FACTORS AFFECTING CUSTOMER’S TRUST IN E-COMMERCE IN VIETNAM

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Huy Anh Duc FACTORS AFFECTING CUSTOMER’S TRUST IN E-COMMERCE IN VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Huy Anh Duc FACTORS AFFECTING CUSTOMER’S TRUST IN E-COMMERCE IN VIETNAM ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: Tran Ha Minh Quan Ho Chi Minh City – Year 2012 i ABSTRACT No one can deny that internet and websites are the most important tools of electronic commerce (e-commerce), to help e-commerce develop effectively. The internet has been widely used from 1994 and e-commerce had been contributing to the growth in many countries. Although there are opportunities for e- commerce growth, it did not achieve its full potential. What did reasons prevent the development of electronic commerce? Having many reason, but an important reason is customer’s trust. The necessary to do is that identify what factors affecting customer trust in the online environment. Based on the research of Cuiping Chen (2007) and F Meziane & Kasiran (2008), this study combine the research model of two studies to form the research model. The main survey was launched on October 2012. For main survey was collected in a month, 272 responses were received in both methods, email and hard copies, in which 32 were rejected because of incomplete responses. After all, 240 samples were usable. After pilot study, the research model had 4 factors affecting customer’s trust, as: Affiliation, Existence, Policy, and Website Design. The results show support for Hypothesis 2, 3, and 4, mean that Affiliation of website, Policy of website, and Website design attitude of company, all emerged as significant predictors of Customer’s Trust. Key word: e-commerce, trust, B2C, customer, factors affecting ii ACKNOWLEDGMENTS It is my pleasure to express my sincere gratitude to my supervisor Dr. Tran Ha Minh Quan for his support throughout the research process. He had devoted his valuable time and efforts in patiently guiding me to complete this study. I would like to convey my special thanks to him for his assistance and encouragement. I would like to thank the faculty of International School of Business (ISB) – University of Economic Ho Chi Minh City. And my special thanks to Professor Nguyen Dinh Tho PhD., who has instructed me how to do a research clearly and simply. Besides, I would like to express my thanks to the ones who have helped me to distribute the questionnaires. Also, I would like to thanks all respondents, who spent their valuable time in filling out the questionnaire. I thank my friends and colleagues who provided much needed inspiration and support during this time. Finally, no words of thanks are ever enough for the dedication of my parents and younger brother who pushed me through each step of my academic journey and wanted to see me get the Master’s degree. December 20, 2012 Tran Huy Anh Duc iii TABLE OF CONTENTS ABSTRACT………………………………………………………………… …………i ACKNOWLEDGMENTS………………………………………………… ………… ii TABLE OF CONTENTS………………………………………………….………… iii LIST OF TABLES………………………………………….…………….…………….v LIST OF FIGURES……………………………………………………………………vi CHAPTER I: INTRODUCTION……………………………… ……….………… 1 1.1. BACKGROUND…………………………………………… …….…… … 1 1.2. RESEARCH PROBLEMS ………………………………… ….… ……… 2 1.3. RESEARCH OBJECTIVES…………………………………… … ………….3 1.4. RESEARCH SCOPE…………………………………………… …………… 4 1.5. OUTLINE OF STUDY………………………………………….…… ……… 4 CHAPTER II: LITERATURE REVIEW………………………… ……………… 5 2.1.MODEL OF CUIPING CHEN (2007)………………… …………………… 5 2.2.MODEL OF F MEZIANE (2008)……………………………………… …… 6 2.3.BUILDING THE RESEARCH MODEL………………………………… 6 2.4.RESEARCH MODEL…………………………………………………… …….7 2.5.DEFINITION OF TRUST………………………………………………… … 8 2.6.ELECTRONIC COMMERCE (E-COMMERCE)……………………… …… 9 2.7.CONSUMER TRUST IN E-COMMERCE.………………………….……… 10 2.8.HYPOTHESES……………………………………………………….……… 12 CHAPTER SUMMARY…………………………………………………………… 16 CHAPTER III: RESEARCH METHOD…………………………………………… 18 3.1.RESEARCH APPROACH…………………………………………………… 18 3.2.RESEARCH PROCESS……………………………………………………… 18 3.3.MEASUREMENT SCALES………………………………………………… 20 3.4.SAMPLING & DATA COLLECTION……………………………………… 25 iv 3.5.MAIN SURVEY……………………………………………………………… 25 CHAPTER IV: DATA ANALYSIS & RESULT…………………………………….26 4.1.DESCRIPTIVE STATISTICS SURVEY RESULTS………………………….26 4.2.THE RATING SCALE…………………………………………………………28 4.2.1. CRONBACH’S ALPHA COEFFICIENT……………………… … 28 4.2.2. EXPLORETORY FACTOR ANALYSIS………………………………32 4.2.3. REGRESSION ANALYSIS…………………………………………….36 CHAPTER V: DISCUSSION, IMPLICATIONS, RECOMMENDATIONS……… 39 5.1.CONCLUSION……………………………………………………… …… 39 5.2.MANAGERIAL IMPLICATIONS………………………………… ……… 39 5.3.IMPLICATIONS FOR FURTHER RESEARCH……………… 41 REFERENCE …………………………………….………………………………… 42 APPENDIX: QUESTIONNAIRE………………………….……………………… 47 APPENDIX: RESULT OF DATA ANALYSIS………………………………………53 v LIST OF TABLES Table 3.1: Measurement scales of research 20-22 Table 4.1: Descriptive Statistics 26-27 Table 4.2: Cronbach’s alpha of EXIS 28-29 Table 4.3: Cronbach’s alpha of AFFI 29 Table 4.4: Cronbach’s alpha of POLI 30 Table 4.5: Cronbach’s alpha of WEDE 31 Table 4.6: Cronbach’s alpha of TRUS 32 Table 4.7: KOM and Pattern Matrix result of final 33-34 Table 4.8: Total Variance Explained 35 Table 4.9: Summarized EFA analysis 35 Table 4.10: Correlations 36 Table 4.11: Coefficients 37 Table 4.12: Model Summary 38 vi LIST OF FIGURES Figure 2.1: Research model of Cuiping Chen 5 Figure 2.2: Research model of F. Meziane 6 Figure 2.3: Research model of Customer Trust in e-commerce 7 Figure 3.1: Research model after revised 24 Figure 4.1: The correlations of the research model 38 1 CHAPTER 1. INTRODUCTION In the first chapter, the overview of e-commerce and its importance for the growth of economy will be introduced. Moreover, the causes that restrict the development of e-commerce will be found out in order to find effective solutions to overcome such limitations. It can be seen that these issues are also the research problems and research objectives for this study. 1.1. Background The development of information technology and internet has formed a new form of transaction in the business environment. It is called as online transactions. No one can deny that internet and websites are the most important tools of electronic commerce (e-commerce), to help e-commerce develop effectively. The internet has been widely used from 1994 and e-commerce had been contributing to the growth in many countries. Amongst emerging economies, China's e-commerce presence continues to expand. For example, with 384 million internet users, China's online shopping sales rose to $36.6 billion in 2009 (Olsen, Robert, 2010). In US e- commerce and Online Retail sales projected to reach $226 billion, an increasing of 12 percent over 2011 ( Mulpuru, 2012). Clearly, the e-commerce has an important role in the development of economy in many countries. Although occurrence of internet in Vietnam later than other developed countries (from 2003), it also had a positive contribution to the national economy. More specifically, revenue from e-commerce in Vietnam reached nearly 2 billion USD, equivalent to 2.5% of GDP, and it is forecasted that the revenue will be 6 billion USD in 2015 (A sleeping e-commerce giant, 2012). These numbers, though still relatively modest compared with many countries, it shows the potential of e- commerce development in Vietnam. Especially, when the percentage of the population using the internet in Vietnam reached 35.49% in September 2012 (report 2 on internet statistics of Vietnam, 2012), the growth potential of e-commerce is based. 1.2. Research problems Although there are opportunities for electronic commerce growth, it did not achieve its full potential. What reasons prevent the development of electronic commerce? To find out the answer, a direct interview was conducted including four people aged from 21 to 27, in which 3 females and 1 male. In four of the interviewees, one person used internet banking services, one person often purchases online and two other know the service/ purchase online but do not use. Obviously, results of the interviews shows that one of the most important reasons influences the customer's decision to use or not to use the online service and online purchasing is the trust. In many studies about customer’s behavior in e-commerce, they also showed that customer’s trust is as a key factor, which impacts customer’s behavior in e- commerce. Liu, T. Marchewka, Ku (2004) compared American and Taiwanese perceptions concerning online privacy and how it relates to the level of trust with a company's electronic commerce website. Their study suggested that trust is an important intermediary variable that influences behavioral intentions for online transactions. Ling (2010) also mentioned in his study that impulse purchase intention, quality orientation, brand orientation, online trust and prior online purchase experience were positively related to the customer online purchase intention. Through the review of previous studies and the actual interview, we can conclude that trust is an important factor affecting customers in online activities. So to help online activities develop more, we need to increase the trust of customers. However, to increase the trust of customers, what is necessary to do? The necessary to do is to identify the factors affecting customer trust in the online environment. This issue has been explored in numerous studies in many countries, many different areas. Flick (2009) has found that perceived site quality was [...]... What factors that affect customers' trust in e-commerce in Vietnam? - How is the relationship between these factors and customer’s trust in ecommerce? Which will influence customer’s trust the most? Therefore, the objectives of this research are as follows: - To identify the factors that affect customers' trust in e-commerce in Vietnam - To determine the influence of each factor on the customer's trust. .. are the four dominant factors which influence consumer perceptions of online purchasing in New Zealand Generally, some of many studies about factors that affect customer’s trust in online environment were defined However, in Vietnam, what do factors affect customer’s trust, those are also similarly or not With this study, I would like to clarify that issues 1.3 Research objectives In the previous section,... 95034 Customer’s Trust 1 240 1.00 5.00 3.3583 94445 Customer’s Trust 2 240 1.00 5.00 3.4208 91591 Customer’s Trust 3 240 1.00 5.00 3.6792 89699 Customer’s Trust 4 240 1.00 5.00 3.4208 97349 Valid N (listwise) 240 With 350 survey invitations were interviewed and sent to the customers with age form 16 – 40 years-old in Ho Chi Minh City and in Binh Duong province in Vietnam There were 272 responses in which... cognition) not in the trustee For example, in a study by Rotter (1967), he defined: Trust as a belief or feeling is derived from the character and the formation and development during childhood  The second stream: Trust is embedded within trustee For example, Rousseau et al (1998) explains that intellectuals in the economy, the trust authority, ability, and expertise is becoming increasingly important,... “Customer Trust is the central variable, when considered in relation with the antecedents, "Customer Trust" be influenced by these factors So in the model of this study will be based on that relationship to determine the factors affecting customer trust “Fulfillment” variable mentioned in the model of F Maziane (2008), “Security” and “Customer service” has been included in the “Policy” variables in the... are: Business-to-Business (B2B); Business-to- Consumer (B2C); Business-to-Government (B2G); Consumer-toConsumer (C2C); and Mobile commerce (m-commerce)  Business-to-Business (B2B) e-commerce is a kind of e-commerce between businesses together This is kind of up to 80% of the current e-commerce activities, and experts predict that the form of B2B e-commerce will continue to grow even faster  Business-to-consumer... Follow the definition of trust developed by Rousseau, Sitkin, Burt, and Camerer (1998) to the customer and online-seller relationship, in the current study, defining: Customer trust in e-commerce as a consumer’s psychological state comprising the consumer’s intention to accept vulnerability based upon their positive expectations c of the intentions or behavior of online-seller As an underlying psychological... model In this research, dependent variable was Customer Trust Factors affecting customer trust are independent variables There are five independent variables in this research, those are: Existence, Affiliation, Policy, Fulfillment, and Website Design EXISTENCE H1 AFFILIATION H2 POLICY H3 CUSTOMER TRUST In e-commerce H4 FULFILLMENT H5 WEBSITE DESIGN Figure 2.3: Research model of Customer Trust in e-commerce. .. contact in e-commerce is that developing a one-way communication methods Meaning only receive information from the website that cannot be returned to their own information, which makes the trust of customers is difficult to develop Recent efforts into to create "two-way, one-to-one personalized interactive dialogues" on websites is more in tune with trust theory, and holds out promise in creating trust. .. customer service Findings also indicate that trust is intrinsically beneficial If a consumer trusts an e-retailer, he/she will come back in the future or even become loyal to the e-retailer Further, findings suggest that though trust has a direct effect on future intentions and loyalty, part of its effect is conditional on its ability to reduce transaction costs In his research, the customer trust was studied . ECONOMICS HO CHI MINH CITY International School of Business Tran Huy Anh Duc FACTORS AFFECTING CUSTOMER’S TRUST IN E-COMMERCE IN VIETNAM MASTER OF BUSINESS (Honours). Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Huy Anh Duc FACTORS AFFECTING CUSTOMER’S TRUST IN E-COMMERCE IN VIETNAM. What factors that affect customers' trust in e-commerce in Vietnam? - How is the relationship between these factors and customer’s trust in e- commerce? Which will influence customer’s trust