In spite of the huge increase in internet usage in Kenya over the past years, the usage of online retailing services in Kenya is still very low, thereby posing an existential threat to the service providers. To induce more initial users to continue using these services, there is need to establish what affects their continued usage. Individual factors, in particular customer perceptions, have been shown by both the information systems (IS) as well as the marketing fields to have significant effect on sustained use of online retailing services. This study therefore sought to establish the effect of customer perceptions on the usage of online retailing services in Nairobi County, Kenya. Its objectives were to establish whether there is a relationship between perceived attributes and usage of online retailing services, to determine whether there is a relationship between perceived risk and usage of online retailing services, to analyse whether there is a relationship between perceived value and usage of online retailing services, to evaluate whether customer satisfaction has a mediating effect on the relationship between customer perceptions and usage of online retailing services and to establish whether customer demographics have a moderating effect on the relationship between customer perceptions and usage of online retailing services. The study employed a descriptive, cross-sectional, survey design and explanatory design. The target population was 6 online retailing firms and the respondents for this study were the 18,147 registered users of these six online retailing firms in Nairobi County, Kenya. A sample of 391 respondents was selected using multi-stage sampling methods including purposive, stratified and simple random sampling. Primary data was collected using a self-administered structured questionnaire and an interview guide, while secondary data was collected through document review. Questionnaire responses were analyzed using descriptive and inferential statistics which involved both linear and logistic regression analysis. Figures and tables were used to present the data. Data from key informant interviews was analyzed using content analysis technique to complement the quantitative data. The results showed that consumer perceptions have a significant effect on the usage of online retailing services. The study also found that customer satisfaction does have a mediating effect on the customer perception – usage relationship. Furthermore, the research established that demographic factors do not have a significant moderating effect on the customer perception – usage relationship. The findings of this study underscore the importance of customer perceptions and customer satisfaction in enhancing the likelihood of success of online retailing services. Consequently, the study recommends that online retailers should enhance service features/attributes as a way of ensuring success of their services by taking into consideration customer-specific needs by personalizing the website to make it more useful, compatible with customer requirements and easy to use for users. In addition, online retailing service providers need to build trust amongst their users regarding online purchasing. Further, online retailers should design and deliver a unique value proposition that has both functional as well as hedonistic appeals. Online retailers should also have an effective customer satisfaction strategy for purposes of customer retention. Moreover, it is imperative for online retailing firms to have a good understanding of their target customers, since this will not only help in determining the appropriate customer engagement strategies but also how to enhance the long-term usage of their services. On the government‘s part, the study recommends the tackling the barriers to online shopping usage primarily through legislation. Since usage also hinges on trust, the government could license a suitable entity to oversee online consumer protection to address users‘ concerns.
CHAPTER ONE INTRODUCTION
Background of the Study
The commercial use of the Internet has grown tremendously over the last two decades, and is characterized by a proliferation of various online-based electronic commerce (e- commerce) services. One of these services is online retailing, which has been described using a number of different terms (Mottner, Thelen & Karande, 2002). It has been referred to as internet retailing, e-retailing, or e-tailing (Anderson, 2000), as part of interactive home shopping (Alba, Lynch, Weitz & Janisqewski, 1997), and by the broader terms electronic commerce (Daniel & Klimis, 1999) and e-commerce (Boscheck, 1998).
According to the Australian Government Productivity Commission (AGPC), online retailing can take several forms: i) as ‗pure play‘ services in which businesses provide online-only services in particular retail categories, ii) as brick-and-click (multi-channel) establishments where online activities are combined with bricks-and-mortar operations,
iii) as online marketplaces where buyers and sellers interact on an electronic trading platform provided by a third-party and iv) as manufacturer-owned websites where products are sold directly to customers, thus by-passing middlemen (2011).
The late 1990s heralded the coming of age of online retailing, with the unprecedented growth in reported sales surpassing triple digit growth (United States Census Bureau, 2004), though it slowed considerably due the failure of e-commerce firms in 2000 (Rohm & Swaminathan, 2004). Nonetheless, the U.S. Commerce Department has been reporting annual e-commerce statistics since 1999, signifying the importance of this sub- sector to the world‘s largest economy (Haynes & Taylor, 2006).
Due to its huge popularity, online retailing has had a significant impact on several market segments such as travel, consumer electronics, hobby goods, and media goods across the globe (Weltevrenden & Boschma, 2008). Consequently, online retailing has evolved into an established marketing channel in its own right within the consumer marketplace (Doherty & Ellis-Chadwick, 2010).
In terms of size, the U.S. is the largest market, and is expected to reach $278.9 billion in sales in 2015 (Forrester, 2011a). In Europe, the second largest market, the number of online buyers is expected to grow from 157 million to 205 million by 2015; total sales are forecast to reach 133.6 billion Euros (Forrester, 2011b). Africa is also gradually embracing online retailing, with countries like South Africa and Egypt ahead of the rest. In South Africa for instance, 51% of those with access to the internet are shopping online, according to a 2011 MasterCard Worldwide survey (Kermeliotis, 2011).
Kenya is showing strong growth potential, as it was the fastest growing Internet market in Africa in 2011 (yStats.com, 2012) with its internet population rising by about 19% to stand at 14.032 million users in 2012 from 12.5 million in 2011 (Communications Commission of Kenya (CCK), 2012). A recent survey of 1700 individuals found that 18% to 24% of the respondents purchase music, movies and e-books online, thus signaling the growth of online shopping in Kenya (Juma, 2010). This upward trend has been aided by the increasing number of young people who prefer to access information via their mobile phones, coupled with the declining prices of internet connectivity costs as well as the high uptake of mobile payment services. This has created an opportunity for online trading platforms such as N-Soko, OLX, Jumia and Rupu, among others (Okuttah, 2014).