CHAPTER- I

INTRODUCTION

In today's digital age, the landscape of consumer behavior has undergone a remarkable
transformation with the advent and widespread adoption of online shopping platforms. This
research report delves into the intricate dynamics of consumer satisfaction within the realm
of online shopping, exploring its meaning, historical evolution, features, functions, and
broader implications.

Online shopping, or e-commerce, refers to the process of purchasing goods and services
through the internet, facilitated by electronic transactions. The concept has a rich history,
dating back to the early 1990s when the first online retail platforms emerged. Since then,
online shopping has evolved significantly, reshaping traditional retail paradigms and
offering consumers unprecedented convenience and accessibility.

This report aims to elucidate the various features and functionalities of online shopping that
contribute to consumer satisfaction. Understanding these aspects is crucial given the
profound importance of e-commerce in modern economies. The convenience of shopping
anytime and anywhere, access to a vast array of products, and personalized shopping
experiences are key features that influence consumer perceptions and behaviors.

Consumer satisfaction in online shopping plays a pivotal role in shaping the success and
sustainability of e-commerce businesses. Satisfied consumers are more likely to exhibit
loyalty, positive word-of-mouth, and repeat purchases, driving business growth and market
expansion. Conversely, unresolved issues such as delivery delays, product quality
discrepancies, or poor customer service can lead to dissatisfaction and erode consumer
trust. The significance of studying consumer satisfaction in online shopping extends
beyond individual transactions. It encompasses broader implications for businesses,
policymakers, and researchers alike. The scope of this research not only evaluates current
consumer attitudes but also anticipates future trends and challenges within the evolving e-
commerce landscape.

Online shopping or online retailing is a form of electronic commerce which allows

consumers to directly buy goods or services from a seller over the Internet using a web
browser. Alternative names are: e-shop, e-store, Internet shop, web-shop, web-store, online
store, and virtual store. An online shop evokes the physical analogy of buying products or
services at a bricks-and-mortar retailer or shopping center; the process is called business-
to-consumer (B2C) online shopping. In the case where a business buys from another
business, the process is called business-to-business (B2B) online shopping. The largest of
these online retailing corporations are eBay and Amazon.com, both based in the United
States.The first World Wid Web server and browser, created by Tim Berners-Lee in 1990,
opened for commercial use in 1991. Thereafter, subsequent technological innovations
emerged in 1994: online banking, the opening of an online pizza shop by Pizza Hut,
Netscape's SSL v2 encryption standard for secure data transfer, and Intershop’s first online
shopping system. Immediately after, Amazon.com launched its online shopping site in 1995
and eBay was also introduced in 1995.

Online shopping in India:

India's e-commerce market grew at a staggering 88 per cent in 2013 to $ 16 billion, riding
on booming online retail trends and defying slower economic growth and spiraling
inflation. The increasing Internet penetration and availability of more payment options
boosted the ecommerce industry in 2013. E-commerce business in India is expected to
reach around $5070 billion by 2020 on the back of a fast growing internet-connected
population and improvement in related infrastructure like payment and delivery systems.
(DNA, 2014)The products that are sold most are in the tech and fashion category, including
mobile phones, ipads, accessories, MP3 players, digital cameras and jewellery, electronic
gadgets, apparel, home and kitchen appliances, lifestyle accessories like watches, books,
beauty products and perfumes, baby products witnessed significant upward movement.
India's e-commerce market, which stood at $2.5 billion in 2009, reached $8.5 billion in
2012 and rose 88 per cent to touch $16 billion in 2013. The survey estimates the country's
ecommerce market to reach $56 billion by 2023, driven by rising online retail. This growth
is because of aggressive online discounts, rising fuel prices and availability of abundant
online options. Mumbai topped the list of online shoppers followed by Delhi, while Kolkata
ranked third.The age-wise analysis revealed that 35 per cent of online shoppers are aged
between 18 years and 25 years, 55 per cent between 26 years and 35 years, 8 per cent in
the age group of 36-45 years, while only 2 per cent are in the age group of 45-60 years.
Besides, 65 per cent of online shoppers are male while 35 per cent are female. To make the
most of increasing online shopping trends, more companies are collaborating with daily
deal and discount sites, the survey pointed out.India has Internet base of around 150 million
as of August, 2013which is close to 10 per cent of Internet penetration in India throws a
very big opportunity for online retailers to grow and expand as future of Internet seems
very bright. (Economictimes, 2014) The size of India's e-commerce market in 2013 was
around $13 billion, according to a joint report of KPMG and Internet and Mobile
Association of India (IAMAI). The online travel segment contributed over 70 percent of
the total consumer e-commerce transactions last year. (DNA, 2014).Those who are
reluctant to shop online cited reasons like preference to research products and services
online (30 per cent), finding delivery costs too high (20), fear of sharing personal financial
information online (25) and lack of trust on whether products would be delivered in good
condition (15), while 10 per cent do not have a credit or debit card. (Economic times,
2014)The Nielsen Global Online Shopping Report shows more than a quarter indicate they
spend upwards of 11 percent of their monthly shopping expenditure on online purchases.71
percent Indians trust recommendations from family when making an online purchase
decision, followed by recommendations from friends at 64 percent and online product
reviews at 29 percent. Half the Indian consumers (50%) use social media sites to help them
make online purchase decisions. Online reviews and opinions are most important for
Indians when buying Consumer Electronics (57%), Software (50%), and a Car (47%).
(India social, 2014).

Background/History

One of the earliest forms of trade conducted online was IBM's (International Business
Machines) Online Transaction Processing (OLTP) developed in the 1960s and it allowed
the processing of financial transactions in real-time. The Computerized. Ticket Reservation
System developed for American Airlines was one of its applications. The emergence of
online shopping as we know today developed with the emergence of the Internet. Initially,
this platform only functioned as an advertising tool for companies, providing information
about its products. It quickly moved on from this simple utility to actual online shopping
transaction due to the development of interactive Web pages and secure transmissions.
Researchers found that having products that are appropriate for e-commerce was a key
indicator of Internet success. Many of these products did well as they are generic products
which shoppers did not need to touch and feel in order to buy. But also importantly, in the
early days, there were few shoppers online and they were from a narrow segment.The roots
of online shopping can be traced back to the 1970s and 1980s when technologies like
Electronic Data Interchange (EDI) laid the groundwork for digital transactions between
businesses. The commercialization of the internet in the 1990s marked a significant
milestone, enabling the emergence of online retailers such as Amazon and eBay. Over time,
advancements in internet infrastructure, secure payment gateways, and mobile technologies
have propelled the growth of online shopping worldwide.

Features
Online shopping offers a range of features that appeal to modern consumers, including 24/7
accessibility, a wide product assortment, personalized recommendations, user reviews, and
seamless payment and delivery options. The ability to shop from anywhere using various
devices has reshaped consumer behavior and expectations.
Convenience: Consumers can shop anytime, anywhere, without the constraints of physical
store hours.
Global Reach: Access to a wide range of products and vendors from around the world.
Personalization: Tailored shopping experiences based on consumer preferences and
behavior. User Reviews: Instant access to peer feedback on products and services.
Multiple Payment Options: Secure and diverse payment methods, including credit/debit
cards, digital wallets, and cryptocurrencies.

Role/Functions

The role of online shopping extends beyond mere transactions; it serves as a catalyst for
market globalization, enabling businesses to reach broader audiences and facilitating
consumer access to diverse products and services. Its functions encompass sales,
marketing, customer service, supply chain management, and data analytics.
• Facilitating product discovery and comparison
• Enabling secure transactions
• Streamlining order management and fulfillment
• Offering customer support and post-purchase services

Importance

The importance of online shopping cannot be overstated in contemporary commerce. For

consumers, it offers unparalleled convenience and accessibility. For businesses, it opens
new markets, reduces overhead costs, and provides invaluable customer data for targeted
marketing strategies.
Consumer satisfaction plays a pivotal role in determining the success and sustainability of
online businesses. Satisfied customers are not only more likely to make repeat purchases
themselves but also become advocates for the platform, recommending it to others within
their social circles. This positive word-of-mouth marketing can significantly contribute to
the growth and expansion of online businesses.
When consumers are satisfied with their online shopping experiences, several key benefits
accrue:

Repeat Purchases: Satisfied customers are more inclined to return to the same online
platform for future purchases. This repeat business fosters customer loyalty and increases
the lifetime value of each customer.
Recommendations and Referrals: Happy customers are likely to share their positive
experiences with friends, family, and colleagues. Personal recommendations carry
significant weight in influencing purchasing decisions, leading to new customer
acquisitions.
Enhanced Brand Reputation: Consumer satisfaction directly impacts brand perception.
Positive experiences result in a strong brand reputation, which is crucial for standing out in
a competitive marketplace. A good reputation can attract new customers and retain existing
ones.
Reduced Churn and Increased Retention: Satisfied customers are less likely to switch
to competitors. By focusing on customer satisfaction, online businesses can reduce churn
rates (the rate at which customers stop doing business with a company) and improve
customer retention.
Positive Customer Feedback and Reviews: Satisfied customers are more likely to leave
positive reviews and feedback, which can further enhance the credibility and
trustworthiness of the online business. Positive reviews serve as social proof and can
influence the purchase decisions of other potential customers.
Cost Savings on Marketing and Customer Acquisition: A base of satisfied customers
can lead to lower customer acquisition costs. Happy customers often require less aggressive
marketing efforts to retain them, resulting in cost savings for the business.
Overall, consumer satisfaction is not just about meeting customer expectations; it's about
exceeding them. In the highly competitive landscape of online commerce, where options
abound and switching costs are low, prioritizing consumer satisfaction is imperative for
sustainable growth and long-term success. By consistently delivering exceptional
experiences and addressing customer needs, online businesses can foster strong
relationships with their customers, driving profitability and market leadership.

Scope/Applicability

The increasing reach of the Internet and internet savvies among customers has resulted in
more and more retailers providing online avenues for customers to make purchases at the
 click of the mouse. Internet has changed the way of conducting business. Many businesses
have started building up their strategies around the internet. Internet has changed the way
of conducting business. Many businesses have started building up their strategies around
the internet. This study deals with the customers’ perceptions towards the following aspects
of online shopping and how the presence or lack of these aspects in an online shopping
environment affects customer satisfaction.The scope of online shopping is vast and
applicable across numerous industries, including retail, travel, entertainment, and
healthcare. It continues to evolve with technological advancements, incorporating
innovations like mobile commerce, virtual reality, and voice-assisted shopping.
The scope of consumer satisfaction in online shopping is vast, encompassing various
industries and consumer demographics. It is applicable to both B2C (Business-to-
Consumer) and B2B (Business-to-Business) transactions.

• B2B (Business to Business) — this involves companies doing business with each other.
One example is manufacturers selling to distributors and wholesalers selling to retailers.
• B2C (Business to Consumer) — B2C consists of businesses selling to the general public
through shopping cart software, without needing any human interaction. This is what most
people think of when they hear "ecommerce." An example of this would be Amazon.
Internet is changing the way consumers shop and buy goods and services, and has rapidly
evolved into a global phenomenon. Many companies have started using the Internet with
the aim of cutting marketing costs, thereby reducing the price of their products and services
in order to stay ahead in highly competitive markets.
Companies also use the Internet to convey communicates and disseminate information, to
sell the product, to take feedback and also to conduct satisfaction surveys with customers.
Customers use the Internet not only to buy the product online, but also to compare prices,
product features and after sale service facilities the will receive if they purchase the product
from a particular store. Many experts are optimistic about the prospect of online business.

In addition to the tremendous potential of the E-commerce market, the Internet provides a
unique opportunity for companies to more efficiently reach existing and potential
customers. Although most of the revenue of online transactions comes from business-to-
business commerce, the practitioners of business-to-consumer commerce should not lose
confidence .It has been more than a decade since business-to-consumer E-commerce first
evolved. Scholars and practitioners of electronic commerce constantly strive to gain an
improved insight into consumer behavior in cyberspace.
Along with the development of E-retailing, researchers continue to explain E-consumers
behavior from different perspectives. Many of their studies have posited new emergent
factors or assumptions which are based on the traditional models of consumer behavior,
and then examine their validity in the Internet context.
 Model/Theory

Various models and theories underpin online shopping behavior, ranging from the Technology.
Acceptance Model (TAM) to the Theory of Planned Behavior (TPB). These frameworks help
elucidate factors influencing consumer decisions and satisfaction in digital environments. 1.

1. SERVQUAL Model (Service Quality)

The SERVQUAL model, developed by Parasuraman, Zeithaml, and Berry in the late 1980s, is
widely used to assess service quality and customer satisfaction. This model focuses on the gap
between customers' expectations and their perceptions of service received. The SERVQUAL
model identifies five key dimensions of service quality:

Reliability: Consistency and dependability of the service provider.

Assurance: Knowledge and courtesy of employees and their ability to inspire trust.
Responsiveness: Willingness to help customers and provide prompt service.
Empathy: Caring and personalized attention given to customers.
Tangibles: Physical facilities, equipment, and appearance of personnel.
In the context of online shopping, the SERVQUAL model can be adapted to measure customer
perceptions of website reliability, responsiveness of customer support, clarity of product
information, ease of navigation, and overall fulfillment of expectations. By analyzing the gaps
between expected and perceived service quality, businesses can identify areas for
improvement to enhance customer satisfaction.

2. Technology Acceptance Model (TAM)

The Technology Acceptance Model (TAM), developed by Fred Davis in the 1980s, is a
psychological model that explains how users come to accept and use technology. TAM focuses
on two primary factors that influence user acceptance:

Perceived Usefulness: The degree to which a user believes that using a particular technology
will enhance their performance or productivity.
Perceived Ease of Use: The degree to which a user believes that using a particular technology
will be free of effort.
In the context of online shopping, TAM helps in understanding consumer behavior towards
ecommerce platforms. A consumer's decision to shop online is influenced by their perceptions
of the usefulness and ease of using online shopping websites or apps. For example, if a
consumer finds an online shopping platform easy to navigate and believes that it saves time
and effort compared to traditional shopping, they are more likely to adopt and continue using
it.

By applying these models, researchers can evaluate factors that impact consumer satisfaction
in online shopping, such as website usability, reliability of transactions, responsiveness of
customer service, and overall experience. This analysis helps businesses tailor their strategies
to meet customer expectations and enhance satisfaction levels, ultimately leading to improved
customer loyalty and retention in the competitive e-commerce landscape.

Advantages

Besides being able to shop from the comfort of your home, many online stores offer
low or no shipping charges and free ship-to-store options.
Other advantages of shopping online include:
1. Always being open
We can always buy products from online platforms around the clock. Consumers
can buy products at the time of their convenience.
2. Saving on transportation cost
Through online purchases we can reduce the cost of transportation for travelling
to the stores.
3. No need of physical location
Since the transaction and market place is virtual, there is no need for any physical
locations.
4. No aggressive salespeople or annoying crowds
People and consumers who don’t want to interact with crowds can easily adapt to
online shopping.
5. No waiting in long lines to check out
Consumers do not have to wait in long lines to purchase or pay for products. They
can buy products quickly and don’t have to waste any time.
6. Being able to read reviews about the products being purchased
The consumers can review the product and it’s quality before buying any product.
They can choose the best product among various options.
7. More choices for buying products
Consumers have a choice to choose between variety of products and they can access
to a large variety of products. They can also find many substitutes in online platforms.
8. Low purchase price
Many online shops sell products at low prices because of lack of money spent on
overheads such as rent, water etc.

Disadvantages

1. Fraud in online shopping

Online platforms are prone to to many fraudulent activities. Although they
provide security services it is not completely free from fraud.
2. Delay in delivery
The delivery of products cannot be always in time. It depends on the factors
such as mode of transportation, natural phenomenon like rain, storms etc.
3. No physical contact
The consumers cannot physically touch or feel the product before attainment.
a major drawback of online shopping.
4. No bargaining power
Although the prices are comparatively low, consumers don’t hold bargaining
power on the sellers.
5. Hide cost & shipping charges
Usually the online platforms provide purchase prices, they don’t clearly
specify the shipping charges and other additional charges. The consumers
have to procced to further steps to identify the charges.
6. Lack of interaction
Consumers and sellers don’t have any direct contact in online shopping. Since
the transactions take place in virtual platforms, they find it difficult to trust the
other party completely.
7. Difficulty in return advantages
The products or services provided from online shopping don’t specify any
particular place and may be the they are provided from abroad or different
countries around the world. Therefore the return of the product is difficult and
the consumers may not get any return advantages.