Posted: April 3rd, 2015

FACTORS AFFECTING ONLINE PURCHASING IN SAUDI ARABIA .

FACTORS AFFECTING ONLINE PURCHASING IN SAUDI ARABIA .

Introduction
The advent of the Information Age has resulted in creation and promotion of entirely new business models and value propositions (Velasquez, Ahmad, 2009). In this regard, nothing has paralleled the exponential growth of the Internet, as the World Wide Web evolved into not only the most prevalent and convenient encyclopaedia of information but also a vehicle for transformation and simplification of a variety of tasks (Ahmad et al., 2004). The Internet now permeates the daily lives of people around the world.
Indeed, the number of Internet users has already exceeded the two-billion mark in the year 2011. Such developments also provide novel opportunities to businesses by expanding their horizons to an unparalleled degree. Consequently, businesses now have access to new markets, many of which are largely blank slates. These markets include the Kingdom of Saudi Arabia (KSA), which has more than 10 million online users. It means almost half of the population in KSA is already online, rendering it a lucrative market for EC.
Undeniably, EC has already become one of the largest markets worldwide, as the volume of global EC is expected to exceed a staggering $13 trillion, involving more than a billion people, in 2012 (Velasquez, Ahmad, 2009). Consequently, the unprecedented growth in EC transactions is likely to continue in near future (Dennis et al., 2009). Such a dramatic growth in EC and consequent revolutionary changes in business practices also resulted in transformation of consumer behaviour. This gives rise to the need for rigorous research directed at discovering factors that influence Business-to-Consumer E-commerce (B2C). Indeed, scientific studies have discovered many factors that affect B2C related decisions by consumers in various cultures and regions.
Research Problem
The main objective of the study is to develop a model of online buying behavior for consumers in Saudi Arabia
The study will try to explore in detail the various demographic, social and economic factors that affect the online shopping. Internet usage and online shopping may be strongly related to each other. This study will try to uncover the relationship between internet usage and online buying and also try to determine the internet usage pattern of users in Saudi Arabia. While trying to determine the internet usage pattern, the study will try to explore the differences, if they exist, in the internet usage based on demographic, social and economic factors .
Research Questions
In general, there are numerous factors which have a significant influence on B2C. These factors also have an impact on B2C in KSA. However, in KSA, the specific ways in which some of these and other factors manifest may be quite unique. The originality of this research lies in the lack of similar studies and research conducted on the Saudi market. Similar research has been done on different markets around the world. My objective is to attempt to answer the following questions:
•    What are the factors affecting online shopping behaviour in Saudi Arabia?
•    What is the affect of the adequacy of Internet legislation in Saudi Arabia on the tendency to shop online?
•    What is the affect of the number of acceptable payment alternatives in Saudi Arabia on the tendency to shop online?
•    What is the affect of the adequacy of security and privacy measures in Saudi Arabia on the tendency to shop online?
•    What is the affect of the quality of Internet service in Saudi Arabia on the tendency to shop online?
•    What is the affect of the adequacy of the delivery system in Saudi Arabia on the tendency to shop online?
•    What is the affect of the absence of female shopkeepers in Saudi Arabia on the tendency among females to shop online?
•    What is the affect of the level of disposable income in Saudi Arabia on the tendency to shop online?
Review of Literature
Researchers have strived to explain behavioural patterns of e-consumers using various existing theories. Here I explore some theories that provide good explanations for e-consumer behaviour.
Theory of Reasoned Action
One theory utilized in online shopping studies is the Theory of Reasoned Action (TRA), which suggests that an e-consumer’s behavioural intention (BI) is determined by two important constructs: the individual’s attitude toward behaviour (ATB) and subjective norm (SN). ATB is determined by the individual’s beliefs about consequences of the behaviour. SN is determined by the individual’s perceptions of social normative pressures about the behaviour. Research in TRA suggests that lifestyle, benefit perception, purchase preference, and demographic profile are the key factors affecting B2C behaviour (Wu, 2003). The TRA has its limitations such as an implicit assumption that, in the post intention stage, an individual is free to act as per intention without limitations. The Theory of Planned Behaviour was proposed to take care of this limitation.
Theory of Planned Behaviour
The Theory of Planned Behaviour (TPB) is an extension of TRA by adding one major predictor construct, perceived behavioural control or PBC in determining BI. PBC is an individual’s perceived ease, or lack of it, of performing the behaviour. It determines the confidence/control, or lack of it, over the behaviour. TPB also helps in understanding the link between the attitudes of consumers and their online purchasing behaviour. In the context of B2C, the application of TPB revolves around the intention/attitude of an individual to engage in online purchasing. The TPB postulates that attitudes towards B2C are dependent on ATB, or the beliefs held by a consumer regarding the specific attributes of retail websites, such as whether or not they can find a product that fits their preferences. They are affected by SN, the social influence of the views and opinions of others, regarding B2C. Also, the beliefs held by users about the availability of technologies, opportunities, know-how, etc. and the ability to benefit from such resources 5 affects the behaviour (Lim & Dubinsky, 2005). Such factors influence the degree to which user feels a sense of control, termed as PBC, affects econsumer behaviour (Pavlou, 2002).
Technology Acceptance Model
Since computer technology is relatively new to some, people may feel reluctant to using it due to a lack of familiarity with keyboard usage, fear of identity theft, fear of “pushing the wrong button”, etc. The Technology Acceptance Model (TAM) is basically an adaptation of TRA to the technology adoption studies. TAM considers various theories concerning beliefs, attitudes, intentions, and behaviours to explain factors that establish consumer acceptance of computer technologies, making it one of the most effective vehicles for investigating and explaining the Internet and B2C usage behaviour of people (Al-Maghrabi & Dennis, 2010). The constructs considered by TAM to predict behavioural intention (BI) to use technologies are perceived usefulness (PU) and perceived ease of use (PEOU). In B2C, PU refers to how much a consumer using the Internet and retail websites believes that it would enhance his or her shopping experience. Whereas, PEOU pertains to the belief a consumer has in his or her ability to use the Internet for online shopping (Klopping & McKinney, 2004).
Expectation-Confirmation Theory
The Expectation-Confirmation Theory (ECT) is widely used in analyzing post-purchase customer satisfaction. ECT proposes that consumer expectations and attitudes about a product or service are solidified prior to the purchase or use. ECT also describes the key factors that compel the desire to repurchase a product or service such as expectation, perceived performance, confirmation, satisfaction, and repurchase intention. It posits that if the primary expectation is fulfilled and resulted in a positive confirmation while achieving consumer satisfaction then consumer is likely to repurchase the product or service (Salo & Karajaluoto, 2007). As such, a superior B2C experience would facilitate more B2C; whereas, a poor B2C experience would discourage B2C (Chang & Chou, 2011).
Factors Affecting Online Shopping Behavior
Researchers have identified important factors that affect online purchasing behaviour. Often, such factors have universal influences; however, some of these factors may not have universal influences and generalizing their effects may provide illogical or inaccurate predictions. Here, an extensive general review of the factors influencing e-consumer behaviour is provided. (Appendix A)
Methodology and Data Collection
Secondary Research (Desk Research)
Desk research should be focused on examining the literature that has been written on the subject matter, and developing a hypothesis for the survey. Moreover, Internet can be an extremely vital source of information. It can be helpful in assessing current online shopping sites in KSA.
Primary research
Survey
The primary research will be conducted using a questionnaire-based survey. The decision whether to use an online or paper based survey would be made after a pilot study.
Interviews Phone or face to face interviews can be conducted with both customers and companies in KSA. These interviews can be used to analyze data collected from the questionnaire-based survey.
Context of the Research
Here, I provide a survey of factors that support or hinder the proliferation of B2C and more unique or relevant to e-consumers in KSA.
Enjoyment
Shopping in KSA is a very popular leisure and social activity. As the climate of KSA is notoriously arid and hot, Saudis tend to congregate for socialization in air conditioned shopping malls. Additionally, shopping malls present a range of entertainment options such as restaurants, cafes, sports/games facilities, game arcades, and play areas for kids. Some malls are only for families or have women-only floors, increasing the popularity of shopping malls as a place to go for leisure. The view of shopping as a form of entertainment can be detrimental to the growth of B2C due to the lack of a comparably enjoyable social experience.
Net Legislation
Consumers need to have clear statements of their rights and obligations, the absence of which makes them more hesitant to buy online and more likely to buy offline. The lack of clearly stated and rigorously enforced trading laws might be one of the factors dampening the attitudes of Saudi consumers about online purchasing. Recently, the Saudi government has issued some regulations with regards to EC. Besides, in 2008, the ministry of communication and technology in KSA passed a law dealing with issues surrounding online activities and trade (MCIT, 2011). Further, stricter laws for Internet usage and trading are currently under consideration.
Payment Systems
Since KSA is governed by an Islamic system, the use of credit cards as a method of payments is problematic, as interest-based financial transactions are forbidden in Islam. The lack of a reliable mode of payment has had a detrimental effect on the diffusion of EC in KSA. However, in addressing this issue, some banks now offer prepaid credit cards that can be used without interest. Moreover, payments made over the Internet via Interac Online are becoming more widespread. This could provide a viable solution to issues connected to unreliable payment methods in KSA.
Security and Privacy Issues
Recently, a lot of privacy invasion and security issues have been prevalent in KSA society, resulting in a rise of concern about the practices of online businesses. In a survey of KSA firms on the information security, it was stated that 56% of firms witnessed no hacking incidents, 22% witnessed hacking incidents, and 20% were not sure whether they had or not (Al Mesaiheej, 2011). The occurrence of hacking in 22% of businesses is relatively high. Naturally, the Saudi e-consumer would be hesitant towards B2C.
Quality of Internet Service
Internet service in KSA needs a great deal of improvement. The standard speeds are a significant barrier to the assimilation of EC in Saudi society. For instance, expensive but faster connections are vital for safe and convenient online purchasing. Indeed, the exponential growth in usage means investments into Internet infrastructure would be beneficial not only for the EC but also for the whole economy.
Postal/Delivery System
Another factor that influences online purchasing within KSA is its inefficient postal delivery system. The postal delivery service in KSA has many issues. In general, houses do not have civic numbers, which makes it difficult to deliver mail to a specific address. People therefore switch to such private but more expensive delivery service providers as FedEx and DHL. However, it also increases the overall cost of online purchases, making physical outlets appear more economical to consumers.
Language
English is the language of choice on the Internet and more than 600 million English users as well as about one-third of all websites being in English bear witness to this fact (Internet Word Stats, 2010). Such prevalence of English 16 on the Internet raises further issues for Arabic speaking consumers in KSA, where Arabic is both the official and the business language. However, many youngsters in KSA are now investing significantly in upgrading their educations and English language skills, two factors which positively affect the chance of them engaging in B2C.
Social Issues
Social issues such as gender segregation are another major factor in KSA, as limited interaction with the opposite gender is preferred. Since shopkeepers are often males, face-to-face purchasing could be uncomfortable for women, especially in the markets of cosmetics, jewellery, and garments. In a society that places high value on the aspect of privacy, especially for women, it is understandable how visiting an undergarment store run by a male would prompt negative emotions. This fact could make online shopping a desirable and welcomed alternative for women and others.
Membership in the WTO
KSA became a full member of the World Trade Organization (WTO) in 2005, an important step towards opening the KSA market to foreign vendors and investors (WTO, 2010). Being a member of the WTO should lead to greater investments in EC and, therefore, more prevalence of B2C in KSA.
Regional Economic Leadership
Being the leading economy in the region, KSA has considerable impact on other regional economies, as changes in its economy tend to induce similar changes in regional economies. For instance, the recent economic stimulus package by KSA government boasted stock markets not only in KSA but also in the whole region. Thus, it is an alluring target for both online and offline retailers. Furthermore, economic expansion tends to spur EC, as well.
Theoretical Constructs
Here I list and discuss constructs in my proposed theoretical model, as depicted in Figure-1, for testing e-consumer behaviour in KSA. I intend to conduct a carefully and rigourously designed questionnaire based scientific research survey to collect data for testing this theoretical model.
Enjoyment
H1a: The higher the perceived level of enjoyment of online shopping, the higher the tendency to shop online.
H1b: The higher the perceived level of enjoyment in offline shopping, the lower the tendency to shop online. 17
If an e-consumer in KSA has an enjoyable online shopping experience as per personal preferences, s/he will have a tendency to return to the site where s/he made a purchase and buy online more frequently. In contrast, a consumer who finds shopping at offline malls a more enjoyable and interactive social experience may not consider online shopping to be a viable option. People in KSA like to shop in malls, as mentioned previously, for the variety of forms of entertainment that malls have on offer. As a result, they may be less likely to view online shopping as an alternative furnishing comparable consumer satisfaction.
Internet Laws
H2: The higher the perceived adequacy of Internet legislation, the higher the tendency to shop online.
Internet laws protect the rights of all parties involved in an online transaction. When such laws exist, the consumer feels more secure in making an online purchase. Therefore, e-consumers in KSA would be much more likely to participate in B2C if the law protects their rights to privacy, security, and safety on the World Wide Web.
Payment Systems
H3: The higher the number of acceptable payment alternatives, the higher the tendency to shop online.
Payment is a crucial aspect in online shopping. Consumers feel confident in making online purchases when payment methods are secure and culturally and religiously acceptable. Due to religious legislation, Saudi citizens cannot use credit cards which use an interest-accruing system; hence, the state must provide alternative forms of payment which do not use an interest-based system.
Security and Privacy Issues
H4: The higher the number of perceived security and privacy issues, the lower the tendency to shop online.
Privacy invasion incidents alarm online shoppers. It is important that they feel secure and protected when conducting an online shopping transaction and providing their personal information. Measures must be taken to ensure, and clearly communicate, the protection and safety of e-consumers.
Quality of Internet Service
H5: The higher the perceived quality of Internet service, the higher the perceived level of enjoyment in online shopping.
Better Internet speed and usability enhance the Web-surfing experience. If consumers can navigate a site easily and efficiently, they will have a more positive outlook on online shopping.
Delivery System Adequacy
H6: The higher the perceived adequacy of the delivery system, the higher the tendency to shop online.
Reliable, timely, and inexpensive delivery of purchases is a cornerstone of online shopping. A consumer who feels confident that s/he can receive a product reasonably quickly and economically will have a very optimistic image of online shopping. Consequently, s/he will be more likely to make repeat purchases.
Social Issues
H7a: The lower the proportion of female shopkeepers in KSA, the higher the tendency among females to shop online.
H7b: The higher the tendency among females to shop online, the higher the tendency among the overall population to shop online.
H7c: The higher the perceived professionalism exhibited by the shopkeepers, the lower the tendency to shop online.
Cultural sensitivities can affect proliferation of B2C. In KSA, almost all shops have only male shopkeepers, which may not provide a comfortable shopping experience to females, especially when buying garments, jewellery, cosmetics, etc. Online availability of such products, with detailed information and variety in prices/brands, should make women prefer B2C. In addition, if more women prefer online shopping then it should impact the B2C participation among the other demographics segments, too. Furthermore, any perceived lack of professionalism exhibited by shopkeepers may support B2C.
Buying Power of Consumer
H9: The higher the disposable income, the higher the tendency to shop online.
Intuitively, a higher disposable income leads to more purchases as well as more online shopping. In KSA, economic benefits and wages are on the rise, which is expected to positively affect B2C. Nevertheless, higher prevailing unemployment may have an opposite effect. Also, higher incomes may lead to more offline shopping due to the fun and entertainment aspects of offline shopping.

Figure 1: Empirical model – Factors affecting online shopping behaviour in KSA