Trust-building factors in E-commerce Industry


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It is a project report submitted by me as a part of final semester curriculum on topic "Trust-building factors in E-commerce Industry"

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Trust-building factors in E-commerce Industry

  1. 1. Trust-Building Factors In E-commerce Industry Sumitted to: Submitted By: Mrs.Sarita Solanki Rana Shivendra Gupta (Asst. Professor , JIMS Rohini) BBA 6th Semester 01950401711 Jagan Institute of Management Studies Affiliated to Guru Gobind Singh Indraprastha University
  3. 3. PREFACE The report is an itegral part of the Bachelor of Business Administration (BBA) Curriculum of Department of Management, Jagan Institute Of Management Studies affiliated to GGS Indraprastha University. During the course of whole project research , the researcher is expected to use and apply his academic knowledge and gain a valuable understanding about the industry. During the course of my research , I did a comprehensive study about various trustbuilding factors in ecommerce industry. In this report I have put my efforts to compile the data with utmost accuracy and give the views to the best of my judgement.
  4. 4. ACKNOWLEDGEMENT I owe my sincere thanks and gratitude to Mrs. Sarita Solanki Rana ( Project Mentor) who inspired me by her able guidance and was a constant guiding light during the course of project study. The support and knowledge provided by her has been a great value addition for me and will go a long way in building a promising career. I would also like to express my deep and sincere gratitude to the people I met to get more insights about the industry and the people who helped me by filling the questionnaire . The project was a great source of learning and a good experience as it made me aware of the various factors on which an ecommerce company should focus so as to gain consumer trust. And finally I would like to thank god and my parents who inspired a lot for the completion of the project. SHIVENDRA GUPTA
  5. 5. CERTIFICATE Certified that the project work titled “Trust-building factors in e-commerce industry” , submitted by Shivendra Gupta (BBA 6th Semester , JIMS Rohini, Enrollment Number- 01950401711 ) for the partial fulfillment of the BBA Degree offered by GGS Indraprastha University is an original work carried out by the student under my supervision. This work has not been submitted anywhere else for any purpose. (Mrs.Sarita Sonalki Rana) Date-April 15 , 2014
  6. 6. DECLARATION I have completed the Semester Project titled “Trust -building Factors in Ecommerce Industry” under the guidance of “Mrs. Sarita Solanki Rana” in partial fulfillment of the requirement for the award of Degree of Bachelor of Business Administration (BBA) at Jagan Institute of Management Studies. This is an original piece of work & I have not submitted it earlier elsewhere. SHIVENDRA GUPTA BBA 6th Semester Enrollment Number. 01950401711
  7. 7. EXECUTIVE SUMMARY With the ever changing customer behavior , Indian people have started buying online. The ecommerce industry in India is growing at a fast pace. In year 2013 only, the industry grew by 88% as compared to previous year. As the industry is growing , there are new entrants and conglomerates who are trying their hands in the industry to get a part of the market share , But doing an ecommerce business is not an easy task. There are various factors which help in gaining consumer trust to purchase online from a specific online retailer. This project on “Trustbuilding Factors in Ecommerce Industry” tells about various factors on which an ecommerce player need to focus to get more customers , This project helps the retailers as well as the general customers who are going to purchase online. A brief about the Indian as well as the Global ecommerce industry is given in the project with a bit of competition information. As this project is all about trustbuilding factors, various surveys are conducted and a questionnaire is prepared which is being filled by 50 people and a thorough analysis is done about the results which is represented through bar graphs. Further there are certain suggestions and recommendations which I have drawn through the survey conducted among the people.At the end , I have concluded the project by mentioning the factors which play a vital role in building consumers’ trust in ecommerce.
  9. 9. 1.1. INDUSTRY OVEWVIEW Ecommerce Electronic commerce, commonly known as E-commerce or eCommerce, is a type of industry where the buying and selling of products or services is conducted over electronic systems such as the Internet and other computer networks. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices, social media, and telephones as well. Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions. This is an effective and efficient way of communicating within an organization and one of the most effective and useful ways of conducting business. It is a Market entry strategy where the company may or may not have a physical presence. E-commerce can be divided into 7 subsections: • E-tailing or "virtual storefronts" on websites with online catalogs, sometimes gathered into a "virtual mall" • Buying or selling on websites and/or online marketplaces • The gathering and use of demographic data through web contacts and social media • Electronic data interchange, the business-to-business exchange of data • E-mail and fax and their use as media for reaching prospective and established customers (for example, with newsletters) • Business-to-business buying and selling • The security of business transactions
  10. 10. Ecommerce Industry in India • India has an internet user base of about 137 million as of June 2012. The penetration of e- commerce is low compared to markets like the United States and the United Kingdom but is growing at a much faster rate with a large number of new entrants.[4] The industry consensus is that growth is at an inflection point. • Unique to India (and potentially to other developing countries), cash on delivery is a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash on Delivery. Similarly, direct imports constitute a large component of online sales. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings. Market Size and growth India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $14 billion in 2012. About 75% of this is travel related (airline tickets, railway tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5% ($300 Million as of 2009). India has close to 10 million online shoppers and is growing at an estimated 30% CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales. Key drivers in Indian e-commerce are: • Increasing broadband Internet (growing at 20% MoM) and 3G penetration. • Rising standards of living and a burgeoning, upwardly mobile middle class with high disposable incomes • Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers. • Busy lifestyles, urban traffic congestion and lack of time for offline shopping • Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs.
  11. 11. • Increased usage of online classified sites, with more consumer buying and selling second- hand goods. • Evolution of the online marketplace model with sites like eBay,Flipkart, Snapdeal, Infibeam, and Tradus. The evolution of ecommerce has come a full circle with marketplace models taking center stage again. India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%. According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16. As per "India Goes Digital", a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015. On March 7, 2014 e-tailer Flipkart claimed it has hit $1 billion in sales, a feat it has managed to achieve before its own target (2015). Infrastructure There are many hosting companies working in India but most[ of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting. Trends are changing with some of eCommerce companies starting to offer SaaS for hosting webstores with minimal one time costs. There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll. India got its own version of the so-called Cyber Monday known as Great Online Shopping Festival in December 2012, when Google India partnered with e-commerce companies
  12. 12. including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day.[16] In early June 2013, launched their Amazon India marketplace without any marketing campaigns. Funding As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising,, in August 2012, raised about 822 crore (US$140 million). Entertainment ticketing website raised 100 crore (US$17 million) investment by Accel Partners. On July 10, 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors making up the additional $160 million include Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global. Snapdeal - USD 50 million in April 13. In Feb 2014, online fashion retailer Myntra raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. 1.2. PROBLEMS FACED BY ECOMMERCE COMPANIES IN INDIA: Physical clues in the traditional shopping environment, such as the appearance of the store and the direct contact with sales persons that affect consumers sense of trust, are absent in the online environment. This lack of physical clues and physical interaction in the online environment, make it more difficult to establish trust with the consumers. So, this constitutes a major challenge for companies that engage in e-commerce. Therefore, it is important to find factors that help to establish consumer trust in e-commerce.
  13. 13. Challenges for ecommerce in india The growth of ecommerce volumes in India is attracting the attention of players around the globe. India, the second most populous country in the world, is home to 1.2 billion people. To put that number into perspective, consider this: the combined populations of Germany, UK, France, Italy, Netherlands, Belgium, and Greece equal one-fourth the population of India alone! Despite lower per-capita purchasing power, this still makes India one of the most attractive emerging markets for ecommerce. But India is far from being a bed of roses. Here are the top 8 challenges that ecommerce businesses face in India. 1. Indian customers return much of the merchandise they purchase online. Ecommerce in India has many first time buyers. This means that they have not yet made up their mind about what to expect from ecommerce websites. As a result, buyers sometimes fall prey to hard sell. But by the time the product is delivered, they demonstrate remorse and return the goods. Though consumer remorse is a global problem, it is all the more prevalent in a country like India, where much of the growth comes from new buyers. Returns are expensive for ecommerce players, as reverse logistics presents unique challenges. This becomes all the more complex in cross-border ecommerce. 2. Cash on delivery is the preferred payment mode. Low credit card penetration and low trust in online transactions has led to cash on delivery being the preferred payment option in India. Unlike electronic payments, manual cash collection is laborious, risky, and expensive. 3. Payment gateways have a high failure rate. As if the preference for cash on delivery was not bad enough, Indian payment gateways have an unusually high failure rate by global standards. Ecommerce companies using Indian payment gateways are losing out on business, as several customers do not reattempt payment after a transaction fails. 4. Internet penetration is low.
  14. 14. Internet penetration in India is still a small fraction of what you would find in several western countries. On top of that, the quality of connectivity is poor in several regions. But both these problems are fast disappearing. The day is not far when connectivity issues would not feature in a list of challenges to ecommerce in India. 5. Feature phones still rule the roost. Though the total number of mobile phone users in India is very high, a significant majority still use feature phones, not smartphones. So, for all practical purposes this consumer group is unable to make ecommerce purchases on the move. Though we are still a couple of years away from the scales tipping in favor of smartphones, the rapid downward spiral in the price of entry-level smartphones is an encouraging sign. I expect that the next few quarters will witness announcements of new smartphones in India at the $30-40 price point. That should spur growth in smartphone ownership. 6. Postal addresses are not standardized. If you place an online order in India, you will quite likely get a call from the logistics company to ask you about your exact location. Clearly your address is not enough. This is because there is little standardization in the way postal addresses are written. Last mile issues add to ecommerce logistics problems. 7. Logistics is a problem in thousands of Indian towns. The logistics challenge in India is not just about the lack of standardization in postal addresses. Given the large size of the country, there are thousands of towns that are not easily accessible. Metropolitan cities and other major urban centers have a fairly robust logistics infrastructure. But since the real charm of the Indian market lies in its large population, absence of seamless access to a significant proportion of prospective customers is a dampener. The problem with logistics is compounded by the fact that cash on delivery is the preferred payment option in India. International logistics providers, private Indian companies, and the government-owned postal services are making a valiant effort to solve the logistics problem. If someone could convert the sheer size of the problem into an opportunity, we might soon hear of a great success story coming out of the Indian logistics industry. 8. Overfunded competitors are driving up cost of customer acquisition.
  15. 15. The vibrancy in the Indian startup ecosystem over the past couple of years has channeled a lot of investment into the ecommerce sector. The long-term prospects for ecommerce companies are so exciting that some investors are willing to spend irrationally high amounts of money to acquire market share today. Naturally the Indian consumer is spoiled for choice. However, this trend has reversed as investors are getting worried about slipping further down a slippery slope, and I expect more rational behavior in 2014. 1.3. SWOT ANALYSIS Strengths 1. Global market: E-commerce biggest strength is the boundary less access in other word no brick structure is mandatory to do business or no specific boundary is required. It enables all the companies to expand them to global level. The widening of geographic retail markets may facilitate the development of global retailers. 2. Time saving: Transaction through internet is no doubt very fast. It saves time by reducing physical movement. 3. No time constraints: The concept of 25X7 shows that online trans can be used any where any time as there is no time constraints. 4. Price/Product comparison: Information and to choose are some of the right which every consumer has. On the same footing ecommerce provide platform to consumers to compare price and product effectively and efficiently. It will tend to have far greater bargaining effectively and efficiently. It will tend to have far greater bargaining power with suppliers than traditional local or national retailers. 5. Cost Effective : Elimination of long chain of middle man,decreasing need of having brick infrastructure and outsource logistic are helping a small business to stand at par with giants.
  16. 16. Weaknesses 1. Security: Security is a biggest challenge in to progress of e commerce. Customer always found themselves insecure especially about the integrity of the payment process. 2. Fake websites: Many fake websites are available on net which promises better service and secure dealing. These web sites can not only disgrace ecommerce but also bring bad name to ecommerce. 3. Fraud: Personal and financial details provided for trading purpose are misused by hackers their personal undue interest. 4. Long delivery timing: The task of Delivery is usually outsourced, who do not care about the timing of the seller. They provide their services as per their own convenience. Some time the delivery time may extend to days or weeks which one cannot wait for. 5. Impossibility of physical examination : Products whose choice is merely depend on its physical condition of the product with need personal touch before selection are not suitable fot e-commece business. As Online products cannot be touched, wear or sit on the products. 6. Customer’s satisfaction: There is no physical and personal or direct face to face interaction between customer and the seller. Therefore the scope of convincing the customer does not exist. Opportunities 1. Changing trends: People are very brand conscious. They are interested in buying branded stuff rater then local. If such stuff is available cross border they will not mind it ordering through e-commerce. E- commerce is fast and effective even financial transactions can be made from any part of the world. People of tomorrow will feel more comfortable to buy products through internet only. 2. Increasing number of user: Daily number of internet users is increasing. People feel more comfortable to shop online.
  17. 17. 3. High availability (24 hour and seven days a week): Along with each and every click of the mouse business is in operation. Those who are busy in day time and cannot spare time for them self, have all the opportunity to shop as per their convenient time even during late night hours. 4. Cost Effective Advertising: Advertising is cost effective as compare to conventional offline system. Threats 1. Competitors: Along with local competition, global competition also exists. Competition is increasing day by day. Big companies have already entered in this field. They are making people habitual at the cost of their companies. 2. Privacy concerns: Fears that information can be misused lead to spam e mail or identity fraud. 3. Changes in environment, law and regulations: Change in trends and fashion can distress E-Commerce side by side change in law and regulations can also affect it.
  18. 18. 1.4. COMPETITION IN ECOMMERCE INDUSTRY IN INDIA There are many ecommerce players in India and several booming up daily. Many are working on marketplace model and many are working as private label brands. Yet , major ecommerce players in India are Flipkart , myntra , jabong , ebay , yebhi , infibeam , etc. They are improving the quality of their services and using new techniques in ecommerce. Competition among these players is taking the whole ecommerce industry in positive direction. Major Players are : 1. Flipkart 2. Myntra 3. Ebay 4. Jabong 5. Infibeam 6. Yebhi 7. Amazon India 8. Pepperfry 9. Croma 10. Zovi 11. MakeMyTrip 12. 13. GoIbibo 14. 15. IRCTC
  20. 20. 2.1. SIGNIFICANCE : This project is analyzing the general ecommerce industry in india and providing a brief analysis of various trustbuilding factors in the Indian ecommerce industry. It will help us to understand the industry in a better way as well as in understanding these factors. 2.2. OBJECTIVES : • 1.To understand various factors which help in building trust in customers to purchase online. • 2.To know about the ecommerce in brief. • 3.To get information about the major ecommerce players in India . . 2.3. SCOPE OF STUDY : This study has a much wider scope. Ecommerce is new concept in India , and is growing at a good pace. So , it will grow only in future. By applying the findings and recommendations of this study , ecommerce in India can be improved . It will help India to build world class ecommerce ventures like Amazon and Ebay. 2.4. RESEARCH METHODOLOGY: METHODS OF DATA COLLECTION In this research , I have chosen the questionnaire method of data collection . Using a questionnaire enables the collection of standardised data, which allows for easy comparison.While designing data-collection procedure, adequate safeguards against bias and unreliability have been ensured. I have examined the collected data for completeness, comprehensibility and reliability.
  21. 21. I have also gathered secondary data which have already been collected and analyzed by someone else. I got various information from journals, historical documents, magazines and reports prepared by the other researchers which I found over internet. For the present piece of research , I have used the following methods: Questionnaire Journals , magazines and previous researches found over Internet. SAMPLE SIZE Here I have taken 30 as the sample size. SELECTION METHOD I have used convenience sampling as our selection method. Convenience sampling means that you choose only those respondents that are able to participate in the survey, after being asked. Usually this involves choosing those cases which are easiest to obtain for your sample. ABOUT THE QUESTIONNAIRE The questionnaire used in the study is prepared after considering various online shopping trends and trustbuilding factors. The respondents of the questionnaire are wisely chosen. Respondents are the ones who hold much of online shopping experience and clearly know cons and pros of the online shopping.
  23. 23. In this chapter , the theoretical framework is presented. The chapter starts with some background information about the Internet and e-commerce. Thereafter, the field of consumer trust in e-commerce is entered. In this section different factors, which are important for establishing consumer trust online, will be presented. The chapter ends with some comments and a summary of the trust establishing factors. We will start our theoretical framework with presenting some background information about the Internet and its development. This will serve as an introduction to the subject of our dissertation. In the next section a short presentation about e-commerce will be given. We find it relevant to introduce the reader to the area of e-commerce, before entering the field of consumer trust in e- commerce, which is the topic of our dissertation. We aim to answer our first research question in this chapter. The Internet: The Internet is a network of computers and smaller networks, which enables computers around the world to communicate with each other, for example by transferring files and documents. Smaller networks are connecting to the big network, the Internet, all the time and because of this the Internet is constantly changing and growing (SOU 1999:106). These new networks offer new opportunities for people, but they also involve new uncertainties. New ways of doing things usually create a feeling of uncertainty among people. Thus, there is a need for promoting trust and confidence on the Internet. E-Commerce: E-commerce involves “business communications and transmissions over networks and through computers, specifically the buying and selling of goods and services, and the transfer of funds through digital communications”. In short, e-commerce constitutes a medium for the buying and selling of products and information on the Internet and for other online services. When used properly, the Internet is a powerful tool with significant advantages. The Internet usually supports or supplements existing channels of distribution, rather than replacing them. Also, the Internet facilitates the
  24. 24. salesperson’s efforts and enhances the effectiveness and efficiency of the sales function, rather than eliminating it. The Internet has made it possible for consumers to buy products and services online, from both national and international companies. E-commerce is a way to do business in certain markets and for selected customers, which can increase sales volume, lower costs or provide more real-time information to customers. Trust: Online shopping requires more trust, since it is more complex than shopping in a traditional environment. On a public network, like the Internet, it is not easy to establish trust between the buyer and seller. In most social interactions involving uncertainty and dependency, trust is generally an important factor. One group of researchers finds that: “Online transactions and exchange relationships are not only characterized by uncertainty, but also by anonymity, lack of control and potential opportunism, making risk, and trust crucial elements of electronic commerce” Trust is a mental shortcut that consumers can use, when trying to reduce the uncertainty and complexity of transactions and relationships in electronic markets. An often mentioned reason for consumers not purchasing from Internet vendors, is the lack of trust . Online it is difficult to connect identities with actual individuals. Therefore, an online transaction does not give the same opportunity, as an in-person transaction, to exercise judgement about the other party. For example, consumers cannot know how long a website has existed or if it still exists tomorrow. Online it is easier to construct a counterfeit website, and represent it as part of a large corporation, than to construct a counterfeit supermarket in the traditional marketplace. So, the consumer cannot feel totally protected from dishonest vendors, with the hidden agenda to just get hold of the consumer’s credit card number. The reluctance towards online shopping, that might exist among consumers is not expected to totally disappear, but might be reduced with the help of increased familiarity, technological advances and legal/regulatory institutions . Different tools and techniques are needed for establishing trust between potential buyers and sellers, in online transactions. Throughout the rest of this chapter, we will give a more detailed presentation of trust and consumer trust in ecommerce. We will start with a discussion of the concept of trust in a general way, before presenting different trust establishing factors. Researchers have highlighted different factors that are important for establishing consumer trust in the online environment. Trust is a multidimensional construct and there is no common model
  25. 25. for trust in ecommerce.So, the literature we have reviewed take up different dimensions of trust and we will try to present some of the most mentioned factors, important for establishing consumer trust. In the end of the chapter, we will sum them up. When reading the rest of the chapter, you will notice that when researchers refer to factors that can help to establish a sense of trustworthiness or which can determine if consumers will trust an Internet vendor or its website, different terms are used interchangeably, for example, elements, underlying dimensions, tools, techniques and instruments. Trust Levels in Transaction Phases Trust in online transactions is often said to be a key factor for determining the success and failure of e-commerce. The process of buying and selling goods, in each individual transaction, consists of a variety of phases such as the information, agreement and settlement phase. Figure on the next page, illustrates the trust levels during the various transaction phases. Online, the information phase usually means the activity of browsing through an online store. In the agreement phase, customers show their agreement by choosing products and accepting the price. In the settlement phase of the transaction, the order is placed and payment performed. We assume that the same phases can be applied to the process of buying and selling services online. The transaction phases can be connected with different levels of trust. In the different phases trust can be fostered with the help of seals and insurance solutions, for example, “seals of approval”, money back guarantees and dispute resolution systems.
  26. 26. Figure : Trust levels during transaction phases The Trust Pyramid : To build trust that leads to satisfied customers is a crucial and complex task .There are six elements, which when combined build a “trust pyramid”. The six elements can be seen in figure and a short presentation of these will follow below.
  27. 27. FIGURE : The Trust Pyramid The three core elements needed just to stay in business are secure technology, merchant legitimacy and robust order fulfilment. These form the base of the pyramid. Above these basic elements there are more subtle trust builders that a company can use to differentiate itself and these are tone, customer control and consumer collaboration. The six elements of trust, together, create comfort and confidence that is needed to get satisfied and loyal customers. State of the Art Security: It is important to use the most reliable security measures on the website. This should also be communicated to consumers in an understandable language. Merchant Legitimacy: On the Web brands are important; since they can help consumers make their choice when they only have limited information about the products’ quality and
  28. 28. functionality. Familiar names with reputable performance records can be very helpful in building trust. Fulfilment: Order fulfilment is the next requirement of a trust building website. Customers want to place an order and receive it efficiently without any major problems. Not clearly defined actual costs can also have a negative impact. So, it is important to explain all costs and make sure that the right buyer gets the right product in time. Tone and Ambience: The trust building is more than just the technical features of a website. Consumers want to be assured that their personal information will be handled with sensitivity. If this is not guaranteed then the consumers will not go through with the purchase. The company should post an easy-to-read privacy statement on the website, which explains how personal information is collected and handled. Other essential elements are design and content. Some things that have an influence on the consumers are, ease of site navigation, the site’s appearance and an uncluttered friendly setting. Control: When the consumers know that they control access to personal information, they learn to trust. A smart approach for the company is to ask permission to get personal information. Thus, to feel in control of the Buying process is appreciated by the consumers. Collaboration: One way to nurture trust is to encourage the customers to contact and inform each other about the company’s product and service offerings. When consumers are considering whether to purchase a certain product or service online, advices from other users of that product or service is often highly valued. To purchase a service seems more risky since it is difficult to evaluate the quality of the service. Therefore recommendations from other users are even more valuable when considering whether to purchase a service. These six elements do not automatically lead to deep, trusting relationships. The consumer and the company can exchange value in a step-by-step process, through which trust is systematically built. Every time the consumer willingly submits some personal information, it should be rewarded with personalized services and richer experiences. This mutual give-and-take process will lead to an advanced trust-based collaboration
  29. 29. Individual Characteristcs of a Consumer: Consumers are one source for trust, since “consumer trust for an Internet vendor can reside in the individual characteristics of the consumer. So, the perception of competence, benevolence and integrity (mentioned earlier) of an Internet vendor is considerably influenced by individual characteristics. Examples of individual characteristics are presented below. Disposition to trust: Besides external stimuli from the Internet vendor,consumer trust is also based on individuals’ personality. The consumer normally develops a basic concept of trust during his or her childhood and this in turn, influences the willingness to depend on others across a wide spectrum of situations and persons. Two types of disposition to trust can be distinguished, which to some level affect trusting intention. These are faith in humanity and trusting stance. Attitude towards online shopping, subjective norm, and behaviouralcontrol: The consumer’s perceptions of shopping convenience mirror his orher attitude towards online shopping. This can be measured by the extent towhich the Internet is accepted by the consumer, as a new shopping placeand how useful it is. Subjective norms “refer to a consumer’s perceptions ofthe extent to which significant referents approve of Internet use for shopping” . Past purchase behaviour: A consumer’s trust in an Internet vendor may be influenced by the consumer’s past online and e-store experiences, since knowledge and/or experience can lead to an increased assessment of an Internet vendor’s trustworthiness (Chen & Dhillon, 2003). New consumers that are highly experienced become more demanding of the web performance and behave more habitual .The level of perceived risk toward purchasing online is lowered by more internet experience and experience of using other remote purchasing methods. A lower level of perceived risk results in increased online purchase rates. Personal values, gender, age, and education: Values are incorporated into people’s value systems and are prioritized according to their relative importance as guiding principles. So, the value system works as a guideline for behaviour and the interpretation of experience by arranging criteria that a person can use to assess and make sense of events and actions in the surrounding world. One’s value system determines desirable or undesirable types of behaviours, events, situations, or people. If a person’s value system emphasises loyalty and honesty, then the person strive to be loyal and honest in relationships with others. Values contribute to the
  30. 30. generalized experience of trust and can create a propensity to trust that goes beyond specific situations and relationships. Furthermore, gender is found to influence a person’s purchase intention or behaviour. When assessing another person’s trustworthiness, males and females look for different qualities in that person. For males, factors such as reliability, emotional trust and general trust emerge and for females, reliability and emotional trust factors emerge. Other important variables that influence consumer behaviour are age and education level. Security and Privacy :A consumer’s willingness to pay online is determined by convenience and trust. If it is too complicated for the customer to register and use the technology, then the customer may not go through with the purchase. Furthermore, it is important that the customer feels secure about not being exposed to fraud or that the money disappears due to technical problems. There are different ways to pay for a product or serviceonline, for example, by cash on delivery, invoice, digital wallets andpayment through credit card online or transference by bank. Two other payment methods that start to gain ground are, direct micro payments via SMS and pay phone numbers. There are pros and cons with each payment method and each method may be more or less suitable for different kinds of transactions and customers (Hansen, 2005). The use of credit cards for payments online has received the most attention. This method usually means that the consumer states the card number on an online form. The company then receives payment from the credit institute. This is considered to be a fast and simple way for the consumers to pay and today, more and more consumers use this method. However, safety questions have been a big concern for the consumers. For customers that pay with credit card, it is more important to buy safely than to buy cheap (Hansen, 2005). They are, for example, worried that the card number will be revealed to unauthorised parties . Some people however, seem to forget the risk involved with credit card payment in a physical store or at a restaurant, where the card number is also exposed to a stranger. The difference from an online payment is that here the customer is able to see the person that receives the credit card. It is important that the payment system really works, when the customer decides to use it .Online payment systems are constantly updated to make them more user-friendly and secure. These systems make the identification of the consumer more reliable. For consumers to have confidence in e-commerce, the development of reliable payment methods is necessary (SOU, 1999:106). If a service does not give a trustworthy and professional impression, for example if the information provided is unclear about who owns the company or which third party that administers the card payment, it
  31. 31. might make the customer hesitant (Hansen, 2005). However, a clearly stated third party organisation can provide an extra level of security for the customer. By taking the payment information from the customer and settling transactions for the vendor, the third party can act on behalf of both. For the customer, this means that payment information is handled by the intermediary company and never revealed to the vendor. This also facilitates relatively anonymous purchases for the customer . As new security solutions are developed, it is important that Internet vendors do not forget to also inform their customers about how these new solutions work. To take one example, it may not be obvious for customers that today sensitive information is encrypted when sent over the Internet, to ensure reliability and privacy (Hansen, 2005). The payment settlement information can be encrypted by the customer before being sent to the vendor. The vendor then passes it on to the customer’s bank, which decrypts it and arranges for the payment to the vendor. Although encryption is said to ensure reliability and privacy, this security solution, according to Loshin and Murphy (1997), still have security holes. Sometimes, it seems like the threats to security are growing faster than the solutions are. Hackers always seem to be one step ahead For example, today identity theft is a growing problem (Cazier, Shao & St. Louis, 2006). Therefore, it is not strange that the Internet security is a major concern which makes customers hesitant to shop online. To conclude, assuring security and reliability are two main factors relevant for the customers when purchasing online and for establishing trust. Most of the reasons that make customers reluctant to provide personal information to a website come from trust. They are concerned about their privacy and security and they fear spam. Potential customers may feel hesitant to purchase online, if they are asked to state their social security number in connection with the order. When a social security number is requested, people often get suspicious and insecure. So, if customers are to state sensitive information about themselves, it is important for the company to clarify that this information is handled according to specific legislation in this area, in Sweden the legislation PUL, This is a way to guarantee that the personal information will not be misused or sold to other parties (Windham & Orton, 2000). This kind of assurance can limit the customers’ concerns and can increase the sense of trust.
  32. 32. Customer Service :Websites sometimes offer only a limited possibility for customers to get feedback and to ask questions. Sometimes, sending an e-mail is the only way to get in touch with the company. For customers this might create a feeling of lack of power (Slevin, 2000). So, it is important to provide different ways for the customers to get in touch with the company, since this promotes interactivity which can help strengthen the customers’ sense of power. Feeling power can help reduce uncertainty, which then can increase trust. It is also important that the company shows its responsiveness and willingness to help, by giving the customers prompt replies to their requests. If a company neglects an incoming e-mail or does not give a fast reply, the customers might feel unimportant and for this reason they might turn to a competitor’s site for answers. In short, trust can be built by making the customers feel that they are important. One way to inspire trust and confidence is to assure that the customer service staff gives a professional and knowledgeable impression. According to Hansen (2005), many online customers have not gone through with a purchase, because they were not satisfied with or did not trust the service. Some customers have even been forced to finish an online purchase over the phone. To receive online help during the order/payment process, can be appreciated by the customers. So, it is of great importance that the Internet vendor provides better and more trustworthy services. Creating facilities on the company’s website, such as discussion forums, where the customers can interact with each other, can be a good way to attract users to the site. These kinds of discussions, between the customers, can provide interesting and useful information for the company, which can be used to improve service performance (Slevin, 2000). This can give an impression about the company’s desire to satisfy the customers’ needs and build long term relationships. In this way the company can also promote word of mouth recommendations. The company can also get useful information by, for example, encouraging potential customers to post a question if they cannot find the information they need. For the site development to progress successfully, user-feedback is required For a consumer to purchase from a store online, a strong sense of reliability is necessary. A company’s ability to establish strong bonds of trust with its customers through a website is crucial for its success online. Although it is not just a question of establishing trust; the company also has to be active in convincing customers since the competitors are only a mouse click away. It is also important to nurture an established customer relationship, by for example, sending out information and advertising in newsletters via e-mails. To be notified with information about the
  33. 33. company can strengthen the loyalty and the sense of trust. Although, customers appreciate to have the possibility to choose whether or not they admit to receive advertising that rely on the registered personal data. So, the customers want to have more control over the personal information and the companies need to respect their privacy.
  35. 35. 1. Growth of ecommerce industry in India during 2007-2011 (As per data availability) Here we can observe the drastic growth in ecommerce industry. It is growing at an annual rate of 54.6%. and Still , a large amount of market is untapped. So , there is a huge scope for ecommerce industry in India.
  36. 36. 2. Types of Online Transactions held There are all kinds of ecommerce models. 1. B2B : Business to Business selling. E.g.Corporate gifting sites like Giftbig. 2. B2C : Business to Consumer Selling . E.g. Sites like Flipkart , Myntra , Yatra 3. C2B : Consumer to Business Selling . E.g.Sites like 4. C2C : Consumer to Consumer Selling. E.g.Sites like olx , etc.
  37. 37. 3. Components of E-commerce Market (as per data availability) So , here we can see that ecommerce industry is spread across a wide range of products and services that include : 1.Online Travel Booking. 2.Consumer Products 3.Financial Products 4.Digital Books and Music
  38. 38. 4. Growth in Internet users Vs Growth in Ecommerce Industry We can see here that both (Internet users and ecom industry ) are growing at a very fast speed. Still , there is a huge internet population which needs to be tapped by ecommerce players.
  39. 39. ANALYSIS OF SURVEY RESULTS 1. Ratio of males to females who buy online. (M:F= 2:1) 2. Age group which contributes maximum to online shopping is 18-29 Years. Results : 18-29= 50% 30-39=20 % 40-49= 20% 50 or More = 10% 3. On an average , 70% People have positive attitude towards online shopping. 4. No. of times people buy online : Never= 10% 1-2 times a year = 20% 5-10 times a year = 40% Once a month=20 % More than once a month= 10 %
  40. 40. 5. Users’ preference for various trustbuilding factors The above chart shows the percentage of customers who preferred particular trust building factor. Data for this bar graph has been collected after analyzing the questionnaire results. 0 10 20 30 40 50 60 70 80 90 100 percentage of people
  42. 42. Key Findings of the study are : 1. Ecommerce Industry , whether global or Indian , is progressing at a fast pace. 2. There are new entrants in the market who are trying to tap the untapped segment of online shopping industry. 3. People are becoming aware about online shopping. 4. People have started judging the nature and trustworthiness of the online site , then only they make purchase from an online site. 5. The younger generation finds online shopping more convenient as compared to offline shopping. 6. Online Travel Agents (OTA) constitute a large part of ecommerce industry. 7. Major factors that help in building trust of consumer are : 1. Safety of Personal Information 2. Safe payment method 3. Reliable/Known shopping site 4. Fast delivery 5. Offer of Cash on Delivery service 6. Return , Exchange and Refund Policy should be favorable 7. Originality of Products 8. Market Share 9. Customer Support Service 10. Look/Feel/User Interface of the site
  43. 43. Some Recommendations that I would like to share are : 1. Online businesses should use secure database which should ensure safety of customers’ personal information. 2. E-commerce ventures should provide online as well as offline payment methods. i.e. Credit/debit cards and Cash on Delivery services as Indian customers trust COD more. 3. Consumers should make an online purchase after verifying the trustworthiness of a site. 4. Ecommerce business should make their return/refund policy user friendly as it is one of the major factors that helps to gain consumer trust. 5. Online businesses shouldn’t compromise on quality of products just to provide lower prices.If quality is best , price is not much a matter of concern for customers.
  44. 44. BIBLIOGRAPHY The information and data used in this project report has been collected from various sources. These sources are : 1. E-Commerce: An Indian Perspective 4 Edition 4th Edition 2. 3. Nielsen survey for Indian Ecommerce 2012 4. Ernst & Young study- Commerce_in_India/$FILE/EY_RE-BIRTH_OF_ECOMMERCE.pdf 5. A project report- India.pdf
  45. 45. APPENDIX Questionnaire: Trust building Factors in E-commerce Industry Please check the alternative that applies for you. 1. Are you .. (A) Male (B) Female 2. Age (A) 18-29 Years (B) 30-39 Years (C) 40-49 Years (D)More than 50 Years 3. Which attitude do you have toward purchasing products/services through internet ? (A)Positive (B) Negative (C) No opinion 4. How often do you shop on the internet ? (A)Never (B)1-2 times a year (C) 5 -10 times a year (D)Once a month (E)More than once a month 5. If you have purchased / would purchase on the Internet, how important are the following factors for you to feel trust to purchase on the Internet? (Mark Your answers in the brackets provided.) Note : 1= Not at all Important 2=Less Important 3=Pretty Important 4=Important 5=Very Important 6=No Opinion (a). Security (secure payment method). [ ] (b). Privacy (about personal information). [ ] (c). Guarantees. [ ] (d). Customer service [ ] (e). Delivery time . [ ] (f). Familiarity (with brand). [ ] (g). Price . [ ] (h). Information (about the company you are dealing with) . [ ] THANKS FOR YOUR PARTICIPATION.