Theoretical Model and Hypotheses

Chapter 3 Research Design and Methodology

The main purpose of this study is realize if uncertainty will effect on consumers purchase intention in the procedure of online cross border transaction. There are multiple factors could possible influence consumers purchase intention in a real market;

however, online market pose a bigger uncertainty for transaction, not to mention in an online cross border transaction. Therefore, in the study, five different types of uncertainties will be discussed and taken to measure the influence of consumers purchase intention. The research proposes the following research framework (Figure 3-1).

Figure 3. 1 Research Model

3.1 Theoretical Model and Hypotheses

According to Chapter 2, we assume that uncertainties of transaction plays an

important role in the result of purchase intention in cross border e-commerce. In order to explore the overall effects of transaction uncertainties on consumer’s purchase intention in cross border transaction, the research model segment uncertainties into five different variables, including product uncertainty, seller uncertainty, delivery uncertainty, return and refund uncertainty, and tariff uncertainty.

Product uncertainty is defined as the buyer’s estimate of the variance in product quality based on subjective probabilities about the product’s characteristics and whether the product will perform as supposed (Dimoka and Pavlou, 2008). In markets, buyer face products with hidden characteristics, since there is asymmetric information between buyers and sellers. According to Dimoka’s model (2012), two issues are raised from product uncertainty: description uncertainty and performance uncertainty Firstly, since the seller might not have ability to correctly describe the product, the buyer will face an obstacle to receive enough reliable information on the product. Secondly, the performance of online products are also possible with hidden defect, since it’s impossible to inspect online oversea products before purchasing. In cross border e-commerce, consumer may face more serious problems about product uncertainty, since the difference of language. With the obstacle of language, it’s more difficult for customer to search information from peer’s view about the product and it may also influence their understanding about product. In some case, the translation of website is not absolutely right. Furthermore, it may lead them to have a lower purchase intention.

H1: Product uncertainty negatively associated with purchase intention.

Seller uncertainty is defined as the buyer’s estimate of the variance in seller quality based on subjective probabilities about the seller’s characteristics (adverse selection) and whether the seller is an opportunist (moral hazard) (Dimoka and Pavlou,

2008). Similar to product uncertainty, the seller uncertainty issue is associated with asymmetric information. Due to the seller’s unwillingness to uncover hidden defect of products through the transaction (Bui and Kettinger, 2013), the effect of uncertainty to buyer might raise. Then if they are facing the higher seller uncertainty, consumers are likely to have a lower purchase intention. Especially in cross border e-commerce, consumer usually know nothing about their seller, and it’s also more difficult to find oversea seller’s information from peer’s view. Furthermore, it may lead them to have a lower purchase intention.

H2: Seller uncertainty negatively associated with purchase intention.

The delivery of goods is also considered as the important part of cross border online shopping. After paying for the product, consumers can immediately receive the product at a physical store; however, by e-commerce, consumers will have to wait for couple days to receive the product, not to mention about cross border online shopping.

It usually take weeks to finish a transaction from ordering. The researches mainly sorted out delivery problems as the delay of delivery (Liu and Wei, 2003) and the lack of order tracking (Posselt and Gerstner, 2005; Reichheld and Schefter, 2000), quality of delivery (Liu and Wei, 2003). Quality of delivery usually refer the possibility of goods damaged during delivery (Liu and Wei, 2003). There are literatures showed that companies which used reliable carriers for delivery turned to have more patronage from customers (Heim and Field, 2007). However, the problems above may create uncertainty, which may lead to concerns over negative result and potential losses.

Delivery uncertainty is defined as the buyer’s estimate of the variance in delivery based on subjective probabilities about the delivery’s characteristics and whether the delivery will act right. The features of the attribute delivery uncertainty to be evaluated

are: (1) late delivery time, (2) non providing customers a tracking number, (3) unstable oversea shipping quality. In cross border e-commerce, unlike goods in the domestic shopping environment, goods in the cross border e-commerce environment may not be perceived to be consistent and reliable in the delivery time and delivery quality due to the long distance shipping by multiple parties. Also seller may not have ability to provide a tracking number. The increasing of delivery uncertainty may negatively effects the purchase intention.

H3: Delivery uncertainty negatively associated with purchase intention.

Cross border online shopping decreases the benefit of physical inspection on the products and increases the probability of dissatisfaction and return the products for a refund. Some of literatures focused on seller’s return and refund on e-commerce. Wood (2001) applied experimental design study to investigate the effect of return policy on buyer’s shopping decision in remote shopping. Mukhopadhyay and Setoputro (2006) researched the optimal return policy for e-commerce with a theoretical model. They all implicated that a good return policy can reduce uncertainty about the quality of products and services (Hou and Cheng, 2017); therefore, return and refund brings significant impact on consumer’s purchase decision. However, none of them has considered the issues of return and refund in cross border online shopping, but the problems may create uncertainty, which may lead to concerns over negative result.

Return and refund uncertainty is defined as the buyer’s estimate of the variance in return and refund based on subjective probabilities about the return of goods and refund. For many buyers, the products may doesn’t meet their preforming expectation, resulting in returning the products for a refund. Comparing with domestic online shopping, refund in cross border online shopping would more difficult on the process,

also the sellers may not provide a clear way to return and get refund. The return policy reduces uncertainty about the quality of services that cannot be inspected before purchase; therefore, it plays a substantial role in consumers’ purchase intention (Hou and Cheng, 2017). The research assume that return and refund uncertainty negatively associated with purchase intention.

H4: Return and refund uncertainty negatively associated with purchase intention.

Tariff is one of the elements which influence consumer’s shopping decision in cross border e-commerce. Taiwanese government had decided to lower the duty free limit for imported goods from 3,000 NTD to 2,000NTD (Customs Bureau, 2017), in other words, more people are being influenced. Moreover, the way to levy a tariff is complex to calculate in Taiwan, since it bases on the product types and the materials of product (Customs Bureau, 2017). Most of oversea sellers don’t deal with this issue, in other word, consumer will be required to pay uncertain fees to the shipping carrier when receive the order (Ann Taylor website, 2018). However some sellers provide prepay system. At checkout, consumer may be presented to prepay duties and taxes. The order total presented at checkout is the exact amount consumer will be billed by seller, and there will be no additional costs due upon delivery (borderfree, 2018). But an over charge in prepay system is possible. Under the complex conditions of seller and the regulations of government, consumer is hardly to acknowledge the final amount of tariff.

In this research, the author defined the situation as tariff uncertainty.

Tariff uncertainty is defined as the buyer’s estimate of the variance in the process of levy a duty based on subjective probabilities about the regulations. Tariff in this research is a tax charge from consumers during the activity of cross border online shopping. For many buyers, tariff or non-tariff and clearance time are the elements

making their purchasing decision more complex in cross border e-commerce. Therefore, we assume that tariff uncertainty is negatively associated with purchase intention.

H5: Tariff uncertainty negatively associated with purchase intention.

Uncertainty avoidance is defined as the feeling about threatened by uncertain or unknown situations” (Franke and Hofstede, 1991). Uncertainty avoidance can evaluate the way in which people respond to the daily uncertainties and ambiguities (Hofstede, 1980). Compare with high uncertainty avoidance people, the people with low uncertainty avoidance tend to accept uncertainty without too much distress, and they usually take risk easily, and express tolerance for different opinions and behaviors.

Purchasing in the internet brings with a greater degree of uncertainty than shopping in traditional, physical establishments (Suki and Suki, 2007), and purchasing in cross border e-commerce even brings a greater degree of uncertainty than domestic online shopping. Therefore, it can be expected that:

H6: The effect of product, seller, delivery, return and refund, and tariff uncertainties on purchase intention will be higher for people with higher uncertainty avoidance.

Product type have been argued that a useful way to evaluate the potential of the internet as a marketing model is through the experience/search classification. (Klein, 1998; Rosa and Malter, 2003). The research base classification on the extent of consumer feel need to directly experience product to evaluate quality. The bigger consumers need to apply their senses to evaluate a product, the more experience qualities the product with; likewise, the bigger consumers feel that second-hand information will allow to evaluate a product, the more search qualities the product with (Weather, Sharma and Wood, 2007). In cross border e-commerce, is much more

difficult for customer to try on products. Therefore, it can be expected that positive association between uncertainty and purchase intention is stronger when moderated by experience goods.

H7: The effect of product, seller, delivery, return and refund, and tariff uncertainties on purchase intention will be higher for experience good.