Factors Affecting Initial Trust in C2C E-Commerce and Strategies of

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1 Factors Affecting Initial Trust in C2C E-Commerce and Strategies of Building Initial Trust in China School of Management, Harbin Institute of Technology, Harbin , China Abstract The study of initial trust is very important to the development of e-commerce. On the basis of current status of China s C2C e-commerce, this paper conducts an in-depth analysis of the factors affecting the consumers initial trust. At last, the paper provides some valuable marketing strategies as to how to build the initial trust so as to facilitate the success of online transactions. The research conducted by this paper will help enterprise enhance their competitive advantage and contribute to the development of e-commerce. 1. Introduction Keywords: Initial Trust, C2C E-Commerce, Online Shopping The study of the trust in the e-commerce environment has long been mostly focusing on the B2C Model, yet with the development of the information technology, the online C2C business has accounted for more than 75% of the online shopping turnover, which has influenced people s work environment greatly and become an important part in the daily life of consumers in the information society. Under the C2C e-commerce environment characterized by the person-to-person transactions, it s difficult for the buyer and seller to build a high degree of trust. Online transactions are different from the traditional ones. Consumers face more risks when making an online purchasing decision. Trust is an important factor under conditions of uncertainty and risk. Consumer s belief that an e-vendor can be trusted plays a vital role in attracting and retaining consumers [1, 2]. In recent years, hundreds of group buying forums have appeared in China. Many consumers pool together their purchase volume with the aim of lowering the purchase price and increasing the sense of security [3]. At present the degree of trust in online transaction remains very low, which is one of the major obstacles to the development of China s economy and e-commerce applications. Compared with the relatively mature e-commerce market environment in developed countries [4, 5], China s C2C e-commerce is still at the initial stage where many consumers are still very skeptical about C2C e-commerce. For example, some consumers are worried about the safety of online shopping. Customer satisfaction is still a key factor of corporate success [6]. At present, the study of the trust issues in the C2C environment in China can not meet the needs of companies, consumers, the government and society to promote the e-commerce practice, thus impeding the development of China s online market and Internet marketing. In such case, it s important and necessary to conduct the research of consumers initial trust in China. This paper studies the factors affecting the initial trust in China s C2C e-commerce and proposes valuable marketing strategies as to how to build the initial trust effectively. 2. Literature review Since the mid-1990 s, many scholars have conducted extensive research on the trust issues in e- commerce. Consumer trust is an essential element for the success of electronic commerce, yet the concept itself is still clouded in confusion by the numerous definitions [7]. Many factors affecting the online trust have been studied, such as the information content, products, transactions, technologies, consumer behavior [8]. Much research has dealt with website features triggering consumer trust to them. Another stream of research focuses on the psychological antecedents. The potential psychological factors can be Journal of Convergence Information Technology(JCIT) Volume 7, Number 19, Oct 2012 doi : /jcit.vol7.issue

2 classified to five groups: personality, perception, attitude, experience and knowledge [9]. Consumer trust in an Internet vendor is commanding more attention [10, 11]. Many research models have been constructed and verified to help build initial trust [12-15]. For example, a positive model of consumers trust of salesperson and manufacturer is developed which provides suggestions for improving relationships and increasing buyer-seller trust [16]. A model has been proposed, which can explain how new customers of a web-based company develop initial trust in the company after their first visit. Lack of trust is a primary reason why many web users do not shop online [17]. The research examining the effects of third-party Web assurance seals on consumers' initial trust in an online vendor was conducted from a functional perspective [18]. A model which focused on the relationship between antecedents and outcomes of online customer experience within Internet shopping websites using an international sample was built. It can help understand how e-retailers can provide effective online experiences for customers [19]. With the development of Information Technology, the studies of the initial trust in China s C2C electronic commerce is growing steadily. C. Pang gives an analysis of the factors affecting the initial trust in B2C e-commerce and proposes some appropriate suggestions, e.g., optimizing the website setup and enhancing the service quality [20]. K.Yu looks at the relationship between the trust, TAM and online shopping behavior and points out the major factors affecting the purchase attitude [21]. Z.Cao studies the impact of such factors as privacy, the business performance of online communities on the trust of online buyers [22]. At present more and more people are involved in C2C online shopping transactions more frequently and China s C2C shopping websites are becoming increasingly competitive. The survey findings indicate that the goods purchased by C2C online shoppers are mostly the IT products and fashionable goods, e.g., computers, cosmetics and clothes. On some famous shopping websites in China, the female buyers have account for nearly 50% of the buyer base. 3. Factors affecting consumers initial trust in China s C2C e-commerce At the initial stage, vendors could not show the consumers their trustworthiness and reliabilities as they expect. Consumers are not familiar with the vendors. Perhaps they know little information about the goods and service provided by the vendors. Therefore, at the initial phase, how the vendors can build sufficient trust to reduce the risks, protect the consumers interests and encourage the consumers to strike a deal has become the key for e-commerce companies to attract users and enhance their competitive advantage. This paper studies the factors affecting initial trust from three different respects, i.e., website, online store and service, believing that the initial trust of consumers in C2C is based on the perception of these factors Website function Websites are the medium of transaction between consumers and online vendors. C2C websites involve transactions between the anonymous buyers and the sellers rather than organizations, so the mutual distrust between traders makes people usually browse websites and hardly make a purchasing decision. The function and quality of websites directly affect the customers shopping intention and the degree of trust of the consumers, therefore how to design a good e-commerce website plays an important role in building consumer trust. The performance of websites themselves, to some extent, can demonstrate the characteristics of the online store such as the credibility, safety and convenience to the consumers. This paper measure the website function mainly from three aspects: the content, technology and reasonable process. A website can be divided into two parts of website content and website design. The former means various types of information on the website, while the latter means how the website is presented to the customers. As for the customers who first visit the Webpage of the online vendors, the design features of the webpage will affect their degree of initial trust. The quality of the Website will leave the customers the first impression as the attractive webpage design will attract customers and promote the further interaction. 506

3 A good website should adopt technology to protect the security and privacy of the online shopping. On the basis of e-commerce technology the websites provide various services and transactions. Usually we think there is a positive relationship between the technical factors and initial trust. The more reliable the technology, the smaller the risks associated with online environment will be and the higher level of trust the consumers will have. The poorly designed websites will affect the consumer perception for the website quality, thus reducing the degree of trust of the consumers.. The reasonableness of the website process can improve the personalization of shopping and customer satisfaction. A reasonable process can effectively prevent the shopping-related risks and make the consumers fell that shopping here is convenient. A complicated online shopping procedure will greatly reduce the consumer desire for shopping, making many prospective customers give up halfway. In fact most people like shopping in a relaxed and pleasant shopping environment with a simple shopping process Online stores The characteristic and performance of online vendors can affect the entire transaction process. This paper evaluates the quality of online shops in terms of the scale, reputation and operating policy of the online stores. Usually the large online stores can reduce the perceived risks of online consumers. Consumers tend to believe that the large online vendors are sufficiently capable to provide desired products and services, deal with problems occurring in the process of transaction on a timely and rational basis, and protect their interest and privacy better. The reputation of online stores will affect the trust of consumers in online sellers. The reputation of the online shops, good or bad, can be spread rapidly by word of mouth of consumers. In China nowadays, many C2C websites have established credit rating system which can provide customers with important credit information. Whether the business policy, such as transaction policy, is sound and reasonable will affect the trust of the consumers. Good business policy will assure the customers that their rights and privacy are protected thus developing a trust in the online vendors and increasing the sense of security for online shopping. Take Taobao as an example. Taobao is a famous web site for online shopping in China, founded by Alibaba Group in It s also the largest online retail web site in Asia. Taobao is supported by a strong technology team and adopts new technologies and services continuously. It provides a platform for small businesses and individual entrepreneurs to open online retail stores. Since it s established, it has good reputation and reasonable policy. Although online transactions are dangerous to some extent, Taobao succeeds in winning consumers trust and making consumers enjoy purchasing on Taobao website Service level The improved service level in the e-commerce environment can greatly enhance the consumer trust and the competitive advantage of the online vendors. In the C2C e-commerce, the dissemination and feedback of information is more accurate and timely. Consumers and vendors don t meet face to face. The information description variable is used to reflect the description of information related to the products and services. Brand is one of the immediate drivers behind online shopping. Usually a good brand stands for high-quality products and satisfactory service. It can give consumers a greater sense of security. Online shops carrying many name brands are easier to win the trust from consumers. The interactive capability reflects the degree of interaction between the sellers and consumers. In the C2C online shopping process, the interaction with the sellers can help the customers have a deeper understanding of the products and develop a higher level of trust. Personalized recommendation means that the vendors proactively recommend the desired goods or service to consumers after analyzing the consumers behaviors. In the online environment, personalized recommendation can help tap the potential needs of consumers and provide the customized services to the consumers. 507

4 Let s take Dangdang as an example. As a famous brand of online bookstores in China, dangdang.com was established in 1999 and is regarded as China's largest online book retailer at present. Dangdang provides a variety of goods such as more than 200,000 kinds of books. Customer-centered, more choice and lower price is dangdang s important principle to provide personalized service to customers. Dangdang has adopted many methods to provide convenient shopping to consumers and help buyers and sellers communicate better during the process of transaction. Dangdang often adopts some promotion methods to meet customers needs, such as group purchase, discount strategy, etc. In this way, Dangdang attracts over 10 million new registered customers per year and wins the consumers trust. 4. Experiment Design The subject of the study in this paper is initial trust, with focus on the initial trust in vendors on C2C websites. We divide the respondents into consumers with online shopping experience and the ones without such experience. The online customers initial trust is preliminarily divided into the capability trust and the goodwill trust [23]. The questionnaire survey mainly comprises written questionnaire and online questionnaire. At first we plan to distribute a large number of questionnaires in the form of , online forum and hard copy and collect some valid ones. Then we ll conduct a descriptive statistical analysis of the survey data, classify the collected data into categories with or without online shopping experience. At last we ll conduct confidence analysis, validity analysis and regression analysis separately using the statistical software-spss, verify the relationship among all variables and establish regression equations. This paper mainly focuses on the design of the experiment. In the future work we ll elaborate the implementation of experiment on a large number of samples in detail and demonstrate relevant data report Confidence analysis The confidence issues are of great significance in statistics. Confidence analysis can help measure the reliability and stability of the test data. We select the commonly used internal consistency α coefficient, which is suitable for homogeneity test. If α value of each variable in the questionnaire is larger than 0.7, we can simply determine that the confidence of this questionnaire is ideal and the obtained survey findings are reliable Validity analysis We plan to adopt the factor analysis function of SPSS to continue the research. Generally speaking, if the value of KMO is larger than 0.7, it means that it is suitable for the factor analysis. Validity analysis consists of content validity, surface validity and structure validity. Take the potential variable of website function for example, if the value of KMO is larger than 0.7, for example 0.865, it means problems distributed on the three dimensions are reasonable and it s appropriate to conduct factor analysis. The same method is used for the other potential variables, such as the service quality Regression analysis Regression analysis can indicate whether there is cause-and-effect relationship among factors. At first we should verify whether the data meets the presumptions of regression analysis. Based on the results of the factor analysis, we ll then conduct the multi-variable linear regression analysis of the survey findings. During the analysis, goodwill trust and capability trust will be used as the dependant factor variables to conduct the goodwill trust regression analysis and capability trust regression analysis. The analysis will indicate whether the degree of fitting of regression model is satisfactory, whether the residual error is mutually independent, etc. At last the results will indicate whether the multiple linear regression analysis in this study is reasonable. 508

5 As for the consumers with or without online shopping experience, the above method is used to measure its impact on the initial trust in online shops. On the basis of the analysis of two categories of consumers, the next step we ll discuss what measures the online vendors should take to build the initial trust. We hope provide some valuable suggestions to vendors and inform their implementation of marketing strategy. 5. Strategies of building consumers initial trust in C2C e-commerce 5.1. Strategies for consumers to enhance the degree of initial trust In this paper we ll provide some strategies to enhance the degree of consumers initial trust. On the basis of the above analysis, we find that brand, website content, interaction level, commodity information are the very factors affecting the initial trust of the consumers. As for the consumers with the online shopping experience, the policy factors will not affect their trust in online stores, but as for those without online shopping experience, they tend to believe that the factors like reliable technology of the website are even more important. They re more inclined to believe in things they can see through their eyes. Consumers with online shopping experience tend to proactively contact vendors, say, by logging on and browsing the websites, sending s to the customer service center inquiring about the products. They pay more attention to the factors related to the service quality, such as whether the transaction rules, sales policy, return policy are fair and reasonable. Vendors need to clearly define their operating policy and establish initial trust using appropriate methods. As for the consumers without online shopping experience, there are many problems to think about before they make a purchase decision online. For example, they re afraid of being cheated during the process of online shopping. Therefore online vendors should focus on the construction of shopping websites, build up their reputation, improve the interaction level and provide high-quality product and service to attract more customers. The government and enterprises should make joint efforts to establish the favorable image of C2C business so as to expand their popularity and enhance the degree of consumers trust Application of Web Usage Mining technology in building initial trust Most online consumers would compare the same goods across different online stores many times before they make their first purchasing decision, leaving a lot of browsing record online although no purchasing behavior occur. Webpage retains valuable information for the users, which reflects the access pattern of the customers. The Web data mining technology is an effective tool to analyze the online consumer behaviors. Vendors should make use of Web data mining technology to analyze the online data so as to win the initial trust of customers Web Data Mining Data mining is an interdisciplinary subject that contains database technology, statistics, artificial intelligence, machine learning, pattern recognition, visualization technology, etc. Data mining is a process of extracting information and knowledge which is potentially useful from a large quantity of incomplete, noisy, fuzzy and random data [24, 25]. With the development of information technology, Web data mining has come into being with great potential value. It combines traditional data mining with web, extracts effective, potential, understandable knowledge and patterns from web resource. The classification of Web data mining is as shown in figure 1. Among Web content mining, Web structure mining and Web usage mining, Web Usage Mining is closely related to the user behavior. The effective web data mining can help enterprises identify the target market and readjust the marketing strategy. For example, mining the user access information can help enterprises develop a better understanding of the common characteristics of the group users and the preference of individual users, so as to recommend their desired goods for personalized marketing. Besides, it is possible to predict the future access pattern according to the user s browsing information. 509

6 Figure 1. Classification of web data mining Web usage mining is used to analyze the users browsing behavior, improve website access efficiency, make website more intelligent, help vendors attract and retain customers and provide the users with personalized service. In this paper we suggest to adopt the clustering and association rules of web usage mining in the studies of initial trust Web clustering Web clustering analysis mainly focuses on user clustering and Webpage clustering. Web user clustering classifies the users with the similar access pattern into a group based on user characteristics in preparation for recommendation of Websites. The main purpose of Web page clustering is to classify the web pages of the same characteristics visited by the same kind of users into a group. The Web clustering can help identify the consumer groups with different characteristics, give a specific consumption pattern of each type of consumers in order to help the enterprise analyze consumer behavior and build initial trust better. For example, we can cluster the customers with the similar characteristics, recommend the relevant hyperlinks to the users and provide customers with more satisfactory service. In this way we can attract more customers trust the online vendors and enhance the consumers trust level Web association rule The association rule is a very important method of Web usage mining. It intended to discover the hidden relationship among the web access records and identify the relationship between the users and all pages of the relevant website during a certain visiting period. The application of the Web mining technology based on the association rule can better promote the personalized service and implement the effective marketing strategy. In view of the dynamic nature and uncertainty of the Internet, we suggest more consideration be given to the impact of such dynamic factors like the time. The application of Web usage mining technology can help us analyze the online consumer behavior and build the initial trust of consumers in the online vendors more effectively. 6. Conclusion This paper studies the factors affecting the consumers initial trust in China s C2C e-commerce, provides some valuable strategies as to how to build the consumers initial trust effectively. The paper also discusses the application of Web data mining technology in establishing initial trust. The research conducted by this paper will help online vendors make marketing decisions better. It will also help e- commerce enterprises attract and retain customers and enhance their competitive advantage. The study of initial trust will facilitate the development of e-commerce. 7. Acknowledgement This paper was supported by National Natural Science Foundation of China ( No ) and the Fundamental Research funds for the Central Universities (Grant No. HIT.HSS ) 510

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