FACTORS AFFECTING CUSTOMER TRUST IN ONLINE SHOPPING IN VIETNAM

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Minh FACTORS AFFECTING CUSTOMER TRUST IN ONLINE SHOPPING IN VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2012 Ho Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Minh FACTORS AFFECTING CUSTOMER TRUST IN ONLINE SHOPPING IN VIETNAM ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. NGUYEN HUU LAM Ho Chi Minh City – Year 2012  i Acknowledgement Apart from the efforts of me, the success of this thesis is depended largely on the encouragement and guidelines of many others. Especially, Dr. Nguyen Huu Lam and Associate Prof Dr. Nguyen Dinh Tho have been instrumental in the successful completion of this study. I would like to take this opportunity to express my gratitude to them and I really appreciate with their tremendous support and help. I feel motivated and encouraged every time I attend his meeting. Without his encouragement and guidance, this project would not have materialized. Besides, I would like to thank my close classmates and staffs working at International School of Business – UEH including Nguyen Thanh Huong, Huynh Ngoc Duy, Thai Thi Thu Giang, and Nguyen Thi Ngoc Lien for their guidance and support. Ho Chi Minh City, Jan 1 st 2013 Tran Minh  ii Table of Contents Abbreviations iii List of Tables iv List of Figures v List of Appendix vi Chapter One: Introduction 1 1. Background 1 1.1. The Internet in Vietnam 1 1.2. Online shopping in Vietnam 1 2. Statement of purpose 2 3. Research question 3 4. Significance of the study 3 5. Scope of the study 3 6. Structure of the study 3 Chapter Two: Literature Review 5 1. Trust in online shopping 5 1.1. Definition of trust in e-commerce 5 1.2. The importance of trust in e-commerce 15 2. Trust antecedents identified in the literature 16 2.1. Perceived privacy and security protection 16 2.2. Perceived risks and benefits 18 Chapter Three: Methodology 20 1. Participants 20 2. Instruments 20 3. Samples and data collection procedures 24 4. Data analysis 24 Chapter Four: Results 26 1. Characteristics of the sample population 26 2. Reliability of measurement instruments 28  iii 2.1. Validating measures 28 2.2. Exploratory factor analysis 32 3. Tests of regression assumptions 37 3.1. Test of multicollinearity 37 3.2. Test of normality of residual & heteroscedasticity 38 4. Evaluating demographic variables’ impacts on customers’ trust 38 5. Hypotheses testing 39 6. Summary of the results 41 Chapter Five: Discussion 43 1. Findings 43 2. Implications 44 3. Conclusion 45 4. Limitations and directions for future research 45 References 46  iii Abbreviations WTO World Trade Organization APEC Asia-Pacific Economic Cooperation ASEM Asia-Europe Meeting SPSS Statistical Package for the Social Sciences PP Privacy Protection SP Security Protection PR Perceived Risk PB Perceived Benefit CTIS Customer Trust in Internet Shopping EFA Exploratory Factor Analysis TVE Total Variance Extracted VIF Variance Inflation Factor  iv List of Tables Table 2.1. Summary of prior conceptualizations of trust 6 Table 3.1. Privacy protection and security protection scales 21 Table 3.2. Perceived risk and perceived benefits scales 22 Table 3.3. Customer trust scale 23 Table 4.1. Distribution of respondents based on demographic characteristics 27 Table 4.2. Item-Total Statistics 29 Table 4.3. Total Variance Explained 34 Table 4.4. Pattern Matrix a 35 Table 4.5. Item-Total Statistics 36 Table 4.6. Model Summary 39 Table 4.7. ANOVA b 39 Table 4.8. Coefficients a 40  v List of Figures Figure 1. Conceptual Model 19 Figure 2. Results of testing the conceptual model 42  vi List of Appendix Appendix A. Customer Survey Form 51 Appendix B. Graphs 57 Graph 1. Regression Standadized Residual 57 Graph 2. Normal P-P plot of regression standardized residual 57 Graph 3. Scatterplot 58  1 Chapter One: Introduction 1. Background 1.1. The Internet in Vietnam It has been more than one decade since the Internet started to have been used in Vietnam. Vietnam connected the world in 2000, the Internet users was a small figures, just 0.3% of the population in 2000. However, the Internet is growing fast, much faster than in any other Asian countries in 2011. Over the last ten years 2000-2010, Internet usage has grown by 12.4 times in Vietnam. This is the highest level of penetration in the Asian countries. After five years from 2000, this number was up to 12.8%; and 17.9% in 2007; 24.0% in 2008; and 25.7% of Vietnam population in 2009. Impressively, este et al. (2012) suggest that a large number of Vietnamese Internet users accounted for 30.8 million at the end of Feb 2012, equivalent to 34% of Vietnam population. More and more people are online and in Vietnam, they spend a massive amount of time on the Internet. There is a huge, targetable population of consumers online. As to Feb 2012, 30.8 million Vietnamese people can be reached on the Internet, with a strong growth every year. In addition, these are not just the teenagers, but also more and more also their parents and in general, the household decision makers, an interesting target audience for marketing activities. They are also increasingly comfortable with making purchases online. 1.2. Online shopping in Vietnam The internet is changing the way consumers shop and buy goods and services, and has rapidly evolved into a global phenomenon and even in Vietnam. 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. Customers use the Internet not only to compare prices, [...]... impacts trust in Internet shopping Security and privacy in online shopping have a positive association with trust in Internet shopping (Monsuwe et al., 2004) A high level of security and privacy in online shopping experience has a positive effect on consumer trust (Ilagan, Sheila de Villa, 2009)   17 H1 Privacy protection of a web has a positive effect on consumers’ trust in Internet shopping H2 Security... PB10 Using the virtual store makes it easier for me to find information PB11 I find the virtual store very useful in my shopping PB12 I find the virtual store very useful in information seeking Customer trust in Internet shopping Four items adopted by Lee and Turban (2001) are used to measure customer trust in Internet shopping based on high coefficient alpha 70 (see Table 3.3) Table 3.3 Customer trust. .. purchases in early stage market in Vietnam, the high young generation population and great coming opportunities closer promises the strongest growth in online shopping area However, the major problem in the area of online shopping is the low confidence in online payment systems Este et al (2012) suggest that one of the key factor to explain for this is that people does not trust in Internet shopping Therefore,... have impacts on customer trust in online in shopping in Vietnam   2 3 Research question Is customers’ trust affected by perceptions about privacy, security protection, perceptions about the risks and benefits during the transaction on the Internet 4 Significance of the study In terms of theory, this study provides an empirical understanding role of factor trust towards online shopping; And in terms of... 3.3) Table 3.3 Customer trust scale Customer trust in internet shopping (Cronbach's Alpha = 0.700; N of Items = 4) In general, I cannot rely on Internet vendors to keep the promises that they CTIS1 make CTIS2 Internet shopping cannot be trusted, there are just too many uncertainties CTIS3 Anyone trusting Internet shopping is asking for trouble Items CTIS4 Internet shopping is unreliable   23 3 Samples... for buying products from a particular store In 2010, every second Internet user in Vietnam has already visited sites that offer online shopping, buy and sell activities or auctions Este et al (2012) suggest that the most of customers purchasing online is just a small piece of big potential e-commerce market and online shopping activities are mainly common in the north and in big cities, whilst in smaller... by combining several trust antecedents in order to provide insights to online firms conducting business in different parts of the world The model suggests that trust in Internet shopping is directly affected The model assumes that their cultural backgrounds influence consumers’ perceptions (see Table 1) The results of this study will identify which factors having significant effects and having an important... directions for the development of online shopping in Vietnam 5 Scope of the study The study focuses on collecting people having experience in the online shopping Ho Chi Minh City The city is selected due to the highest Internet penetration rate Este et al (2012) suggest that the Internet penetration rate is more than 50% the population have used the Internet already in urban Vietnam The city is higher than... between trust as a set of specific and general belief is primarly happened dealing with interpersonal trust in organizational settings (McAllister, 1995; McKnight et al., 1998) However, this distinction is seldom occured in economic transaction settings because the definition of trust is used in these contexts is an extension of trust definition rather than the original definition of interpersional trust. .. 12) PB6 PB7 PB8 PB9 Using the virtual store increases my productivity in information seeking (e.g., find product information within the shortest time frame) Using the virtual store enhances my effectiveness in shopping (e.g., get the best deal) Using the virtual store enhances my effectiveness information seeking (e.g., find the most important information about a product.) Using the virtual store makes . Literature Review 1. Trust in online shopping 1.1. Definition of trust in e-commerce Trust definition in Internet shopping is a quite complicated concept in e- commerce field. Depending on different. makers, an interesting target audience for marketing activities. They are also increasingly comfortable with making purchases online. 1.2. Online shopping in Vietnam The internet is changing the. ECONOMICS HO CHI MINH CITY International School of Business Tran Minh FACTORS AFFECTING CUSTOMER TRUST IN ONLINE SHOPPING IN VIETNAM