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To cite this article: Urvashi Tandon & Ravi Kiran (2019) Factors impacting customer satisfaction:
an empirical investigation into online shopping in India, Journal of Information Technology Case
and Application Research, 21:1, 13-34, DOI: 10.1080/15228053.2019.1609779
Article views: 44
ABSTRACT
The study examines various factors influencing online shopping in India .
The research analyzes website quality and other drivers of online shopping
to evaluate their impact on customer satisfaction. It also analyzes “Social
Media interactions” and “Pay on Delivery (POD)” mode of payment as new
drivers of online shopping. Data collected from a sample of 500 online
shoppers was analyzed using structural equation modeling. In this study
both social media interactions and POD emerged as significant drivers of
online shopping. These drivers of online shopping along with website
quality had significant impact on customer satisfaction. The results would
motivate e-retailers to capitalize on social media and POD mode of pay-
ment to convert traditional shoppers to become online shoppers.
Introduction
Online shopping has significantly increased in the past two decades and has become a legitimate
alternative to brick-and-mortar mode of shopping for consumers. Online shopping has also gained
momentum in recent years in developing countries due to factors like rapid access to product related
information, time convenience, delays due to traffic jams, limited parking space and above all Pay-On-
Delivery mode of payment(POD). The Indian e-commerce estimated level of $64 billion by 2020 and
$200 billion by 2026 is likely to surpass online shopping level in U.S by the year 2034 (IBEF, 2018).
Today, in the second largest smart-phone market in the world, there is literally a shopping mall in every
Indian’s pocket. With Internet penetration expected to almost double to 60% by 2022, the number of online
shoppers is also expected to grow rapidly to 150–200 million during the same period. (PWC, 2018, p. 4)
The increase in online shopping in India is mainly due to POD which has been adopted as the mode
of payment by around 80% of online shoppers. This is evident from reported high collections Rs.
2.8 billion through POD in India in 2014 (ASSOCHAM, 2014). According to a study by Federation
of Indian Chambers of Commerce and Industry (FICCI) and Indian Institute of Foreign Trade
(IIFT), total potential of Business to Consumer (B2C) in India was estimated to be US$ 26 billion in
2017 of which $3 billion can be achieved by 2020 (IBEF Report, 2018). Internet penetration in India
reached 430 million people in 2016 but only 14% of these people shopped online (Sushma, 2017).
India’s vast geography consisting of 6000 small cities and 600,000 villages presents a logistic
challenge to online retailers to find profitable ways of delivering products in these locations
(Nielson Report, 2017). Clearly, rise in internet penetration in India has not been converted into
increased online shopping numbers. At the end of 2017, online retail was 2% of Indian Retail
Industry (Forrester Research, 2018). Therefore, it is necessary to explore factors that will help the
online retailers to engage more consumers to buy products and services online.
Theoretical background
Many models for introduction and acceptance of IT innovations have been developed and validated
by a number of previous studies. These models include: the Technology Acceptance Model (TAM;
Davis, 1989), the Theory of Planned Behavior (Ajzen, 1991), extended TAM (Venkatesh & Davis,
2000), the Unified Theory of Acceptance and Use of Technology (UTAUT) (Venkatesh, Morris,
Davis, & Davis, 2003), the model combining TAM and the Theory of Planned Behavior (Taylor &
Todd, 1995), the Model of PC Utilization (Thompson, Higgins, & Howell, 1991), and the Social
Cognitive Theory (SCT; Bandura, 1986).
a technology innovation. TAM involves two primary predictors- perceived ease of use (PEOU),
perceived usefulness (PU) besides BI as the mediating variable.
Wolner-RoBlhuber, Burger, & Gussenbauer, 2013) . The present study therefore analyzes POD mode
of payment as a driver of online shopping.
In UTAUT2 only mobile internet was taken into consideration and Venkatesh, Thong, and Xu
(2012) invited researchers to validate the model under varied conditions of different countries.
Venkatesh et al. (2016) suggested that the main effects in UTAUT2 can serve as a baseline model for
future research for parsimony and refining current context effects and/or identifying new context
effects (p.346). According to Williams, Rana, and Dwivedi (2015) UTAUT has been tested by
exploring alternative relationships between its constituent components in various contexts and
environments, but there are still ample and clear opportunities for researchers to engage with and
further shape and develop the field (p. 470). The present study tests the predictors of UTAUT2
model in online shopping context to make the model acceptable and more suitable for those
countries which are technologically less advanced. This is important because developing countries
differ in terms of institutional infrastructural contexts basically because of socio-economic features
and regulatory aspects. Therefore, it is for the first time that UTAUT2 is being tested in the context
of India by including Pay-on-delivery (POD) mode of payment and Social Media Interactions as
drivers of online shopping. Further, these constructs have been validated through discriminant
validity and composite reliability also.
communications which enhance their targets. The website quality helps online retailers to retain
customers. From these studies, we can understand that for meeting the requirements of customers, it
is essential to lay emphasis on website quality. Website quality can be construed as a higher level
construct comprising of lower level constructs and as such bundling them together in a single
composite score may not be helpful (Koufteros, Babbar, & Kaighobadi, 2009). Website quality of
online shopping (second level of abstraction) can be conceptualized as amalgamation of security and
privacy, ease of ordering, website design, ease of navigation, and customization of product. Given
above literature survey, the following hypothesis is framed:
Researchers have explored various features of website (Shin et al., 2013) website design (Guo
et al., 2012) and website navigability (Lee & Kozar, 2012) that lead to customer satisfaction.
Satisfaction on first visit motivates repeated visits to a website (Ha & Janda, 2008). Liu et al.
(2008) suggested information quality, website design, merchandise attributes, transaction capability,
security, payment, delivery and customer service as strong antecedents of customer satisfaction. Luo,
Sulin, and Zhang (2012) also confirmed that retailer’s service quality and website design play
a significant role in enhancing customer satisfaction. The ability to customize online purchase
process has also been associated with an increase in customer satisfaction (Thirumalai & Sinha,
2011). Clearly, it appears that website quality leads to customer satisfaction. To validate this relation,
following hypothesis is framed:
Trujillo, 2014). Yang (2010) reported significant impact of price value, hedonic motivation along
with performance expectancy and effort expectancy, but insignificant impact of facilitating condi-
tions and habit on e-learning. The cost and pricing structure have a significant impact on customers’
technology use. The price value is positive when the benefits of using a technology are perceived to
be greater than the monetary cost and such price value has a positive impact on intention
(Venkatesh et al., 2012). Rodriguez and Trujillo (2014) applied UTAUT2 to study online air ticketing
purchase by Spanish customers and all constructs of UTAUT2 were found significant except social
influence and habit. Baptista and Oliveira (2015) studied M-banking adoption and confirmed
performance expectancy, hedonic motivation and habit as significant variables, where as Albugami
and Bellaaj (2014) found performance expectancy, effort expectancy and habit as significant vari-
ables. Thus, there is no uniformity in the findings and there is a need to understand the importance
of performance expectancy, effort expectancy, facilitating conditions, social influence, price value,
hedonic motivation and habit in stimulating online purchase. Accordingly, the hypotheses pro-
posed are:
H2(a): Performance expectancy, effort expectancy, social influence and facilitating conditions are
the drivers of online shopping.
H2(b): hedonic motivation, price value and habit are the drivers of online shopping.
The recent increase in online shopping in India may be attributed to “Cash-on-delivery” (COD)
mode of payment. Before the introduction of Cash on Delivery mode of payment, most of the online
retailers provided payment options through credit card/debit cards where consumers had to input
card/payment details online. These payment options inhibited Indians to shop online. Moreover, low
penetration of credit card and debit card in Indian society also restrained people to shop online
leading to distrust among consumers. COD solved the distrust and fear about delivery of faulty and
wrong products to a great extent because consumers get to inspect the product and be satisfied
before paying. Further, North Indian consumers are very open to online shopping, but prefer Cash
on delivery, indicating a deficit of trust on electronic transactions (India Retailing Bureau, 2016).
Importantly, COD option requires online retailers to transport the right product and deliver swiftly
to ensure customer satisfaction. Further, few Indian studies like Jain (2014), Thakur and Srivastava
(2015) and Tandon et al. (2017) have mentioned COD (Cash-on-delivery) mode of payment as
a catalyst for online shopping, as it is the preferred mode of payment. But its relationship with
customer satisfaction as a construct has not been validated. Hussain et al. (2007) highlighted issues
regarding methods of payments for Internet purchases in India, China and Pakistan and concluded
that majority of customers in these countries consider POD as the most convenient and time saving
mode than credit card. Jadhav and Khanna (2016) suggested that COD followed by debit card and
net banking are the modes of payment, but COD was analyzed as a single item in the construct of
perceived ease of use. Jain (2014) focussed on customers’ decision making process in Indian
environment and concluded that majority of customers feel secure while shopping online and the
most preferred mode of payment is Cash-on-delivery mode of payment. Polasik and Fiszeder (2009)
analyzed the factors influencing the acceptance of the seven major payment methods (POD, online
payment integrator, card payment, bank transfer, pay-by-link, virtual payment provider and pay-
ment-in-person) by online retailers in Poland. Three crucial payment methods in e-commerce were
identified: (1) POD with 39.5% of transactions and 40.6% turnover value; (2) bank transfer to the
shops’ bank account with 28.7% of transactions and 29% of turnover value and (3) online payment
integrators with 15.9% of transactions and 16.9% of turnover value, including all available methods
of payment. A study by Chiejina and Olamide (2014) on Nigerian customers highlighted ‘pay-on-
delivery’ mode of payment as a major trust builder between customers and online retailers. The
study of Wolner-RoBlhuber et al., 2013) also confirmed that POD is still very common in Austria
with a share of 24% in total payments. Akroush and Al-Debei (2015) suggested that adopting POD
mechanism in Jordan was found to be effective and successful in raising the level of trust and
attitude toward online shopping. Pay-on-delivery has been suggested and considered in most of the
past studies, but has not been empirically validated as a construct.
Based on above discussion, the following hypothesis has been proposed:
In technologically developing nations like India, it is meaningful to identify which factors of online
shopping have a significant positive association with customer satisfaction. A customer’s decision to be
faithful toward a particular technology depends upon the sum of many small encounters and if contended
they will adopt the technology. In the present study, performance expectancy, effort expectancy, facilitating
conditions, social influence, price value, hedonic motivation, habit, security and privacy and ease of
ordering are conceptualized as drivers of online shopping. Therefore, following hypothesis is proposed
to understand the effect of drivers of online shopping and customer satisfaction:
Model formulation
The proposed model (Figure 1) based on literature review contains latent variables or constructs
(Website quality and drivers) and paths (arrows). Paths show relationships between latent variables
and dependent variable (customer satisfaction). The high level of security and privacy, website
design, ease of ordering, ease of navigation and customization are antecedents of website quality.
Performance expectancy, effort expectancy, facilitating conditions, social influence, hedonic motiva-
tion, POD mode of payment, price value, habit and SM are antecedents of drivers of online
shopping. The drivers of online shopping and website quality influence customer satisfaction.
Attention on these variables may lead to customer satisfaction. This will help online retailers to
increase confidence in consumers toward online shopping and may bring an affirmative change in
the attitude of users.
SEM was preferred over other techniques as SEM allows in developing complex path models with
direct and indirect effects. This allowed us to have a more accurate model depicting the causal mechan-
isms that we were interested in. This was precisely the reason why SEM with AMOS 20 was used.
Research methodology
Survey instrument
The target population in this study has been online shoppers in India. The study was conducted in North
Indian states namely Jammu and Kashmir, Himachal Pradesh, Punjab, Haryana, Delhi and Uttar Pradesh.
Prominent website quality items reported by Wolfinbarger and Gilly (2003) and Tandon et al. (2017) were
included in this study. Most of the scales of drivers of online shopping were adapted from Venkatesh et al.
(2012). The items in the scale were customized to fit in online shopping context. The scale of Pay-on-
delivery mode of payment included five items as new scale items which were not included in any previous
studies. Ease of ordering items were taken from previous study of Tandon et al. (2017). Items for SM were
adopted from Duffett (2015) to suit online shopping. All the items were measured using a five point Likert
scale with the anchors varying from strongly agree to strongly disagree.
Data analysis
Demographic profile and characteristics of respondents
Table 2 shows the basic characteristics of the customers surveyed. Out of the total 500 users of online
shopping, 59.40% were males and 40.60% were females. Among the respondents, 57.4% were between
18–30 years of age followed by 24% in middle age group of 31–45 years of age and remaining 18.6% were
above 45 years of age. Table 3 depicts Internet Usage and Online Purchasing characteristics of the 500
respondents. During the last one year, majority of the respondents (43%) had purchased 2–5 products
online followed by 38.2% who had purchased more than five products. Regarding preferred mode of
payment, majority of the respondents i.e., 66.4% prefer to pay through POD mode of payment followed by
debit card (21%) whereas credit card (12.6%) was the least preferred mode of payment. This clear
preference for POD mode of payment supports our inclusion of this factor as one of the drivers of online
shopping in our study. The profile of our respondents also reveals that a considerable number of
respondents are well educated postgraduates and graduates.
Structural model
The hypothesized second order model was estimated separately on all second order independent
variables i.e., website quality and drivers of online shopping and one dependent variable i.e., customer
satisfaction. The results are summarized in Table 5. Website quality is significantly explained by website
design, ease of navigation, customization of product, ease of ordering, and security & privacy thereby
supporting H1. All the independent variables namely performance expectancy, effort expectancy,
facilitating conditions, social influence, hedonic motivation, price value, SM and pay-on-delivery loaded
on drivers of online shopping. All the variables emerged significant except price value which emerged as
insignificant variable. Therefore, the results fully support H2(a) which states that: performance expec-
tancy, effort expectancy, social influence and facilitating conditions are drivers of online shopping, H2(c)
which states that: SM interactions are drivers of online shopping and H2(d) which states that: POD mode
if payment is a driver of online shopping. However, the results of the study partially support hypothesis
H2(b): where hedonic motivation emerged as significant variable and price value was insignificant
variable. All the fit indices indicated an acceptable fit (Table 5).
The next step involved was testing of the structural model and corresponding theoretical relation-
ships. The structural model with standardized weights is shown in Figure 2 (Table 6). Website quality had
a positive effect on customer satisfaction (standardized factor loading = 0.46, R2 = 0.21, p < .001) thereby
supporting H1 (b). Similarly, drivers of online shopping (standardized factor loading = 0.740, R2 = = 0.
55, p < .01) had a significant positive effect on customer satisfaction thereby supporting H 2(e). To build
a comprehensive model, a combined R2 = of the constructs viz., website quality and drivers of online
shopping has been calculated. The value of R2 = = 0.26, and its value is weakly significant.2 The overall fit
indices of the research model are shown to be acceptable (Table 7.) This indicates that the hypothesized
model is a reasonable presentation of the structures underlying the observed data. Table 8 presents the
results of hypothesis framed.
Goodness of fit statistics CMIN/df = 2.203, GFI = 0.96, NFI = 0.981, RFI = 0.923, TLI = 0.963,
CFI = 0.986, RMSEA = 0.04, *** significant at 0.001 probability level, **significant at 0.01 probability level
* Significant at 0.05 probability level
[*** significant at 0.001 probability level, **significant at 0.01 probability level]
Discussion of results
The study has empirically examined the impact of website quality and drivers of online shopping on
customer satisfaction.
2
Henseler, Ringle, and Sinkovics (2009) proposed a rule of thumb for acceptable R2 = with 0.75, 0.50, and 0.25 values are described
as substantial, moderate and weak respectively.
24 U. TANDON AND R. KIRAN
Website quality
The research model (Figure 2) validated and identified those features of website quality which lead to
customer satisfaction. The findings of the study indicated that security and privacy, ease of naviga-
tion, website design, customization of product and ease of ordering are significantly associated with
website quality. This substantiates the findings of previous studies, where website design and security
and privacy have significant positive relationships with customer satisfaction (Guo et al., 2012; Luo
et al., 2012; Tandon et al., 2017). This also indicates security and privacy protection as an important
driver influencing customer satisfaction. Therefore, it is incumbent on online retailers to embed
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 25
relevant security and privacy features on the website. Ease of navigation and customization of
product also emerged as important factors of website quality. This is supported by previous literature
(Calisir et al., 2010; Tandon et al., 2016).
Performance expectancy and effort expectancy emerged as significant drivers and are consistent with
findings of earlier research studies (Foon & Fah, 2011; Sareen & Jain, 2014; Yaprakli et al., 2013;
Zhou, Lu, & Wang, 2010). The social influence relationship is also consistent with previous studies of
Foon and Fah (2011), Yaprakli et al. (2013) and Venkatesh et al. (2012) but was inconsistent with the
study of Baptista and Oliveira (2015). This indicates that people in developing nations like India
value the advice from their colleagues, friends and peers who may be their opinion leaders
(Chauhan, Mukhopadhyay, & Jaiswal, 2018). Hedonic motivation was found significant indicating
its significance in online shopping. This finding is consistent with previous studies of Baptista and
Oliveira (2015) and Tandon et al. (2016). Facilitating conditions were also found significant. This has
been supported by Zhou et al. (2010), yet there are many others e.g., Im et al. (2011) and Sareen and
Jain (2014) whose research did not support it. Price value was found insignificant indicating that this
perceived price saving does not stimulate online purchase. This is consistent with results reported by
Baptista and Oliveira (2015), but contrary to what was found by Venkatesh et al. (2012). It was also
hypothesized that these drivers of online shopping are positively associated with customer satisfac-
tion. This has been corroborated by previous reported study of Yaprakli et al. (2013). SM interac-
tions emerged as a significant driver of online shopping. This finding is supported by results of
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 27
previous studies (Elisabeta & Ivona, 2014; Heinrichs et al., 2011; Muda et al., 2016) indicating that
increased levels of perceived SM presence affects consumer attitudes toward online shopping.
The study extended the model by adding two more drivers of online shopping viz., SM interactions
and pay-on-delivery mode of payment. The significant contribution of the study is empirical validation
of pay-on-delivery mode of payment as a construct within the UTAUT2 model. Pay-on-delivery mode
of payment has significant relationship with customer satisfaction. Since POD is clearly a preferred
mode of payment in emerging nations like India, adequate effort is required from online retailers to
extend the delivery of their products to as many postal codes as possible in these countries.
Theoretical implications
The improved UTAUT2 model can be tested in the context of other developing countries. The major
theoretical contribution of this study lies in integrating features of website quality and drivers of online
shopping to determine their impact on customer satisfaction. The emergence of website quality as
a significant factor confirms that customers aspire to find information through graphical components,
hyperlinks and layout of websites. Customers purchase online only if website is easy to understand and
navigate through. With good layout and attractive graphics, users can gain information about the products
and services effectively and efficiently. Ease of ordering (ordering, cancelling, tracking and modifying the
orders) emerged as a significant factor influencing customer satisfaction. Another major theoretical
contribution of the present study is including predictors’ viz., POD and SM interactions as constructs to
understand their impact on customer satisfaction. There is sparse research on payment mechanisms.
Through this study, the role of pay-on-delivery mode of payment is also established as a trust-builder
between customers and online retailers in Indian online shopping context. The effect of pay-on-delivery
mode of payment is more prominent in developing countries like India, which are technologically deficient
and where online shopping has started much later than in comparison to advanced countries. Thus POD
and SM interactions need to be studied in future research studies to cover more cultures and countries.
Practical implications
The empirical findings of this research provide useful implications for online retailers also.
Understanding the constructs in the proposed research model is crucial for online retailers in India as
well as emerging economies so that they can attract more customers and retain existing customers.
Online retailers in India need to continue informing customers about the usefulness, convenience and
other benefits of online shopping. They need to improve channel enjoyment, fun, excitement and
satisfaction by offering quality products to increase customer satisfaction. The emergence of website
quality as a significant factor leading to customer satisfaction accentuates the need to make websites user
friendly with attractive and vibrant web pages which are easy to upload.
The study confirms that factors like performance expectancy, effort expectancy, social influence,
hedonic motivation and facilitating conditions make online shopping easy. As reflected from the
study, customers are concerned about the responses from the members of community. Online
retailers should identify frequent shoppers who can become opinion leaders and can convince
other people to opt for online purchase. The emergence of price value as insignificant factor
indicates its implication for pricing strategy of online retailers. The current pricing tactics of online
retailers may not reflect the relative value attached to the benefits from the listed products.
Attractively priced products relevant to the customers help in making purchase decisions (Harmer
& Yoong, 2008). Online retailers need to focus on the warrantee, guarantee as well as after sales
28 U. TANDON AND R. KIRAN
service which may be added to build confidence and enhance online shopping. Attractive price
discounts on festive seasons can promote online shopping. The emergence of performance expec-
tancy and effort expectancy as significant variables is a reminder that the task of shopping must yield
adequate performance for the effort expended. Therefore, in order to attract and retain customers,
online chat forums and presence on SM, and virtual shopping tours through the website may
alleviate the concerns of consumers.
An important implication of the study is validating POD mode of payment with UTAUT2. Most
of India’s population doesn’t have a Debit or Credit card and the ones who have, use it basically to
withdraw cash from ATM. Therefore POD mode of payment was found to enhance online shopping.
As people in small towns are also adopting online shopping due to internet penetration, focusing on
POD can offer online retailers a competitive advantage. POD will not only help to reduce perceived
risk due to credit card information theft, invasion of privacy but will also address other issues such as
loss of delivered goods, poor quality of products, and wrong items supplied.
Acknowledgments
The authors hereby express their sincere gratitude to Dr. Shailendra Palvia (Editor-in-Chief, JITCAR) for sparing his
precious time for critical evaluation, encouragement and valuable suggestions that led to a significant improvement of
the manuscript. We are also thankful to anonymous reviewers for their careful reading of our manuscript and many
constructive suggestions to improve the manuscript.
Notes on contributors
Dr. Urvashi Tandon is an Associate Professor at Maharaja Agrasen University, Baddi, Himachal Pradesh, India. She
has completed her Ph.D from Thapar University, Patiala and currently doing research on E-Commerce, Online
shopping and Supply Chain practices of online retailers. Her research has been published in several journals like
Service Science, Information Development, Nankai Business Review, International, Information Systems and e-Business
Management, International Journal of e-Business. She has more than 15 years of experience in teaching. Her teaching
interests include Marketing, e-Business, Supply Chain Management, and Strategic Management.
Dr. (Ms.) Ravi Kiran is Professor and Head; School of Humanities & Social Sciences and Professor Incharge Alumni
Affairs, Thapar Institute of Engineering & Technology (Deemed University), Patiala, India. With post-graduation in
Economics and Ph.D. in Industrial Management She is currently doing research in the areas of Business Economics
and Modelling, Industrial Management, E-Business & Entrepreneurship. She has been awarded 2018 Emerald Literati
Award for paper entitled, ‘Analyzing customer satisfaction: users perspective toward online shopping‘ published by
Urvashi Tandon, Ravi Kiran & Ash N. Sah in Nankai Business Review International . She has been on editorial board
of many reputed journals. She has published 136 papers in international journals of repute. She has guided 26 Ph.
D. students and 20 Masters students. She has published two books.
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 29
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JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 33
(Continued )
34 U. TANDON AND R. KIRAN
(Continued).
The use of online shopping has become a habit for me. HT1
I am addicted to shopping online. HT2
Online shopping has become natural to me. HT3
POD mode of payment(New scale items)
*I think POD is a reliable mode to payment COD1
*I prefer to buy through pay on delivery(POD) mode of payment COD2
*I plan to pay through POD mode of payment. COD3
*POD mode of payment facilitates easy return of defected products COD4
*POD give me confidence for future repurchase of products COD5
Social Media Interactions (Duffett, 2015)
The postings that appear on the Facebook page describe functions of the featured product. SOM1
I will visit the brand‘s online store to purchase the product which appears on Facebook page. SOM2
Advertisements on Facebook have a positive influence on my purchase decision. SOM3
Customer Satisfaction CS1
I am satisfied with my purchase.
I am satisfied with POD mode of payment CS2
I am satisfied with quality of product received through online purchase CS3
Products purchased online have measured up to my expectations CS4
I am satisfied with the range of products offered online CS5
Items in italics are deleted items