purchase decision differently” (Lii and Lee, 2005).

“Perception involves the process of categorization, and people tend to place new experiences into existing classifications of familiar experiences” (Monroe, 1990; cited in Lii and Lee, 2005).

Late night shopping in the UK is fast becoming a way of life and a new culture, since for many people 24-hour high street shopping is invaluable as it allows them to fit it around their lifestyles, this is very common in the larger cities like London where this sort of service fits in well with the metropolitan lifestyle whereby time is crucial, however having said that, it’s also being almost equally favoured by people living in smaller towns or suburbs. The changes occurring in buyer behaviour patterns are alarming to high street retail stores as more and more people are beginning to work partly or wholly from home and they may prefer their goods bought online to be delivered at home, this is also rapidly picking up for supermarkets where the consumers prefer their grocery as well as other items shopped on line to be delivered at their doorstep (Haymarket, 2006).

Whatever may be the case, Cottam (2006, cited in Haymarket, 2006) says that high street retailing is facing stiff competition with on line ‘anytime’ culture, meaning that customers are shopping 24/7 and therefore even high streets supermarkets such as Asda and Tesco have also launched 24-hour stores. Customers’ perceptions about 24/7 shopping remain to be investigated, since some high street supermarkets that tend to provide 24/7 services are closed on Sunday afternoons due to Sunday trading laws, but this has also changed in recent years. Once more it raises the question, what are customers perception of 24/7 culture in relation to the internet and high street stores, a fair example to portray, the 24/7 concept proved to be costly, in comparison to profitability against cost, for a superstore like Sainsbury’s as Sainsbury failed in its attempt, even though it believed it had the winning formula (Haymarket, 2006). The reason behind the failure was that Sainsbury’s could not attract enough customers as there is no guarantee that a fair percentage of existing or new customers will change their habits to take advantage of 24-hour shopping (Haymarket, 2006). Indeed this is a lesson for others (organisational learning) and thus most retailers are being cautious in their approach to 24/7 services. Bearing this in mind customers are constantly taking advantage of such facility and are trying or even getting used to shopping around the clock says Gladding (2006, cited in Haymarket, 2006). Analysts argue that 24-hour retailing is less likely to grow beyond its current levels as retailers have raised little awareness of the fact, hence stores such as Asda and IKEA are being cautious about this approach by advertising their long opening hours in the form of outside signage and flyers (Haymarket, 2006). The key question that arises from this scenario is the customers’ perception of the availability of 24/7 online shopping versus the high street 24/7 timings. Do customer’s really want go to shopping at high street stores and supermarkets at night (freely) compared to doing online shopping at night? Security is another issue that could be a vital sign of failure for high street stores or supermarkets to remain open 24/7 and be able to achieve their budget.

Depending on the type of product, Andrew and Currim,(2004) have highlighted some key characteristics of customers shopping on line, despite the additional aspects. They say that consumers shopping online for products such as groceries differ from those who shop in high street stores claiming that on line grocery shoppers tend to be more frequent, heavy shoppers, less price sensitive, prefer larger sizes and do more screening on the basis of brand names. Alternatively, Morganosky and Cude ,(2000) suggest that convenience is the main motivation for on line shoppers, and according to Keh and Shieh,(2001) on line shopping is ideal for time-starved customers such as couples with two careers, children, and above-average income who want to spend time with their families instead. These suggestions are valid and can be applied to the reasons for consumer’s behaviour towards shopping online, however it also differs to the type of market and the products on offer. Hence, for those people, convenience is more of a priority than price stresses, Keh and Shieh, (2001). Also Professionals, working women and single independent hard working individuals are just some of the people who do not have time on their hands and their perceptions of online shopping especially for items such as grocery remains to be determined. Keh & Shieh, (2001) simply claim, with being deficient in practical evidence, that such customers dislike grocery shopping and only those with busy schedules will consider on line purchasing as a viable option. Online shopping may save time and money as the frustration of dealing with children at a store or supermarket that involves pushing carts up and down the aisles, waiting in long lines at checkout counters, and finding parking spaces, could be eliminated, Keh & Shieh,(2001).Whilst on the other hand, as more people today having the opportunity to “surf” from their offices, they are more likely to shop during office hours and thus may prefer to collect their online shopping at ‘convenient’ stores on their way back home (Pavitt, 1997). Vaughan (1999); cited in Jardine (1999) head of consulting at Retail Intelligence says that “consumers might do their main shopping on the internet once a week but will still need to stock up on fresh foods locally” and this is the alternative method that supermarkets have taken by opening ‘convenience’ stores such as Tesco Express, Sainsbury’s Local, and M&S Simply Food, (Jardine, 1999).

According to Lii and Lee (2005), their study on examining customers’ perception of shopping on line suggests competitive pricing being the main reason. It allows them to compare prices of products more quickly and easily than when shopping in stores. (Korgaonkar and Wolin, 1999; Ernst & Young, 2001; cited in Lii and Lee, 2005). According to the author, Mysupermarket.co.uk is a classic example; The website allows registered shoppers to compare their online shopping from high street supermarkets in the UK which are Tesco, Asda, Sainsbury and Ocado which is fully online based. Furthermore it allows users to switch at a click if they decide to change their preference to the cheapest supermarket. The problem associated with this is that it may be time consuming going through the tedious process of comparison because consumers may dislike switching from their preferred supermarket. In the authors’ view high street supermarkets also offer this service. A good example is that of Sainsbury’s supermarket where there is often a price comparison sheet placed next to their own shelf edge price tags showing their prices as compared to Tesco and Asda. If not then Sainsbury’s have opened small kiosks often located towards end of an isle where the customer advisor can compare their prices for customers with other competing supermarkets and if their prices are high then they do price match or sell the item even cheaper. This shows that the high street physical stores are also doing their best to match the benefits of on line shopping.

Another factor that may drive away consumers from shopping on line is transportation cost. Bellman (2001), says that growing numbers of e-tailers are eliminating these costs as they find that customers often cancel orders after going through the entire ordering process and then considering the transportation cost being high, and this may be the key factor that drives potential customers away.

The other fear of shopping online is privacy. Most web users refrain giving out their details, especially data in the form of credit card details as they fear exploitation of their privacy (Bellman, 2001). Insufficient product information on screen also contributes to decline of purchase. Apart from this, all secured websites do have a ‘time-out’ function where user sessions are based on time limits. If ‘time-out’ occurs, customers risk losing their entire shopping basket, which is quite frustrating from a customers’ point of view. These are some of the most common factors which may keep away customers from shopping online and reason their preference to shop in high street stores simply because they are well aware of the location, store layout, product selection and return policies as well as the stores reputation (Greenbury, 1999; cites in Maruca, 1999).

Online e-tailing has a great and growing future, but the high street is still an important destination for customers. The limiting factor of e-businesses could be, a simple example, such as one cannot buy a piece of fruit via shopping online but can do so from a store. Furthermore, there is no empirical evidence to justify what drives customers to shop on line instead of high street stores, ultimately questioning what customer’s online shopping preferences are?

2.6 The E-tail clothing sector in UK

Fashion is a sensitive and rapidly moving market which is growing at a faster pace in the UK, in comparison to its other European counter parts. Shopping on line for clothing products is also fast gaining popularity in the UK. Although buying over the Internet remains small in comparison with buying through the traditional channels, such as the brick-and-mortar physical stores, it is growing and clothing is a substantial portion of the e-tail sector in the UK.

The online clothing sector caters for almost all segments of the UK market starting from the low cost value clothing to high end designer clothing including bespoke tailoring to couture clothing, the choice is unlimited and the options ever increasing. One can buy a single handkerchief to a full suit online, even clothing and accessories for all age ranges are available, whereby the customer can buy clothes for new born babies to clothes for senior citizens, therefore making this shopping