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Chapter 1 – Introduction

Study Background

The coming of the 21^st century has produced what has been referred to as the “e” generation. The use of the internet has brought a lot of excitements in various business dealing and has led to the introduction of ecommerce, business, eSupply chain, eGovernment, eEntertainement, and eCRM and eMarket place among others (Aljukhadar & Senecal, 2011). The internet is being widely used in a number of sales and marketing activities with collection of adequate and useful data collection and dissemination of crucial information to crucial stakeholders. This has been through activities such as information retrieval, communication on products, customer support tools and distribution channels among others. The internet as such, has opened a window of opportunity to businesses due to its influence in making viable the conduct of business via the internet, allowing the connection of individuals without geographical limitations (Ajzen, 2002). Consumers can be able to access the internet and order goods and services without worrying on store hours, traffic jams or time zones. Further, the use of the internet has provided opportunities for the marketers which offer innovative ways in promotion, communication as well as the distributions of products and information to their target consumers (Chen & Tan, 2004).

Majority of the marketers agree that the internet marketing will increase consumer spending as well as loyalty to both the online and offline products if adequately used. This is mainly due to the significant advantages of the two-way communication as well as its ability to transmit information quickly when compared to traditional methods of communication (Cheung, et al., 2005). Further, there have been simultaneous increases in the consumer adoption of personal computers, as well as network systems, which have encouraged and pressured marketers and firms to provide internet retailing sites. There have even been predictions that the need for physical stores can eliminate their use and replace them with electronic retailing (Hair, et al., 2012).

While majority of the firms acknowledged the use of the internet in their marketing mixes, only a few numbers of researchers have studied the factors which encourage or discourage consumers when purchasing products or services online. Despite the high popularity of the internet, majority of the knowledge on internet marketing is based on experiential evidence from such elements as popular press, radio and television (Hansen & Jensen, 2009).

Many companies from different parts of the world have focused on establishing the rise of the internet and this has been harmed by confusion on the impact that the use of the internet has on the business. Many studies have focused on using the internet to advertise rather than focusing on the issues relating to why consumers make a decision in purchasing products through the internet (Benedicktus, et al., 2010; Hair, et al., 2012). These studies have focused on investigating the user demographics, reasons for shopping online, preferred items for purchasing online as well as satisfaction or dissatisfaction acquired from shopping online. As such there is a gap in the literature involving the factors influencing consumers’ decision when buying luxury brands online. This gap has not been investigated adequately in the existing literature.

For the purposes of this study, the researcher has intentionally selected luxury brands as the target products and several reasons for their utilisation as a choice (Hernández, Jiménez & Martín, 2010). First, the luxury brands are a growing industry all over the world with their use increasing with improved education, income and lifestyles in many countries (Seock & Bailey, 2008). Secondly, the luxury brands are high involvement products and it requires consumers to conduct an extensive search on the attribute and characteristic in products, as well as their benefits before making a purchase decision (Benedicktus, et al., 2010). This makes luxury brands particularly good products to sell online. Further, there are increasing trends of consumers turning to the internet to acquire information before making a decision (Kim & Kim, 2004). Currently, there are over 50,000 luxury related web sites available in the internet. Majority of the consumers are turning to this website to acquire product information. As the number of the internet users’ access to the information increases, the use of the e-commerce in luxury brands is expected to rise (Hsu & Chiu, 2004). Further, the researcher is confident of successfully acquiring reliable and adequate data which is necessary for the study and is currently working as a top manager in this area. As such luxury brands should provide an appropriate choice for the study (Tong, 2010).

In summary, the benefits of utilising the internet in marketing are many as they provide an opportunity for marketers to develop innovative activities which have not previously been available. However, marketers need to be able to have adequate insightful understanding of the consumer behaviour to luxury brands when making the purchases online (Hansen & Jensen, 2009). The information will enable managers to plan their marketing mixes and provide a better understanding of consumers enabling them to provide and meet the demands of the customers. Companies such as Alibaba will be able to establish and meet, as well as increase customer satisfaction, develop strong brands which will provide consumers a basis for continuing to use the brand. This study is as such crucial in identifying factors and their influence on consumer decision making when buying luxury brands online (Cheung, et al., 2005). The following is a discussion of the rationale of the research study.

Rationale of the study

The rationale for the study can be analysed and seen on both of theoretical contributions to the already available literature as well as its practical contributions to online shopping of online luxury brands in China. The following is a discussion of these contributions.

Theoretical contribution

Although, there are a number of studies conducted on internet shopping in the literature using the technology acceptance model and theory of reasoned action with a focus on technological products, there is little research existing with regards to the factors influencing the consumer’s purchase intention of consumers when buying products or services online. This research is the first empirical study investigating the factors influencing purchase intention of luxury brands online. The study aims to contribute to the body of knowledge in this field (Zhou, et al., 2007).

There are inadequate explanatory models on the use of the internet. Despite the high growth on the use of the internet in Chain over the last few years, a majority of the Chinese people are yet to make any purchase online (Benedicktus, et al., 2010). There is a need for explanatory models examined through the use of existing literature to acquire a suitable model to explain consumer’s behaviour intention in buying luxury brands online (Kim, 2012). The TAM and TRA were selected in this study due to its ability to explain significantly a proportion of variances between behavioural intention and actual behaviours mainly from the research in purchasing products online (Barkhi, et al., 2008).

Practical Contributions

In addition to the theoretical contributions above, the findings of this research will also impact on many managerial applications in companies. First, the research provides important information for the corporate management in their prioritisation of human resources, time and budget allocation (Benedicktus, et al., 2010). Secondly, marketing managers will also be able to use findings from the study marketing mixes in order to cater the online consumer’s demands and increase consumer satisfaction by findings and utilising adequate and appropriate strategies and statistics in dealing with the factors investigated in this research. Thirdly, the study will provide useful inputs for the web developers on website designers which are attractive and effective web features such as content and layout of the website and homepages in drawing more business from the consumers (Hair, et al., 2012). Finally, policy makers can utilise this information in order to promote online businesses in improving and creating infrastructure and regulations with regards to the internet, fraud prevention, security and privacy issues and coverage so as to facilitate and encourage more consumer participation in purchasing and selling products online (Aljukhadar & Senecal, 2011).

As illustrated, the study will have contributions both at the academic level and at the managerial implications basis. Providing more insights on the consumer behaviour and their intent to purchase products online is important as it will enable firms to understand what the consumers require from them and develop better ways of providing various online services to the customers (Hansen & Jensen, 2009).

Research aims and objectives

The mains research aim of the study is to investigate the factors influencing consumer’ purchase intention to online luxury brand with a focus on the Alibaba case study. This will be done by conducting a survey on the consumers who make purchases of luxury brands in Alibaba online shop. The main aim will be achieved through a breakdown of several specific research objectives.

The following are the specific research objectives for the research study:

1. To understand the current situation of online marketing of luxury brand in Chinese market
2. To analyse how website factors (e.g. reliability, responsiveness, tangibles, assurance and security) may influence Chinese consumers’ attitudes toward online luxury brand
3. To analyse the influence of Chinese consumers’ trust propensity to website on their purchase intention to online luxury brand
4. To put forward recommendation for foreign luxury brands to improve their effectiveness of marketing in Chinese market

Research Questions

The researcher poses a number of research questions based on the research objectives to guide the research.  The following are the research questions for the research study:

1. What is the current situation of online marketing of luxury brand in Chinese market?
2. What website factors (e.g. reliability, responsiveness, tangibles, assurance and security) may influence Chinese consumers’ attitudes toward online luxury brand?
3. What is the influence of Chinese consumers’ trust propensity to website on their purchase intention to online luxury brand?
4. What are the recommendations which can be put forward for foreign luxury brands to improve their effectiveness of marketing in Chinese market?

Research disposition

The research study has the aim of investigating the factors influencing the consumer’s purchasing intention on online luxury brands in China. In order to meet this aim, the study is organised from chapter one to five chronologically. Chapter one introduces the research study and provides the background information of the study, rationale of the research, research aims as well as research objectives. The chapter is followed by chapter two which involves the literature review. This chapter provides a review of the theoretical sources as well as empirical review of the various elements of the research study such as purchasing intention, and decision making processes of the online luxury brands. The chapter is crucial in that it provides a basis for the study and provides a review of the studies already conducted in areas relevant to the research topic. This helps in identifying the gaps in knowledge with regards to the research study.

Chapter three deals with the research methodology; in this chapter, the researcher approaches and methods are discussed. This includes various elements such as philosophy, strategies and instruments used for the data collection. It further includes the ethical considerations, sampling and sampling techniques among others. The fourth chapter is on the research findings and analysis. This discusses the data collected both in the literature review involving the secondary data and the primary data collected through the use of the questionnaire survey. Chapter five of the thesis involves the conclusion and recommendations. The chapter summarises the findings, draw conclusions and formulate the recommendations which firms can follow in understanding the behaviour of consumers purchasing online luxury brands. Research limitations are also discussed in the chapter as well as areas which need to be studied further.

Chapter 2: Literature review

Introduction

In this chapter is an elaborate theoretical framework that is essential in guiding the research process of the present study. Specifically, the chapter consists of a critical review of extant literature on the topics of online marketing, luxury brands, the Chinese luxury brands consumption market and their interrelationships. The direction of the literature review is attributing to the research objectives forming the basis of this study. In addition, the chapter will attempt to establish inconsistencies and missing gaps in the extant literature to which the study may offer contributions. The last portion of this chapter consists of a summary of the discussions herein.

Definition and scope of online marketing

According to Spindler (2010), online marketing, also known as internet marketing, is a collection of measures that are intended to guide online customers to a particular webpage and possible lead to purchase. Thomas (2011) further advances this definition by noting that online marketing goes beyond the restrictive nature of certain measures into incorporating every tool that the internet brings to a marketer’s disposal. Online marketing, Thomas (2011) notes, has not limit in scope but at the same time remains logical and congruent to the basic foundations of marketing which include creating relationships and sustaining existent relationships with customers. On a different sense, Verma and Mehla (2014) identify online marketing – which they also refers to as online advertising – as a burgeoning business involving the establishment of a linkage between consumers online and organisations online.

The above definitions of online marketing indicate that online marketing involves a variety of internet tools and methods used to reach out to customers. Verma and Mehla (2014) point out these tools as email marketing, search engine marketing, display advertising, mobile advertising and social media advertising. Further, on this list Spindler (2010) emphasizes on search engine optimization as the most effective method citing the infamous pay-per-click method. Thomas (2011) adds blogging to the list of internet tools for marketing and notes the imperative nature of blogging in boosting online sales.

Online marketing of luxury brands in the Chinese market

The market for luxury brands in China

The market for luxury goods in china is arguably, according to Chevalier and Lu (2010), the most promising and dynamic for fashion, jewelry and other luxury goods in the world. The market is composed of a variety of affluent buyers that are constantly hunting for items intended to be personal and as gifts to loved ones (Chen and Kim, 2013). Chevalier and Lu (2010) further note that both the online and offline market for luxury brands in china accounts for over 5% of the global luxury brands consumption.

A peculiar trend in the Chinese online market, as evidenced in a report by Euromonitor international, is that there is an elaborate growth in the online market though not as strongly as the store-based market (Euromonitor International, 2014). According to the report, the majority of Chinese shoppers still prefer store-based acquisition of luxury goods attributing to negative issues associated with the internet. However, there is an increasing section of the market that embraces online retailing. As Chitrakorn (2014) notes, the evidence to this is the proliferation of foreign stores in the online retail of luxury goods in China. Another market trend in the online facet is the emergence of selling agents that act as a link between the online retailers and the local consumers. Commonly referred to as the ‘daigou’, these agents have taken over the online market for luxury brands in China (Young, 2014). The emergence came as a result of the steep taxes and duties levied by the government on foreign imports in China that consequentially inflates prices of luxury goods. The ‘daigou’ usually set up online boutiques and then customers can have purchases made for them oversees, especially in famous fashion stores in London. The market for ‘daigou’, despite its illegal nature, according to research by Chitrakorn (2014) is increasing and was estimated to be worth over 100 billion Yen in 2014.

A report on the Chinese online consumer market by the KPMG group notes that there is an extremely large divide between the market for common products sold online in China and the marker for luxury brands sold online in China (KPMG, 2014). Whilst, as aforementioned, the market for luxuries is beginning to establish itself, the online market for common goods is flourishing with some store operating entirely online (Chitrakorn, 2014). The niche of online luxury brands is thus mostly focused on by international fashion groups such as Alibaba. In addition, the main consumers targeted are the middle and upper class travelling Chinese. This, according to KPMG (2014), is evidenced by foreign online website stores offering Chinese language options in their domestic sites. Atsmon, Wu and Dixit (2011) in regard to the travelling consumers adds that they have become wiser over time and are now price sensitive than before. KPMG (2014) further notes that the market lacks homogeneity and sports divergent practices as well as sophisticated trends. In the perspective of Atsmon, Wu and Dixit (2011), sophistication which has been tagged along by increased exposure to the internet is the source of divergent market behaviours. Lastly extant literature notes that some hindrances to the development of the online luxury market in the Chinese context include after-sales and maintenance of customer services, authentication issues as well as warranties and guarantees (KPMG, 2014). Atwal and Williams (2009) adds to this list by noting that for luxury consumers, the luxury that comes along with a store’s services is everything.

The consumers

Research by Atsmon, Wu and Dixit (2011) indicates the luxury consumers in China have increasingly become aware of luxury brands and similarly information about them. This, coupled with rising incomes in the middle class, has led to a surge in demand and consumption of luxury brands. KPMG (2014) adds to this sentiment by noting that the shifting consumer preferences and attitudes towards luxury goods have been fueled by availability of internet services. Internet is now more accessible to the average middle-class consumer in china and this, citing specific use of social media and online interactive forums, has caused a spread of knowledge about luxury brands. Euromonitor (2014) also cites the increase in online retailing of luxury goods in china. However, Euromonitor emphasizes that the increase in internet retailing is not as fast as would be expected in the contemporary luxury goods markets. Yaobin and Tao (2007) agree to the fact that internet retailing in the luxury facet in China is not growing at the same pace in comparison to the same in western communities. An attribution to this, Yaobin and Tao (2007) note, is the cultural orientation implicit in the Chinese consumers as well as contempt, currently attenuating, in embracing the internet and technology. Euromonitor (2014) extrapolates this fact by adding that the slow growth may be linked with preference to store-based retailing that is caused by lack of trust in online retail stores especially third party stores.

An imperative aspect in online luxury consumers in China is cultural orientation. A study carried out by Pavlou and Chai (2002) on the force behind electronic commerce across different cultures – with China and the United States as the case studies – shows that Chinese consumers are more tied to their cultures as opposed to their western counterparts. The study, borrowing from Hofstede’s dimensions on culture, notes that collectivism and power distance elements are high in China. Thusly, social identity is important as well as uniqueness – an affiliation to a power group. Similar sentiments are expressed by Zhan and He (2012) who posit that the consumption of luxury products in China is largely influenced by a collective influence of the society and the need for uniqueness. Consequentially, consumers will tend to dismiss mainstream high fashion brands.  Atsmon, Wu and Dixit (2011) further adds to the element of cultural orientation by noting that integration of a brand’s international appeal with the local heritage is a subtle strategy of penetrating the luxury market in China. However the study on the young Chinese consumers by Tong (2015) brings on a different aspect in that it identifies a tendency of departure from traditional Chinese cultural trends by young consumers. Atsmon, Wu and Dixit (2011) suggest that young consumers make the majority of luxury consumers in China.

Lastly, extant literature on the nature of online luxury consumers in China reveals a set of characteristics that collectively inhibit a burgeoning growth in the particular industry. A study by Lu and Tao (2007) on customers’ initial trust on online stores in China revealed that mistrust acts as an impedance to online shopping activities. In addition to this Pavlou and Chai (2002) identify word-of-mouth practices as both enablers and inhibitors to online retail success. According to their study, Pavlou and Chai (2002) note that what friends, family and other constituents of a consumer’s inner circle say determines whether a consumer will proceed to shop online. Value consciousness and sophistication are also part of innate attributes of online luxury consumers in China (Atsmon, Wu and Dixit, 2011; Zhan and He, 2012).

The impact of website factors on consumer purchase intentions

Design

Website design relates to the manner in which a website has been authored as a way of simplifying consumer interaction. In a research done by Hassanein and Head (2007) on website interface and its impact on the attitudes towards online shopping, identifies that the appearance of a website determines the experience that a customer will have when shopping online. Specifically, Hassanein and Head (2007) believe what online stores should be striving at is creating the same human warmth and sociability in online stores as in physical stores. The study concludes that integration of shopper interaction on a website creates a psychological illusion of having other shoppers around and this improves the attitudes towards online shopping. These sentiments are shared by Lorenzo-Romero, Constantinides and Alarcón-del-Amo (2013) who argue that website design factors, including visual attractiveness and design quality have an impact on the initial attitudes that a customer will have towards a particular shopping site. However, in Lindgaard et al.’s (2006) study, there emerges a concern as to the lack of elaborate studies linking website design to the choice of a particular online vendor. In his study on how quickly people form an opinion about a particular website, agrees to the fact that visual attractiveness in the design of a website impacts on the attitudes that consumers will have about that website. The findings by Lindgaard and his co-researchers (2006) indicate that it takes approximately 50 milliseconds for a customer to form a positive or negative opinion about a website.

In Bai, Law and Wen’s (2008) study on the impact of website design quality on customer satisfaction and purchase intentions, unlike in Lindgaard et al.’s (2006) study, notes the existent of research linking design with choice of online vendors. In addition Bai, Law and Wen (2008) points out that based on data from the Chinese online visitors, there is a positive correlation between the design quality and customer satisfaction as well as between customer satisfaction and purchase intentions. However, the customer satisfaction does not mediate website design quality with purchase intentions. The aforementioned studies all link website design aesthetics with customer satisfaction and positive purchase attitudes. However, the study by Lindgaard et al. (2006) reveals the ambiguity in the definition of design factors that form part of website aesthetics. This matter is addressed by Lavie and Tractinsky (2004) who classify aesthetics into classical and expressive thusly incorporating both cognitive aspects such as being ‘clean’ and symmetrical and emotional aspects such as pleasant. Therefore, both the said aspects can be directly linked to consumer attitudes towards a website. However the emotional aspect does not entirely portend well with design issues as noted by the research done by Seo et al. (2014). Lastly, a study by Jardina et al. (2012) besides agreeing to the positive impact of an appealing design to customers, notes a gender bias in terms of appreciating appeal. Females depict similarity in their judgment of well-designed websites as opposed to males.

Security and Privacy

In a study on consumer characteristics and the acceptance of online shopping, Sarigiannidis and Kesidou (2009) point out that the issues of security and privacy have been paramount in e-commerce since its inception. Security in e-commerce involves the belief by a customer that information cannot be accessed by third parties while privacy involves the extent of the user’s control over collection and use of information about them (Sarigiannidis and Kesidou, 2009). Celik and Yılmaz (2011) also agree with the aforementioned study by citing a proliferation of security concerns in the recent year and their rise as an inhibition to online shopping. Celik and Yılmaz (2011) add to the discussion by citing specific issues of concern on security and privacy as level of security on online payment methods, validity of e-documents, legality of online transactions, and safety of online archives and control of the stored information. Flavián and Guinalíu (2006) elaborate the same concept that security and privacy are imperative to the users of a website and influence the purchase decisions. A fundamental issue handled by the study shows a direct relationship between security and level of trust to a website.

In regard to shopping for luxury brands online, a study done by Seringhaus (2005) addresses the issue of security and privacy in a similar manner as the above studies. However Seringhaus (2005) goes on to note that luxury shoppers are more concerned about security and trust in comparison to the average online shoppers. The study indicates that luxury shoppers demand for outright security assurance as well as transparency on the side of the sellers. The findings of this study are congruent to the findings of Chen and Li (2010) on a study on the factors surrounding the willingness to buy among Chinese online shoppers. Chen and Li’s (2010) study points out a burgeoning impact of the perceived system assurance (assurance of security in transactions) on willingness to buy among the Chinese online shoppers. A study on consumer trust in e-commerce in the U.S, Singapore and China identifies an antagonistic element not brought out in the previous studies. Teo and Liu (2007) unearth the fact that the Chinese online buyers are not affected by the level of risk in a website. However, the authors also point out that risk perception among Chinese online shoppers is a controversial and debatable topic. Lastly, the study by Teo and Liu (2007) alludes that the Chinese online shoppers have been circumventing this issue by ordering online and paying offline – a habit also proliferated by underdevelopment in the credit card system in China.

Reliability

In regard to websites, Kim and Lee (2002) cite reliability as the ability of a website to accurately execute instructions, deliver in a timely manner and to store information in a secure and private manner. Lee and Lin (2005) in attribution to the SERVQUAL model of measuring customer perception of service quality, posits the importance of reliability in ensuring customer satisfaction noting the reliable websites are linked to satisfied customers. Zhu, Wymer and Chen (2002) whilst agreeing on the direct and positive impact of reliability on customer perception of service and level of satisfaction adds that reliability can be achieved through mistake-free and secure purchases. Alam and Yasin (2010), in a study on customer satisfaction in online shopping, argues that the most influential factors affecting online shopping include presentation of the homepage of a website and the reliability of the website. On the other hand Sarmah and Sarma (2011), citing online reliability as an accurate representation of a product involving safe and timely delivery, emphasis the importance reliability accrues to quality. Specifically, Sarmah and Sarma (2011) mention the specific attributes associated with reliability as presence of reputable brands in an online shop, availability of advertised inventory and product guarantees and warrantees. Collier (2006) further notes that availability of advertised products in stock enhances reliability on a particular shopping site as opposed to others. Extant literature thus seems to suggest that reliability cannot be ignored as a factor in influencing purchase intentions. However, there is scarcity of literature focusing on the case of China in regard of online luxury shopping and reliability.

Responsiveness

Stiakakis and Georgiadis (2009) identifies responsiveness as part of the SERVQUAL dimensions of measuring service quality and as a critical concept in guiding purchase intentions amongst customers. Specifically, Stiakakis and Georgiadis (2009) breaks down responsiveness into prompt response through the website to customers’ requests, assistance when a customer finds issues during a transaction and prompt dispatch and delivery of a product. In addition to this, Sarmah and Sarma (2011) note that the willingness of a website support team to respond to customer issues greatly shapes the responsiveness image of a website. In general, online shoppers, according to Liao and Cheung (2002), from the start, expect a website to be responsive. If this is not the case then a customer’s attitude towards the website becomes negative. The findings of the study by Lee and Lin (2005) shows that responsiveness in design – including information retrieval and navigation speeds – and responsiveness of the online support teams positively impact the level of customer satisfaction.

Website usability, extrapolating to responsiveness and reliability, of a website has also been found to impact on the kind of evaluation a website is accorded by users and the level of trust they will have on that website (Nielsen and Norman, 2000). Stiakakis and Georgiadis (2009) further add to website responsiveness by citing the need for after-sales services as an important element in ensuring that the consumer is satisfied completely. Yee-Loong Chong (2013) in reference to the online market in China notes that the usability of a website, which Nielsen and Norman (2000) relate to the responsiveness of a website, determines whether there shall be continuance of use of the website by the customer. This is especially true for mobile phone shoppers.

Personalization

Sarmah and Sarma (2011) couple website personalization with simplicity of use and points out a couple of elements that constitute ease of use and personalization. These include ease of remembering the URL of the site, capability of each user maintaining a wish-list of purchase on the site, a tailored customer homepage, ability to remember the search history and shipment options, such as selecting the preferred carrier. Shuk Ying and Bodoff (2014) adds to issues of personalization, by using the elaboration likelihood model and consumer search theory, by pointing out that personalization of a website can be tailored in a way as to influence buyers to fall congruent of the sellers intent. The ideology of tailoring personalization in a way that it favours the site owner is further supported by Hongpapanl and Shraf (2011), However, Hongpapanl and Shraf (2011) do note that the extent of personalization or the amount of content needed to invoke and optimize customer satisfaction and thusly sales optimization is still lacking in terms of research content. This being the basis of their study, the two authors, Hongpapanl and Shraf (2011), try and establish the link between the amount of information that is offloaded to a website, the level of customization and the overall performance of the website. The findings indicate that online retail performance can only be boosted be information being directed at customers specifically rather than in general.

Personalization reduces the assumed complexity thereby making it easy for a user to interact with a website. According to Kim and Lee (2009), website personalization, similar to offering individual guidance to every customer during the purchasing process in an offline store, make the shopping experience easier and achieves trust and loyalty of the customers. Another study done by Liang, Lai and Ku (2007) in regard to personalization posits, in agreement to the research done by Hongpapanl and Shraf (2011), that personalization of a website impacts positively on customer satisfaction. Specifically, this study done by Liang, Lai and Ku (2007) notes a positive relationship regarding website personalization with customer satisfaction, customer trust and customer loyalty. In the context of the Chinese online luxury shoppers, a study done by Luo (2011) on how to influence the online shopper in China shows that in personalization of information, as pointed out by Hongpapanl and Shraf (2011), e-firms can achieve more customer satisfaction and convenience.

Thusly, from the above discussion of the extant literature on personalization of websites, key points emerge across all the studies. These include the fact that customer satisfaction and positive purchase intentions are directly influenced by website personalization. In addition, personalization substitutes the practice of attending to an individual customer offline. It builds up loyalty and trust on the vendor. Moreover, the winning aspects in terms of the specific areas of personalization have been highlighted in one of the studies. However, it is imperative to note that little literature exists in regard to the online luxury shopping in China and matters on website personalization.

The impact of consumer trust propensity of websites to online purchase intentions

Trust in the context on e-shopping is defined by Hassanein, Head and Ju (2009) as the complete reliance of customers on the seller in a manner that the customer can be vulnerable to the seller. From available extant literature, trust appears as an important component influencing customers in online purchases. Firstly, Flavián and Guinalíu (2006) conducted a study to investigate the existent effects of perceived security and privacy on the levels of trust that a customer has on a website. The findings indicate that the levels of trust are directly linked to the loyalty customers have. In addition, the level of trust not only affects the intent to buy but also the behaviours surrounding the purchase including preference, cost and frequency of visits. Yang, Jun and Peterson’s (2004) view is congruent with the view that trust has an impact on buyer online purchase behaviour. However Yang, Jun and Peterson (2004) add to this by pointing out website security as the underlying force impacting on customer trust. In a study to assess consumer characteristics and their influence of consumer accepting online shopping by Keisidou, Sarigiannidis and Maditinos (2011), the findings are consistent with the ideology that trust levels influence online shopping behaviour. This particular study also brings in a new perspective by identifying that vendor size and reputation are the forces behind the levels of consumer trust. Specifically, the bigger and more reputable a vendor is, the more trust that can be accorded to the vendor by online shoppers. The same sentiments are shared by Jarvenpaa, Tractinsky and Saarinen (1999) who note that reputation and size are factors impacting on consumer trust on an online vendor.

Social presence and website trust

On a different perspective, the study by Thabet and Zghal (2013) on perceived online presence and its impact on customer trust to a website indicated that social presence in an online store is an antecedent of consumers’ trust to a website. Thusly, it can be extrapolated from this that customer interaction forums that often provided as options in the vendor websites contribute to the level of trust customers will have on the particular vendor. Thabet and Zghal (2013) identify these interaction platforms as Virtual communities, FAQ (frequently asked questions) forums and instant messaging. Additionally indicators on online presence are identified by website traffic, human pictures as well as registered users. Hassanein, Head and Ju (2009) in their study of social presence and website usefulness and their impact on customers’ website trust, notes that trust is always created in a social context and thus social presence is fundamental in establishing online trust between a vendor and a customer. The study findings indicate that western cultures easily establish online trust with perceived online presence. However, collectivist cultures such as China, being accustomed to establishing trust through face-to-face communications, require more warmth in social presence in order to build trust (Hassanein, Head and Ju, 2009). Thusly, warmth and sociability in website design can increase consumer trust even on collectivist societies such as China.

Website trust in China’s context

In the context of the online market in China, a study was conducted by Yaobin and Tao (2007) in a bid to establish trends in initial trust among the online stores in China. The study identifies some factors that impact on initial trust including perceived usefulness, consumer’s trust propensity, and security of the website and the reputation of the vendor. Additionally, the study finds perceived usefulness as a direct mediating link between ease of use and initial trust. Congruent to the findings of Hassanein, Head and Ju (2009), Yaobin and Tao (2007) note that China is cultural different from western societies and thus establishing initial trust is not only important but also crucial in online vending. Critically analyzing the society in China, in light of the study by Hamamura (2011) on social trust and allusions made in similar studies, it is evident that disturst is prevalent in online shopping. As Hamamura (2011) puts it, only wealthy societies generalise trust across the board whilst developing economies like China lack the socio-political-economic infrastructure to accrue such trustworthy culture. Thusly, the same trend in extrapolated to online shopping.  Lastly, an important concept of trust among the Chinese regular and luxury online shoppers is that collectivism to a great extent but not entirely defines what vendor to trust. As evidenced in the extant literature above, the Chinese have not personal identity when it comes to purchase intentions; rather what appears crucial is fitting in the context of the society and class.

Summary

This chapter’s intent was to review the existent literature on the factors influencing Chinese consumer purchase intentions on online luxury brands. Notably, the numbers of studies focusing on the Chinese online market are minimal and thusly the chapter borrows heavily from general literature regarding online purchase and factors surrounding it. Previous research work shows a link between website factors including design, personalization, reliability, responsiveness among others and consumer purchase intentions. Additionally, prior studies show that trust is an inherent issue in online shopping among regular and luxury shoppers. Trust, essentially is built on reputation, size of vendor, level of security on the website and the perceived social interaction among users. The analysis of research shows that trust varies in cultural context and in which case earning trust in the collectivist Chinese online market is comparably difficult. The chapter also, via extant literature, reveals the current situation of online luxury shopping in China. Specifically, the daigou market is the current trend acting as a way of avoiding high taxes from the government. A majority of the shoppers also are increasingly becoming aware of luxury brands and prices. The market though not fully developed currently posits indications of continuous growth.

Chapter 3 Research Methodology

Introduction

This study has the main aim of investigating the factors influencing the Chinese consumers’ purchase intention to online luxury brand by analysing the case study of Alibaba. This chapter of the study is crucial in that it ensures adequate data is collected for the analysis. The following is an illustration of the research methodologies available for the researcher.

Figure 1: Research Methodologies: Source: Miller and Tewksbury (2008)

Research Philosophy

Researchs philosophy is defined as the acquisition of knowledge with regards to certain research phenomena. The two main research philosophies include interpretivism and positivism. Positivism refers to a philosophy which is based on the belief that the study of human behaviour should be carried on like the study carried on natural science (Collis & Hussey, 2009). In this study, interpretivism research philosophy will be used. The main reason for this selection is that the phenomena of the study and its focus in to investigate the factors influencing the purchasing intention to online luxury brand in Alibaba. The study focuses on the perceptions and opinions as well as behaviours of the consumers in their intention to purchase luxury brands online. The study focuses on using a case study on Alibaba to investigate the experiences and feelings required from a sample representing a population.

Research Approach

There are two approaches which can be utilised in a research study. These are the deductive and inductive research approaches. Inductive research approach involves an observation of the world from a more specific or abstract ideas (Miller & Tewksbury, 2008). It involves a researcher following a specific topic in order to identify relationships and develop empirical generalisations through the study. A deductive research approach starts on theory development and then trickles down to a small and specific hypothesis which can be easily tested (Creswell, 2003). The study will follow an inductive research approach as the appropriate approach for the study.  The inductive research approach is a comprehensive observation of the world from a specific case leading to generalisations. The researcher has started on a more specific topic and through it will be able to make generalisations on other areas (Collis & Hussey, 2009).

Research Strategy

There are a number of research strategies which can be used to meet the needs of the research study, which involves meeting the research objectives. These include case study, surveys and experiments.

Case study is applicable in research. However it has both advantages and disadvantages. Advantages include allowing an in-depth analysis of the situations; they can be conducted on rare cases and allows the researcher to take a more focused analysis of the situation. The strategy, however, has a number of disadvantages such as inadequacy in the generalisations as well as the studies being scientific and the bias possibility for the researcher (Bryman & Bell, 2003). Surveys on the other hand also have both advantages and disadvantages. Advantages for the use of surveys include its lows costs of handling it, better and more precise results, and convenience in data gathering as well as little bias. However, like the other strategies it has disadvantages such as inflexible design and possible inappropriateness of questions in the survey (Mik, 2006).

Based on the analysis above, a case study is the most appropriate research strategy to analyse the research problem. The use of the case study strategy is crucial for this research study as it will enable the researcher to acquire in depth information on Alibaba. A case study strategy is appropriate as it allows the researcher to acquire an in depth understanding of the organisation as well allowing a more focused analysis of the situations. The Alibaba customers participating in the research study will aid in acquiring the information from the company. Case studies have the possibility of researcher bias. This will be dealt with by gathering information from different sources to ensure that the researcher is not biased in representing the information.

Research instruments

There are a number of researches instruments which can be used in data collection. These include questionnaires, observation and interviews. Questionnaire is a form of instrument, which involves documents with a set of questions, which are designed to elicit response from respondents for the purpose of data collection. The use of questionnaire is advantageous as it allows a researcher to acquire various forms of information from the participant such as demographic information, and attributes, part experiences as well as opinions (Collis & Hussey, 2009). The use of questionnaire is also disadvantageous as it is restricted to the questions that the researcher has posed thus may lead to a respondent not giving crucial information about a particular issue. The second instruments which can be used for data collection is through interviews. It is advantageous as it allows interaction and generation of ideas on a particular topic (Mik, 2006).

Based on the above research instruments, both the interviews and the questionnaires will be utilised as the data collection instruments for this research. The use of both interviews and questionnaires allows the researcher to acquire information from these two sources, thus reducing biasness and allowing for adequate data collection (Bryman & Bell, 2003). The questionnaire will be administered to the consumers of Alibaba while the interview will involve the researcher conducting interviews with selected participants from the company. The questionnaire will be administered to the customers while the interviews will be conducted on the management of the company.

The use of the questionnaire is to enable the researcher to acquire a large amount of information through the use of minimal resources and at reasonable time (Mik, 2006). The questionnaire survey is selected as one of the method to utilise for data collection. The questionnaires were self-administered online for the consumers shopping in Alibaba. The use of the questionnaire is motivated by two main reasons. First, the use of questionnaire is less costly as well as less time consuming. Further, the level of biasness in the study is reduced as the information is acquired first hand form the participants (Creswell, 2003). Secondly, the use of the questionnaire allows the researcher to have fully filled and valid questionnaires and this leads to the acquisition of adequate data for analysis (Collis & Hussey, 2009). The following is a table illustrating the theoretical basis for the questionnaire design. Besides, the research will utilise the unstructured interview as it is less formal, and as such will allow the management staff participating in the study to freely interact with the researcher. It is advantageous as it allows the interviewer to modify the sequences of the questions, change wording and explain or add questions during the interview. This will allow the interviewer to acquire adequate information on the research problem.

Sampling Method

A sample refers to the part of the population which is taken to be the representation of the entire population. It is a portion of the entire population which is selected in order to adequately provide a representation of the population being studied. The population sample in the study involves consumers shopping in online luxury brands in China. In order to provide adequate and conclusive findings and results, a representative sample of 150 questionnaires will be distributed to the consumers of jewelry brands shopping in Alibaba.  Besides, about interview, the researcher will choose 3 interviewees from the employees of Alibaba.

The researcher has two approaches to choosing a sample. These are the probability and the non probability. Probability sampling utilises scientific rationales such as formulas to select a sample (Curwin & Slater, 2007).  This particular study will utilise the non probability sampling method in particular convenience sampling. This is because there is no exhaustive population list of consumers shopping online in Alibaba and as such, non-probability sampling is more convenient and will be less costly (Collis & Hussey, 2009).

Data Collection and analysis methods

There are two types of data; quantitative and qualitative data. Quantitative research involves numerical data which are used to inform the research study. Qualitative data on the other hand uses non numerical data in order to explain the various relationships of concepts in the research study (Bryman & Bell, 2003). The research study utilises both qualitative data and quantitative data to meet the objectives of the research study.

Data collection process is a very important part of undertaking a research study. It is an important aspect as data collection requires an adequate method to ensure that information is undertaken adequately to meet the research objectives (Miller & Tewksbury, 2008). 3 interviews will be conducted by the researcher on the employees of the company.  Out of the 150 questionnaires surveyed, 120 questionnaires were expected to be retuned fully filled at a very high response rate. A high response rate provides results which can be argued to be conclusive and accurate and as such will provide accurate generalisation on the factors affecting consumers purchase intention of the online luxury branding China. Data analysis involves interpretation of data by the researcher with the main aim of deduction of maintain from the data which is gathered (Bryman & Bell, 2003). The data analysis tool used is Excel as well as SPSS statistical tools.

It is important for the researcher to consider research reliability and validity in the development and data analysis of the research questions. It is important to make sure that the questionnaire is consistent and that the level of inconsistency is reduced in the responses of the survey participants (Mik, 2006). In order to get valid responses from the participants, the study questions in the questionnaire had been developed with close reference to the elements and concepts involved in the research problem. Further, the questionnaire will be in precise and simple terms so as to reduce the misinterpretation of questionnaire questions by the participants in the survey (Hanson & Grimmer, 2007). In order to ensure that the data collected is reliable, the researcher pre-tests the questionnaires before distributing them to participants.

Ethical Consideration

During the research process which includes the data collection, the researcher will encounter a number of challenges. It is important for the researcher to have ethical considerations to ensure that ethical challenges are handled (Bryman & Bell, 2003). This includes development and putting of an introductory note in the questionnaire illustrating the main purpose of the study and also providing an assurance that the respondents’ identities are covered. The respondents need to be assured that their responses as well as identities will not be used for any other purpose other than for the academic purpose stated in the introductory note (Miller & Tewksbury, 2008).  This helps in acquiring the researcher’s confidence on the respondents which allows them to provide honest information without fear of being exposed, which leads to fear of personal violation. Further, the researcher explains the rights for the participants to either fully participate or withdraw from the study at any time they feel they want. It will also involve requiring and asking for the participant’s full consent only when they return the fully and appropriately filled questionnaire sheet back to the researcher (Collis & Hussey, 2009).

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