Academic journal article Journal of Electronic Commerce Research

Effects of Consumer Social Interaction on Trust in Online Group-Buying Contexts: An Empirical Study in China

Academic journal article Journal of Electronic Commerce Research

Effects of Consumer Social Interaction on Trust in Online Group-Buying Contexts: An Empirical Study in China

Article excerpt

1. Introduction

Online group-buying enables individual consumers to combine their purchasing power on the Internet in order to obtain discounts. Demand aggregation and volume discounting are core principles of online group-buying, with the goals of decreasing transaction costs and risk and eventually increasing customers' utility [Anand and Aron 2003]. As network technology and e-commerce continue to develop, online group-buying is becoming more and more popular as a business model for online shopping.

According to the China Internet Network Information Center (CNNIC), as of December 2013, the number of online group-buying customers in China had reached 141 million, representing a usage rate of 22.8%, an 8.0% increase since the end of 2012 [CNNIC2014]. According to data from the China Electronic Commerce Research Center (CECRC) on group-buying, services sales (e.g., catering, entertainment, hotel, beauty) yielded 32.0 billion RMB (60% of the market), while product sales (e.g., food and beverage, clothing, household items) yielded 21.2 billion RMB (40% of the market) in 2013 [CECRC 2013].

Since the first Groupon-like group-buying website was set up in China in March 2010, many group-buying websites have emerged. The number of group-buying websites totaled more than 1,800 at the end of 2010, a number that more than doubled during the first half of 2011 to 4,800. During the second half of 2011, some small group-buying websites shut down due to funding problems, while other large group-buying websites were shut down due to product quality problems. For instance, Gaopeng (Groupon's Chinese website) was exposed for selling fake Tissot Swiss watches. According to CECRC, by the end of 2013, 6,246 group-buying websites had been set up in China, 5,376 of which had been shut down-a failure rate of 86%. The top ten independent group-buying websites currently account for 42% of the group-buying market [CECRC 2013].

For group-buying websites, it is important to know how to obtain the trust of consumers and what factors affect trust in the context of online group-buying. Trust formation is viewed as a dynamic process [Lee and Choi 2011; Walczuch and Lundgren 2004], and many researchers have focused on trust formation from a process-oriented rather than a static perspective [Chang et al. 2006; Kim 2012]. Many scholars have dedicated themselves to the study of trust antecedents [Gefen et al. 2003; Zucker 1986] and some have examined how trust formation contributes to reducing the uncertainty associated with online transactions [Li 2008; Kim 2012; Zucker 1986]. However, few have investigated the multi-person nature of purchase decisions and how social interaction influences consumer trust over time.

Online group-buying is a process of aggregating consumer demand. During this process, most consumers from the group engage in social interaction by communicating with each other and sharing information. Nowadays, most third-party group-buying websites, such as Tuan 800 (http://www.tuan800.com/) and Liba (http://www.liba.com), form discussion communities. After websites launch group-buying services, group members or potential customers can freely discuss options in these online communities. Although many burgeoning group-buying websites (e.g., MeiTuan.com, t.58.com, ju.taobao.com, t.dianping.com, etc.) have not specifically set up discussion communities, they allow consumers to post comments, which essentially are a form of interactive communication. In this way, group-buying members are able to autonomously form social interaction groups in which they share information and mutually influence each other. As group members tend to exaggerate their initial points of view during the communication phase, group decision-making tends to be more dynamic, and shifts in direction tend to be more extreme, a phenomenon called group-shift[Hale and Boster 1988; Isenberg 1986; Kogan and Wallach 1967]. Positive group-shifts create more demand, which results in more group-buying. …

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