Risks and Consumer’s Reluctance to adopt E-commerce in Vietnam Giang Khanh Bao Hoang Email: baohoang0608@gmail.com Instructor Name: Prof Le Nguyen Hau Email: haulng@yahoo.com Contents Chapter INTRODUCTION E-commerce in Viet Nam Management Problem Research Problem: Research Objectives Research Scope: Chapter LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT Technology Acceptance Model (TAM) Perceived Risks Perceived Risk with Products and Services (PRP) Perceived Risk in The Context of Online Transaction (PRT) Research Hypotheses Perceived Risk in the Context of Online Transaction Perceived Risk with Products/ Services E-commerce Adoption Model Chapter RESEARCH METHODOLOGY Research process Research Method Measurement scale Perceived Risk with online transaction Data collection Method Data Analysis Method Chapter DATA ANALYSIS Descriptive statistics of sample Final sample Demographic Statistics Measurement scale Exploratory Factor Analysis Hypotheses research model Regression Analysis Testing Regressions Chapter CONCLUSION AND RECOMMENDATION Discussion Recommendations Limitations References Risks and Consumer’s Reluctance to adoptE-commerce in Vietnam Chapter INTRODUCTION 1.1 E-commerce in Viet Nam Vietnamese people are used to purchasing products in a traditional way, which means that they will go to show rooms or company representatives to get products and services This brick and mortar method provides great benefits to businesses An actual physical location gives customers a sense of security and a face to the brand Customers can also receive their purchased products or services immediately This traditional shopping experience, however, creates higher expenditures on businesses since they need to spend money on shopping locations, staff and facilities The Internet has grown dramatically in recent years due to the development of information technology From our daily lives to commercial transactions between businesses, the Internet has profoundly impacted and changed the way we businesses The number of people who go online is bolstering In 2011 Vietnam’s E-commerce Penetration level was only 0.25% at the value of 154 million USD However, the projected level will triple to 0.71% with online retails reaching 900 million USD by the end of 2016 (T.D., 2014) Ecommerce presents enormous opportunities for both consumers and businesses from all over the world, especially in Vietnam With a population of 90 millions, Vietnam market is an attractive place for businesses no matter what size Giant business benefit from implementing E-commerce Top local businesses are the main contributors in the rapid increase of E-commerce Penetration These local e-businesses include Nguyen Kim, thegioididong.com, and FPTShop which project their online sales volume to reach 10, 50 and 25 million USD respectively by 2014 (T.D., 2014) For start-up brands, or businesses that lack financial resources to open various store locations, the traditional method of selling products and services becomes a challenge By implementing E-commerce into their business model, nonetheless, these companies can reach out far and wide to consumers In contrast to traditional shopping experience, online transactions encompasses distinctive features such as extensive use of technology for transactions, the distant and impersonal nature of the online market environment, and the implicit uncertainty of using open network infrastructures for transactions (Naiyi, 2004) Web retailer opportunistic behaviormay arise when there exists spatial and temporal separation between consumers and marketers Thus lead to increasing consumers’ fear of fraud from product and identity uncertainty (Naiyi, 2004).Moreover, third party or hackers may post risks related to consumer’s personal and financial information Reports from breach of Internet security comes up on the news more often than not The issue becomes more critical when the reports are about loss of customer information from big companies Mitchell and Jarupunphol state “the fact that breaches of Internet security are reported with great frequency means that there is a danger that potential users will be reluctant to engage in E-commerce because of fears about security” (2001) Preferably, perceived risks in E-commerce transactions should be the same or similar to that of a traditional transaction (Jarupunphol & Mitchell, 2001) Participants, seller and buyer, in a traditional transaction can face to face thus there exists little distrust between people But this is not the case for E-commerce.The location of the business and goods are relatively unknown Personal contact is limited between seller and buyer Even when the buyer inquires a questionon the product, there is no guarantee that the seller is providing the correct details and it is likely for a time delay in response Furthermore, legal framework varies from different business sites and is not very clean-cut in E-commerce Therefore, mutual trust is an important issue Another issue that becomes prominent in E-commerce is network attack, which can be associated with any online transaction risk Such risk encompasses: IP spoofing attacks, meaning a hacker steals an authorized Internet Protocol (IP) address and proceeds to use that IP to inquire businesses, information theft such as stealing business or some important personal information (message, such as e-mail messages, credit card numbers) Another common attack is hacking user’s password to e-mail, bank account, etc Social engineering attacks targets Internet users who have little understanding their computer system A typical example of this attack is when the hacker sends an e-mail message to the users and asks for their password (Yanyan, 2014) Entrepreneurs in Vietnam have been trying to develop their business through Ecommerce They have created websites and stay connected through emails to clients to advertise their products They have even joined e-trading floors to reach out to potential clients Yet not all consumers are willing to experience shopping online Several valid factors contribute to such reluctance in adopting E-commerce According to Naiyi (2004) “Web shopping involves a number of concerns of consumers, including trade fraud, product quality, monetary losses, privacy, information quality and so on”.Those concerns may be the consequences of a failed purchase online or from the perceived risks that involve in the lack of personal or physical presence of the opposite end Risks are obstacles that prevent consumers from willing to participate in online transactions Therefore, any obstacle to E-commerce such as perceived or real risks in financial transaction, product performance, delivery, time etc need to be examine and resolve With examination and resolution, E-commerce can evolve to a safer market for consumers 1.2 Management Problem: What types of risks should firm be aware of and reduce from in order to attract more consumers into adopting E-commerce in Vietnam? According to the CEO of Vatgia.com, one of the major online E-commerce sites in Vietnam, “The Vietnamese market has never experienced the hyper-supermarket stage before Therefore, the local purchasing mind-set hasn’t followed the current trend, online shopping Moreover, the space and time restraints prevent E-commerce from getting its deserved position Delay in money delivery makes consumers and suppliers gradually lose belief in E-commerce”(Nguyen, 2013) According to Vietnam E-commerce and Information Technology Agency (VECITA) survey, 702 out of 781 Internet users go online daily(2013) The survey reports that from these users 87% go online to update information, 73% use social network or forum, 71% access e-mail, and only 20% shop online Surveys of E-commerce and Information Technology Agency in 2013 about online shoppers indicated that from the 20% people who shop online, 61% of them purchased items online via sales E-commerce websites.(2013) According to the survey results, the respondents’ perceived risks involve in online shopping were many At the top is the risk which comprises the quality of products or services worse than advertised (77%) Below that are the following types of obstacles starting price not lower than buying from traditional shops (40%), unprofessional logistic services (38%), afraid of personal privacy disclosure (31%), and complicated online order procedures (29%)(2013) When further asked as to why respondents were not buying products online, the answers correlated to the difficulties in examining quality of products or the features of products not as advertised (59%) The respondents believed that buying in stores easier and faster (45%) Trust related issues were very high in consideration as well (41%).Another issue was not having enough information to make purchase decisions (38%) or not having credit cards or other payable cards (37%)(2013) However, among 781 respondents, 88% will continue to purchase items online in the future and 12% remaining will go back to conventional shopping(2013) This should not be overlooked, however, since these consumers weren’t happy but perhaps due to their work schedule and daily life which prohibit them to go back to conventional shopping style Therefore management should examine these perceived risks in order to improve their online offerings of goods and services to provide consumers with better shopping experience as well as attract potential consumers to join E-commerce 1.3 Research Problem: Albeit many benefits that E-commerce can bring to customer, many people are still reluctant in adopting the model One ofpotential barriers that has been identified is perceived risk (Davis, Bagozzi, & Warshaw, 1989) According to Asia/ Pacific, Middle East and Africa Online Shopping Study, 49% of respondents have never purchased online due to the uncertainty that online transactions are secure or safe (MasterIntelligence Knowledge Panel, 2010) An organization wish to succeed in this new business era needs to have a clear understanding of how consumer’s perceptions of risks affect their reluctance to adopt Ecommerce Particularly, what are consumers’ perceived risks? Which components of those risks can be control? How can managers achieve positive results by handling said components? 1.4 Research Objectives: This research aims to find out the answers to the above-mentioned research problems Particularly, it is to investigate the impacts of two factors namelyPerceived Risk In The Context of Transaction (PRT) and Perceived Risk with Service (PRP) on the adoption of E-commerce in Vietnam 1.5 Research Scope: The scope of this research is confined to people who arestudents or office workers from the age between 17 to over 55 years oldcurrently reside in Ho Chi MinhCity The number of participants is 201 Chapter LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT In this study, the Technology Acceptance Model and Theory of Perceived Riskare used as the theoretical foundation In the review, we will present four factors which are believed to influence customer’s intentions to adoptE-commerce, or better put, the level or consumer’s reluctance in adopting E-commercebased on these model and theory relate to different risk factors 2.1 Technology Acceptance Model (TAM) Although many models have been proposed to explain and predict people’s willingness, TAM has been the only one that targets major factors in the relation between technology and people’ acceptance level.Fred Davis proposed the TAM in his doctoral thesis at MIT Sloan School of Management in 1985 (M.Y, 2009) He proposed that system use is a respond that can we explained or predicted by user motivation(M.Y, 2009) TAM explains and predicts IT efforts, particularly efforts in building theories to examine and predict the determinant factors of information technology (IT) acceptance Furthermore, TAM facilitates design changes before users have experience with a system TAM adapts the belief-attitude-intention-behavior relationship user acceptance based on two specific behavioral beliefs: perceived ease of use (PEU) and perceived usefulness (PU), which determine an individual’s behavior intention to use an IT (Davis, Bagozzi, & Warshaw, 1989).PEU is defined as people’s subjective appraisal of performance and effort whereas PU is defined by ‘‘the degree to which a person believes that using a particular system would enhance his or her job performance’’ (Davis, Bagozzi, & Warshaw, 1989) These perceived usefulness when buying a product entail certain risks Therefore, perceived risk has always been assumed to be a predecessor factor to PEU and PU What changes in a consumer’s perceived risk directly affects both PEU and PU and consequently affects TAM Thus we focus on examining the correlation between TAM and perceived risk rather than PEU or PU Social Risk Psychological Risk Privacy Risk 77 Appendix F:Customer’s Reluctance to adoptE-commerce Instrument and Questionnaire Statement of dimension Even I have access to E-commerce, I not intend to use it I am not intending to use Ecommerce although times is reasonable for me I believe I will not use E-commerce in the future I intend to decrease my use of Ecommerce in the future Questionnaire in Vietnamese 79 80 81 APPENDIX G: RELIABILITY ANALASIS OF MEASUREMENT SCALES Perceived Risk with Products/ Service Scale Scale: Performance Risk Case Processing Summary Cases Valid Excluded a Total a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 786 Scale Statistics Mean 9.62 82 Scale: Financial Risk Case Processing Summary Cases Valid Excluded a Total a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 744 Scale Statistics Mean 12.65 83 Scale: Security Risk Case Processing Summary Cases Valid Excluded a Total a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 700 Scale Statistics Mean 12.46 84 Scale: Delivery risk Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 638 Scale Statistics Mean 9.23 85 Scale: Time risk Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 635 Scale Statistics Mean 8.97 86 Scale: Social Risk Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 718 Scale Statistics Mean 8.62 87 Scale: Psychological risk Case Processing Summary Cases Va Ex To a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 664 Scale Statistics Mean 9.38 88 Perceived Risk in the Context of Online Transaction Scale Scale: Source risk Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 679 Scale Statistics Mean 9.55 89 Scale: Privacy risk Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 670 Scale Statistics Mean 9.43 90 ... Customer’s Reluctance to adopt E- commerce I am not intending to use E- commerce although the cost and times is reasonable for me I believe I will not use Ecommerce in the future I intend to decrease my... online E- commerce sites in Vietnam, “The Vietnamese market has never experienced the hyper-supermarket stage before Therefore, the local purchasing mind-set hasn’t followed the current trend,... theoretical foundation In the review, we will present four factors which are believed to influence customer’s intentions to adoptE -commerce, or better put, the level or consumer’s reluctance in adopting