Exploring Online Buying and Online Trust in China

ABSTRACT - There is a wealth of Western research on communication media and the building of trust linking media affects to trust building. Vendors that sell online with computer-mediated communication (CMC), is generally criticized for not providing a trust-building context and thought to be less effective than face-to-face contact (FFC).

Citation:

Fang Liu, Mark Dixon, and Jamie Murphy (2002) ,"Exploring Online Buying and Online Trust in China", in AP - Asia Pacific Advances in Consumer Research Volume 5, eds. Ramizwick and Tu Ping, Valdosta, GA : Association for Consumer Research, Pages: 336-342.

Asia Pacific Advances in Consumer Research Volume 5, 2002      Pages 336-342

EXPLORING ONLINE BUYING AND ONLINE TRUST IN CHINA

Fang Liu, University of Western Australia, Australia

Mark Dixon, University of Western Australia, Australia

Jamie Murphy, University of Western Australia, Australia

ABSTRACT -

There is a wealth of Western research on communication media and the building of trust linking media affects to trust building. Vendors that sell online with computer-mediated communication (CMC), is generally criticized for not providing a trust-building context and thought to be less effective than face-to-face contact (FFC).

Despite rhetoric that CMC is unconstrained by geography, local culture should be considered for selling successfully online. This paper’s literature review and survey suggest that China’s cultural characteristics and low level of consumer confidence constrain the ability of CMC to build online trust, even more so than in Western cultures. Trust-building strategies with "Chinese characteristics" are suggested for successful online selling in mainland China.

INTRODUCTION

E-business generates great excitement (Jarvenpaa, 1998), yet low trust attenuates this excitement (Novak, Hoffman and Peralta 1999). About one third of US web users noted that the lack of physical presence inherent in businesses that sell over the Internet inhibits purchasers(GVU, 1997). Western literature debates the influence of computer-mediated communication (CMC) on building trust due to its lack of face-to-face contact (FFC). Most studies of online trust have been in Western literature and few studies have been in other cultural contexts. This paper explores characteristics of online buying and online trust in China.

LITERATURE REVIEW

Technological, social and cultural characteristics influence the disparity of Internet expansion between developing and developed countries (Atkin, 1998; Petrazzini and Kibati, 1999), exemplified by Chinese and US differences (Tan et al., 1999). The literature review opens with a discussion of differences in the use of the Internet to conduct business between the world’s developed and the developing countries, with the US and China as respective exemplars. Discussion of online trust in western and eastern literature, particularly media’s role, follows.

ONLINE SALES IN THE UNITED STATES AND IN CHINA

Internet growth relies on infrastructure (Tan et al, 1999) and advanced infrastructure gives the US abundant bandwidth (Commonwealth of Australia, 1999). In China however, an underdeveloped infrastructure, expensive access, slow access speed, immature payment systems and poor customer service hamper Internet adoption. While large Chinese telecom providers are installing new fibre-based high-bandwidth infrastructure, it might take years for the infrastructure to mature (Tong et al., 2000).

Most Chinese Internet Service providers support modems at lower speeds than those offered in the US (Anderson, 2000). Slow access speed is a cause of dissatisfaction with Chinese Internet service (CNNIC, 2002). Faster, cheaper, Internet access and cheaper computer pricing has made it possible for the US to rank as the most wired nation in the world (ABC News, 2000).

US users commonly pay a fixed monthly access fee, but Chinese users pay access fees plus by Bthe-minute telephone charges. This makes Internet access unaffordable to many Chinese. US users enjoy inexpensive access twenty-four hours a day, seven days a week, but for Chinese users time is money (Tong et al, 2000). Deregulation and new capacity should reduce Chinese access fees but "simply wiring up the 90%-plus of homes that don’t have a telephone land line could take years (Tong et al, 2000 p.1)."

The US leads the world in Internet use, with about one third of the world’s online population and 166 million users or thirty in every fifty citizens online. By comparison, China has 33.7 million users but only three in one hundred citizens online (CNNIC 2002). Chinese and US Internet users also differ demographically with respect to income, gender, and education.

About three out of every four US users are college graduates (Cathners In-Stat Group, 2000) compared to just over one in five Chinese users (CNNIC, 2002). While the number of US lower-income households online is increasing, thes households account for just one in ten US Internet users (Media Metrix, 2000a)Ccompared to over seven out of ten lower- to medium-income Chinese Internet users (CNNIC, 2002). Women account for more than half of US citizens online (Media Metrix, 2000b), about 10% more than the gender representation in China (CNNIC, 2002).

As a composite reflection of infrastructure, access costs and users, the use of the Internet to buy and sell also underscores Chinese and US differences. Although China’s bricks-and-mortar economy has been growing by almost seven percent for a decade, Chinese business use of the Internet as a selling medium is still in its infancy, both proportionally and in absolute terms (Anderson, 2000). China’s RMB 55 million (US$6.6 million) of online consumer sales in 1999 was just 0.02 percent of total national consumption (CNNIC, 2000). About three in ten online consumers and one in thirty online organizations had bought online in 2001 (CNNIC, 2002).

Yet in 1999, almost half of US businesses sold goods or services online and combined B2C and B2B revenues were US$171.544 billion (ITTA, 2000). By 2002, US Internet shopping revenues should hit nearly $37.5 billion (Erwin et al., 1997). In conclusion, online selling in China is growing but trails the United States.

ONLINE TRUST

Western literature defines trust as the willingness to rely on a trading partner in whom one has confidence (Moorman, Desphpande and Zaltman, 1993). Trust is one of the most important variables in the relations between human and computer (Fogg and Tseng, 1999) as well as between human and human (Rampel, Homles and Zanna, 1985). Building trust is important for traditional as well as online businesses, as trust enhances commitment and increases customer satisfaction (Hans, Grether and Leach, 2001).

Trust is especially important in electronic commerce (Hardy, 1995). Novak, Hoffman and Peralta (1999) found that consumers do not shop online due to a fundamental lack of faith in online businesses. This is consistent with Boiler’s (1995) and Coats’ (1998) studies which found that a common impediment to online shopping is consumers’ lack of trust in the legitimacy of online stores.

Trust is the foundation for a good guanxi (relationship in Chinese) in China and leads directly to cooperative behaviors conducive to relationship marketing success (Wong, 1998). Guanxi draws on connections in order to secure favors in personal relations (Brunner, Chan and Zhou, 1989). Guanxi is not only important in personal relations but also widely recognized as a key business determinant of a firm’s performance in China (see Pye 1992; Ambler 1994 and Leung; Wong and Tam, 1995; Xin and Pierce, 1996 for detailed discussions on guanxi).

Chinese literature defines trust as a belief about an exchange partner’s trustworthiness that results from the partner’s expertise, reliability, or intentionality (Luo, 1997).

This suggests that customer trust is an important determinant of online success in China.

COMMUNICATION MEDIA

Online business has unique features compared with traditional business and researches are beginning to tackle building trust online versus offline. One of the more striking differences is that the parties usually communicate via computer-mediated communication (CMC) and may never or rarely meet face to face (Steinfield and Whitten, 1999).

Communication is an important element of trust. Lee, Kim and Moon (2000) defined communication as "the formal as well as the informal sharing of meaningful and timely information between buyers and sellers". They believe that communication fosters trust by resolving disputes and aligning expectations. Communication media represent the most striking differences between traditional business and online business (Steinfield and Whitten, 1999) but also because this topic has been studied widely in the western literature, findings can be "borrowed" to discuss online trust in the China.

In Western literature, media richness theory assumes that communication media possess characteristics that make them more or less effective on various dimensions (Fulk et al., 1987). Recent research complements and extends media richness theory by considering the social context in which communication is embedded.

The early CMC’s lack of audio and video cues leads to impersonal perceptions, lacks normative reinforcement and leads to less socio-emotional content exchanged (Rice and Love, 1987). E-mail, for example, is less effective than face-to-face contact for creating or maintaining trust (Spoull and Kiesler, 1986, 1991; Trevino, Lengle and Daft, 1987). Similarly, Wiesenfield, Raghuram and Garud (1998) concluded that face-to-face contact (FFC) is more effective than computer-mediated communication for building customer trust. FFC is irreplaceable for both building trust and repairing shattered trust (O’Hara and Johanson, 1994; Nohria and Eccles, 1992).

FFC conveys social context cues, suits highly equivocal tasks and is particularly effective for creating social presence (Spoull and Kiesler, 1986, 1991; Zack, 1993). Social presence theory also states that computer mediated group interaction lacks the ability to share the socio-emotional information and cues needed to develop trust, warmth and other interpersonal affections (Short, 1976).

Mowshowitz (1997) found that customers might perceive a lack of permanency, reliability and consistency in computer-mediated communication. Research on virtual teams questions whether CMC can function effectively in the absence of frequent FFC. For example, "the lack of daily face-to-face time, offering opportunities to quickly clear things up, can heighten misunderstandings" (Lipnack and Stamps 1997, p17). These studies suggest that CMC eliminates communication cuesCwarmth, attentiveness and other interpersonal affectionsCwhich individuals use to build trust (Handy, 1995). The heart of Handy’s argument is that "trust needs touch" (p46).

Olson and Olson (2000) argued that meeting face-to-face provides information about the trustworthiness of others such as the social class, ethnic background and whether they like each other. They also claimed that none of the computer-mediated communication tools can provide the visual cues from which people might be able to guess other people’s intentions.

There is little research on the effects of communication media on online trust in China. Face-to-face contacts are generally accepted as the basis for initiating trust and maintaining trust in the Chinese context (Studies on this can be seen from most of the literature on guanxi.) An apparent low level of consumer confidence in China has enhanced the idea that face-to-face contact is essential in building a trust relationship (Ma and Kao, 1988). One member of a preliminary focus group conducted in December 2000, Guangzhou, Southern China for this research said "I find it hard these days to trust big shopping centers so how can we possibly trust companies n the web that we can not see at all?"

CULTURAL DIFFERENCES

Although computer mediated communication is transforming the marketplace, cultural influences seem likely to operate online, not just offline. Steinfield and Whitten (1999) argue for research on culture’s impact on attitudes to buying and selling online. As individuals from different cultures vary in their communication and group behavior (Gundykunst et al., 1996), cultural differences should extend to online communication. For example, Olson and Olson (2000) proposed that some people are inherently more trusting than others and some cultures are more trusting than others.

As the collective programming of the mind and an aggregate of common characteristics, a nation’s culture generally reflects their traditions and common ways of thinking (Fink, 2000). Yet while France and Germany both represent Western culture and more specifically European culture, it could inflame or amuse residents of these countries to suggest that they have the same cultural background. Similarly, Turkey, Turkmenistan and Thailand represent Eastern culture. Given this caveat, the following compares several key Eastern versus Western cultural characteristics, which may influence trust when consumers buy online.

Individualism-Collectivism and High-Low Power Distance. Individualism-collectivism is a major difference between eastern and western cultures (Hosftede, 1980). Collectivism is fundamental to Chinese culture, emphasizing conformity, harmony and benefits to families or group members. Individualism gives priority to individual needs, values, and goals. Collectivism strongly reflects interdependent relationships with others and trust builds with frequent face-to-face contacts and mutual commitments. . According to Leung, Wong and Wong (1993), trust develops when partners observe each other’s behavior across a variety of situations.

This collectivist need for face-to-face contact is especially true when dealing with uncertainty (Jarvenpaa, 1998). Face-to-face contacts and interdependence is minimal when buying occurs online, which limits trust building in a collectivist culture. A content analysis of leading US and Chinese web pages, which found significantly more individualistic references on US pages (Zhao, Murphy and Liu, 2001), may suggest that the freewheeling individualist would be more willing to trust others in the computer-mediated communication environment. However, we have seen no empirical studies to verify this suggestion.

Another commonly accepted cultural dimension, power distance, means that cultures tend to accept or not accept inequalities among people. In Hofstede’s original work (1980), power distance is a dimension separate from individualism/collectivism. However, Cho et al (1999) argued that greaterpower distance is embedded in the collective nature of a society, due to the priority placed on agreement among people and on showing respect to superiors or to elders. Triandis (1990) also claimed that collectivism includes power distance due to the high correlation between collectivism/individualism and power distance (r=.70) in Hofstede’s original work. Jarvenpaa (1998) found that buying and selling online generally features a low power distance because, unlike face-to-face communication, it provides a better medium for equal communication. He believed that this would pose more difficulties in initiating trust in a high power distance culture such as the Chinese culture.

Past-Future Orientation. Another cultural difference is a strong past orientation by Chinese. Stemming from Confucian "Dynamism", accumulated experience and past knowledge play an important role in decision-making. Chinese tend to be past-oriented, taking pride in their rich and long history (Cheng and Schweitzer, 1996). The US, however, focuses more on future planning (Cho et al, 1999).

Evaluating a partner’s past and present behavior is a prerequisite to initiating trust in China. From Jarvenpaa’s study in 1998, online activities usually demonstrate a weak past association. Activities on the net are transactional rather than related to past activities. Chinese web sites seem more reflective of the past as their home pages had significantly more references to the past than US pages (Zhao, Murphy and Liu, 2001).

High-low context. The context of a culture is also frequently used to distinguish Asian and Western cultures (Cho et al, 1999). Hall (1976, p91) explained that a high context communication or message is one in which most of the information is either in the physical context or internalized in the person while a low context communication or message is vested in the explicit code.

Asian cultures, such as Chinese, Japanese and Korean tend to have high contextCa strong emphasis on emotion and moodCversus the western tendency towards low context (Detailed studies can be found at Hall 1976, Gudykunst, Yoon and Nishida 1987; Yum, 1987;Taylor et al. 1994, 1997;). Advertising research supports this culture dimension, for example, Miracles (1987) found that Japanese TV commercials try to make friends with the audience and prove that their feelings are understood in order to initiate trust and generate purchases.

High context consumers usually associate a product with a particular situation or type of lifestyle and pay more attention to intangible aspects of the product. Affective or subjective impressions usually influence their buying decisions. Eastern cultures are more likely to favor "bricks and mortar" shopping over online buying because the former provides a better environment for the display of intangible benefits and affection. Trust between buyer and seller when interacting online lacks emotional or affective components making trust-building difficult.

These cultural characteristics suggest that frequent face-to-face contact, a past orientation, and high context communication are important for building trust online in China. The following survey produces a snapshot of perceptions of trust in online buying in China.

RESEARCH METHODOLOGY

Sample

A convenience sample of 130 (88 male and 42 female) third-year commerce students at a Southern Chinese university completed a questionnaire in January 2001. The questionnaire included 74 questions regarding three topics: characteristics of Chinese online buying, online trust issue and communication media issue (a comparison of CMC and FFC). University students are relatively homogenous in age and income. According to the CNNIC Semi-Annual Survey Report (2002), university students account for 24% of China’s Internet users and 52% of Internet users are between 18 and 24 years of age. Therefore, this sample has practical implications for businesses going online in China.

Questionnaire Development

The literature review suggested led to 74 questions regarding online buying, trust, communication media and demographics. The survey asked respondents to rank their answers on a Likert scale from 1 (totally disagree) to 7 (totally agree). The questionnaire was written in simplified Chinese, checked by three Chinese PhD students. Oral instructions were given in Mandarin.

FINDINGS AND DISCUSSIONS

Trust and Communication Media

Mean scores between 4.2 and 6 indicate that statements on trust and communication media are generally supported by the sample. The sample group believes that trust is an important determinant of business success in China (mean=6.02) and FFC is important in building trust (mean=4.72). They also believe that trust is particularly important to doing business online in China (mean=5.59). Concerning communication media, people in the sample believe that FFC is more useful than CMC in building trust, and "more friendly"(mean=4.85) and CMC, and "providing more information"(mean=4.77) than CMC. However, FFC and CMC rate faily closely in "effectiveness"(mean=4.35) and "being fast" (mean=4.22). The results confirm that CMC is less able to provide emotional cues for building trust-based relationships.

Interestingly, the survey shows that there is strong linkage between previous buying experience and the attitude towards online trust. People who have never shopped online have a significantly stronger belief that "gaining customer trust is an important determinant of business success in China" [Chi Square Value=7.139, df=1, assym. Sig.=0.008 (p=0.01)] than people who have had online buying experiences (whether successful or not). So trust is more of an issue to those who have not tried online buying.

Also, people who have never shopped online show a stronger belief that "online shopping is less fun than physical shopping" [Chi Square Value=4.481, df=1, assym. sig.=0.034 (p=0.05)] than people who have bought online. It suggests that providing "fun" in online shopping may be important for getting online customers.

Online Buying Behavior

The survey shows that 23% of the sample has had at least one successful online shopping experience, while 11% of the sample have tried online shopping but never completed a purchase. The remaining 66% of the sample have note tried online shopping. These results confirm that that online buying is still an early stage of development in China. The results are also consistent with the results of The 1^st Online Buying Report (June 2000) in China, which found that 21% of Internet users in China have bought something online.

Among those with successful online shipping experiences, "personal use products" are the most common purchases (64.3%). The product price range was mainly "less than 100 Yuan" (66.7%) and the most frequently used payment method was "cash on delivery" (75%). Around 52% of the sample had "two to four" online buying experiences.

Attitudes towards Online Buying and Online Buying Intention

According to the CNNIC (2000), there were five primary obstacles to online buying in China:

1. Security cannot be guaranteed;

2. Credit of Producers cannot be guaranteed;

3. Delivery wastes time;

4. Payment is inconvenient, and;

5. Pricing is unattractive.

These obstacles were represented by five attitudinal statements in the questionnaire (except for "Delivery wastes time"). The statements "online shopping provides less product varieties", and, "online shopping provides less fun" were added to the questionnaire to compare respondents’ attitudes to online shopping and physical shopping.

These statements are were generally supported (mean>4) except the pricing statement. [Online shopping is less secured: n=129, Mean=4.60, STDEV=1.51; The credit of producer is less guaranteed: n=129, Mean=4.54, STDEV=1.43; The payment formats are less convenient: n=129, Mean=4.82, STDEV=1.51; The pricing is less attractive: n=129, Mean=3.74, STDEV=1.51; Online buying provides less product varieties: n=129, Mean=4.18, STDEV=1.79; Online buying has less fun: n=127, Mean=5.54, STDEV=1.44,] The statements on security, payment method and fun have higher means than the other three statements. This result indicates that lack of security, inconvenient payment format, and lack of fun are considered the most important obstacles to online buying.

Western consumer behavior studies suggest that attitude influences buying intention. According to this survey, 59% of respondents would like to purchase online within the next 12 months, while 41% said they would not purchase online. There was no significant difference between these two groups’ attitudes towards the statements presented. [Online shopping is less secured: t=0.674, df=125, sig. (2-tailed)=.502; The credit of producer is less guaranteed: t=0.329, df=125, sig(2-tiled)=.743; The payment formats are less convenient: t=1.313, df=125, sig(2-tailed)=.192; The prices are less attractive: t=1.431, df=125, sig(2-tailed)=.155; Online buying provides less product varieties: t=.355, df=125, sig(2-tailed)=.723; Online buying has less fun: t=.542, df=123, sig(2-tailed)=.589.] This implies that attitude towards online buying may not correlate closely with online buying intention. Online buying intention among Chinese consumers may be influenced by a mixture of factors, including knowledge, buying experience, and income.

On the other hand, significant differences were found in responses to the question regarding overall attitude towards online buying. [t=5.611 df=118 sig.=.000 (p=0.05), equal variance assumed.] It shows that people who intend to buy online have a more favorable attitude towards online buying than people who have no buying intention. Further study is needed to clarify why there is no significant difference in attitude towards different aspects of online buying while there is significant difference in the overall attitude statement.

Moreover, results show that people with an intention to buy have relatively more knowledge about the Internet as a marketplace than those who have no buying intention. There are significant differences in confidence to buy online shown from the responses to the statements "E-commerce is mainly the use of computer mediated communications such as email and EDI" [Chi Square Value=4.501, df=1, assym. sig=0.034 (p=0.05)] and "Using SET can make online shopping more secure" [Chi Square Value=12.264, df=1, assym. sig=0.000 (p=0.01)]). People with more knowledge of the Internet show more confidence in buying online, which may lead to higher buying intention.

The results also indicate that previous successful buying experience has positive effects on buying intention. About 87% of respondents who had succeeded in buying online would buy online in 12 months, compared to only 50% of those who have not bought online. The difference is significant [Chi Square Value=12.728, df=1, assym. sig=0.00 (p=0.001)]. Thus, encouraging people to try online buying is likely to result in repeated online purchases in the future.

LIMITATIONS AND FUTURE RESEARCH

There are a number of limitations in this research, which must be considered in interpreting the results.

Because this work is exploratory, we emphasize the conceptual development rather than the empirical design. Only Chinese respondents were sampled. We plan to survey a Western sample so we can make comparisons between the cultural groups.

The questionnaire does not include some variables that may be important to predicting trust in online buying. According to Lee, Kim and Moon (2000): comprehensive information, shared value, and communication media are probably all important. Of these three, our survey only investigates the communication media. Future work will need to assess the other two variables. Further, when investigating communication media, we only examined the difference between face-to-face communication and Computer-Mediated Communication. Work could be done on different formats under CMC. To posit a causal relationship between trust and communication media requires further validation.

The survey was administered to university students only. A wider cross-section of the Chinesebuying public might reveal differences to our findings. A future study should include other major Internet buying groups such as the young managerial group.

Some of the demographic variables collected in the survey turned out to be significant in analysis. Women showed a higher online buying intention than men [Chi Square Value=6.163, df=1, assym. sig=0.013 (p=0.05)]. Women also agreed more than men with the statement that online shopping provides less attractive pricing than physical shopping [Chi Square Value=8.250, df=1, assym. sig=0.004 (p=0.01)]. There was no significant difference between female and male online shoppers in online buying satisfaction (such as product quality, customer service etc) except that females are more satisfied with the delivery speed than males [Chi Square Value=6.331, df=1, assym. sig=0.012 (p=0.05)]. Greater age correlated with a stronger preference for face-to-face contacts. Our analysis distinguished a low-income group (monthly income below 300RMB) from a high-income group (monthly income at or above 600 RMB) and a middle income group (those in between). Neither the high group nor the low group showed strong satisfaction with Internet payment methods. However the high-income group showed significantly higher satisfaction [Chi Square Value=6.126, df=1, assym. sig=0.013 (p=0.05)] with them than the low-income group. The higher income group also agrees accepts Internet buying as a whole more than the low-income group [Chi Square Value=6.514, df=1, assym. sig=0.011 (p=0.05)]. Future work will need to address these demographic sensitivities.

Finally, the study was based on a snap-shot survey conducted in the classroom so it failed to take into account the dynamic nature of an online buying situation.

Future experiments could test some tools that are beginning to promote trust in Western online buying.

Authentication of counter-parties by the use of digital certificates is widely used by online shops now. Internet browsers such as Internet Explorer and Netscape Navigator implement digital certificates with a technology called "Secure Sockets Layer (SSL)". A growing sophistication in the online buying public may lead to a boost in trust once this technology is understood for its ability to verify exactly who the buyer is dealing with. A survey that measured knowledge of, and trust in, this technology would be useful.

Trust-builders designed to support the Eastern favored "past orientation", such as web-sites that emphasize an online business’s history and stability, warrant testing. Similarly, graphic elements that suggest face-to-face relationships, such as pictures of the proprietors might help buyers relate to seemingly intangible vendors. So might pictures of trusted individuals that endorse the proprietors and their online businesses. Use of such graphic elements could be measured to test if these make a difference to buyers’ perceptions of online vendors.

Voice over Internet Protocol (VoIP) technology allows buyers to talk with sales representatives over their Internet connection. This is used by some of the large high-volume online vendors in the US. Future improvements in bandwidth might even make video connections over Internet practical. Current roll-outs of broadband in major cities are making this a possibility. Questions that ask about experiences with these technologies could be included in future surveys.

CONCLUSION

It is important to note that Chinese and Western requirements for trust, while culturally conditioned, are not at opposite ends of a spectrum of trust. Rather, both cultures require some form of evidence of the reliability of a potential counter-party (trading partner) and some form of personal trust building. This study has attempted to explore the trust issue in Chinese nline business. It has found that trust is perceived as an important determinant for online business in China. Moreover, computer-mediated communication makes trust-building challenging for online buyers and sellers.

Discussion and findings in this paper may help online business practitioners become more aware of the trust issue and customers’ attitudes to Computer-Mediated Communication. We recommend companies selling online be aware of local culture when they design marketing strategies. This paper could also serve as an introduction for readers who are interested in online business in China.

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