INSTITUTE OF MANAGEMENT

STUDIES

Dissertation
Topic - A Study of Consumers
Perception towards E-tailers and
Conventional Retailers.

Submitted By:
Rajesh Singh (BM 013059)

Mentor :
Prof. Surabhi Singh
Assistant Professor

DECLARATION
I hereby declare that the Dissertation project entitled A
Study of Consumers perception towards E-tailers and
Conventional Retailers. submitted to the Institute of
Management Studies, Ghaziabad, is a record of an original
work done by me under the guidance of Prof. Surabhi Singh
and this project work is submitted in the partial fulfilment of
the requirements for the award of the degree of PostGraduation diploma in Management.

Rajesh Singh

Prof. Surabhi Singh

(BM 013059)

Assistant Professor
IMS Ghaziabad

ACKNOWLEDGEMENT
We are living in the age of team work. This project is a
result of team work only. I would like to extend my
sincere thanks to Prof. Surabhi Singh. Efforts made by
me in this project would not have been possible
without the kind support and motivation of my mentor.

INDEX
2

Contents

Page number

Introduction

Review of Literature

Objectives of the Research

10

Research Methodology

11

Reliability test
Factor analysis
One sample T-test
Questionnaire
Bibliography

12

INTRODUCTION

Electronic commerce, commonly known as E-commerce or e Commerce, is trading in

products or services using computer networks, such as the Internet. Electronic commerce
draws on technologies such as mobile commerce, electronic funds transfer, supply chain
management, Internet marketing, online transaction processing, electronic data
interchange (EDI), inventory management systems, and automated data collection
systems. Modern electronic commerce typically uses the World Wide Web for at least one
part of the transaction's life cycle, although it may also use other technologies such as email.
Electronic commerce is generally considered to be the sales aspect of e-business. It also
consists of the exchange of data to facilitate the financing and payment aspects of
business transactions. This is an effective and efficient way of communicating within an
organization and one of the most effective and useful ways of conducting business. It is a
market entry strategy where the company may or may not have a physical presence.
E-commerce businesses usually employ some or all of the following practices:
Provide Etail or "virtual storefronts" on websites with online catalogs, sometimes
gathered into a "virtual mall".
Buy or sell on websites or online marketplaces.
Gather and use demographic data through web contacts and social media.
Use electronic data interchange, the business-to-business exchange of data.
Reach prospective and established customers by E-mail or fax (for example, with
newsletters).
Use business-to-business buying and selling.
Provide secure business transactions.
India has an internet user base of about 250.2 million as of June 2014. The penetration of
e-commerce is low compared to markets like the United States and the United Kingdom
but is growing at a much faster rate with a large number of new entrants. The industry
consensus is that growth is at an inflection point.
Unique to India (and potentially to other developing countries), cash on delivery is a
preferred payment method. India has a vibrant cash economy as a result of which 80% of
Indian e-commerce tends to be Cash on Delivery. However, COD may harm e-commerce
business in India in the long run and there is a need to make a shift towards online
payment mechanisms. Similarly, direct imports constitute a large component of online
sales. Demand for international consumer products (including long-tail items) is growing
4

much faster than in-country supply from authorised distributors and e-commerce
offerings.
India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3
billion in 2011 and to $14 billion in 2012. About 75% of this is travel related (airline
tickets, railway tickets, hotel bookings, online mobile recharge etc.). Online Retailing
comprises about 12.5% ($300 Million as of 2009). India has close to 10 million online
shoppers and is growing at an estimated 30% CAGR vis--vis a global growth rate of 8
10%. Electronics and Apparel are the biggest categories in terms of sales.
Key drivers in Indian e-commerce are:
Increasing broadband Internet (growing at 20% MoM) and 3G penetration.
Rising standards of living and a burgeoning, upwardly mobile middle class with high
disposable incomes
Availability of much wider product range (including long tail and Direct Imports)
compared to what is available at brick and mortar retailers
Busy lifestyles, urban traffic congestion and lack of time for offline shopping
Lower prices compared to brick and mortar retail driven by disintermediation and
reduced inventory and real estate costs
Increased usage of online classified sites, with more consumer buying and selling secondhand goods
Evolution of the online marketplace model with sites like shop.dtdc.com ,eBay , Flipkart ,
Snapdeal, Infibeam,jewelsgalaxy.com, qnetindia.in,Dealkyahai.com and Tradus. The
evolution of ecommerce has come a full circle with marketplace models taking center
stage again.
India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675
Bn by 2016 and $850 Bn by 2020, estimated CAGR of 7%. According to Forrester, the
e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a
CAGR of over 57% between 201216.
As per "India Goes Digital", a report by Avendus Capital, a leading Indian Investment
Bank specializing in digital media and technology sector, the Indian e-commerce market
is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes
a sizable portion (87%) of this market today. Online travel market in India is expected to
grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in
size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in
2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015.
On March 7, 2014 e-tailer Flipkart claimed it has hit $1 billion in sales, a feat it has
managed to achieve before its own target (2015).
Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$24 billion) by
the year 2015 with both online travel and e-tailing contributing equally. Another big
segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily
by operator websites.
As of 2012, most of the e-commerce companies are yet to start making money. However,
due to their growth prospects, many venture capital firms such as Accel Partners have
5

invested considerably. In one of the biggest fund raising, Flipkart.com, in August 2012,
raised about INR822 crore (US$140 million). Entertainment ticketing website
BookMyShow.com raised INR100 crore (US$17 million) investment by Accel Partners.
On July 10, 2013, Flipkart announced it had received $200 million from existing
investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors
making up the additional $160 million include Dragoneer Investment Group, Morgan
Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.
Snapdeal - USD 50 million in April 13.
In Feb 2014, online fashion retailer Myntra.com raised $50 million from a group of
investors led by Premji Invest, the investment company floated by Azim Premji,
Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart
reportedly for Rs. 2,000 crores. However, cyber law and e-commerce due diligence are
still being ignored by investors and financial institutions while investing in India.

REVIEW OF LITERATURE

Consumers are motivated by product availability. Gallino and Moreno (2012) analysed the
consequences for a major US home ware retailer of implementing a buy-online-pick-up-in-store
(BOPS) system. BOPS allows consumers to search stores inventory online. If a nearby store has
the product in stock, customers have the option of picking up the good from that store within two
hours of purchasing it online. Given that consumers save on shipping costs and are able to pick
the good up at their convenience, one would expect online sales to increase. However, the
opposite occurred. Although online traffic increased, online sales within a 50 mile radius of a
store fell relative to areas unaffected by the change.9 However, this decrease was more than
offset by an increase in store traffic and sales.
The ability to locate and purchase a vast array of goods previously unavailable at conventional
retailers arguably provides a greater motivation for the rise of e-Commerce than lower prices
(Brynjolfsson et al., 2003).
Whilst conventional inventories are limited by shelf and storage constraints, internet retailers
face no such issues. Centralised warehouses and drop-shipping arrangements with distributors,
allow internet retailers to maintain an almost unlimited virtual inventory. Moreover, the
enhanced search features and personalised recommendation tools offered by internet retailers6
drastically increase product awareness exposing consumers to a wider variety of products than
was previously feasible at a conventional retailer.
Brynjolfsson et al. (2003) attempted to quantify the consumer welfare gain arising from the
enlarged product variety made available over Amazon.com. In 2000, Amazon offered over 2.3
million unique titles for sale on its website more than 23 times the size of an average Barnes &
Noble superstore.
In July 2012, PricewaterhouseCoopers, in conjunction with Frost & Sullivan, released their
report on the Australian and New Zealand online retail market. According to this report, 51% of
New Zealanders regarded lower online prices as being the most important reason for shopping
online. Such a finding appears to be tentatively supported by the academic literature.
As search costs drastically reduce, the online retail market has become increasingly integrated
(Brynjolfsson, Dick and Smith., 2010). Search engines such as Google, Yahoo! and Ask.com
allow consumers to be directly connected to manufacturers throughout the world. Shopbots
such as webjet and pricespy.co.nz automatically search major retailers, allowing consumers to
compare prices and other attributes (such as shipping time and product availability) amongst
retailers.
In a 2001 study of the US online book market, Smith and Brynjolfsson (2001) found that a
majority of shopbot consumers do not choose the lowest priced offer even though such offers
are ranked according to price. Whilst customers remain price-sensitive, those who did not select
the cheapest offer paid an average premium of 24.1%. This discrepancy can be explained by
consumers strong predilection for offers from the big 3 retailers (Amazon, Barnes & Noble and
Borders) who were found to have a $1.72 price advantage over generic retailers. This advantage
was most apparent in Amazon which benefited from a $2.40 price advantage over generic
7

retailers, and a $1.20 advantage over Borders and Barnes & Noble (Smith and Brynjolfsson,
2001). As can be seen from these results, consumers appear to use store branding as a proxy for
credibility.
With the advent of e-Commerce, the traditional view that a high exchange rate benefits domestic
retailers has been discredited (Infometrics, 2012). As the dollar appreciates, domestic retailers
are forced to compete against international retailers whose prices become increasingly attractive.
With the NZD sitting at record levels against the USD, this competition has become more
intense, squeezing domestic retailers margins in an already stagnant economy.
Recent technological and banking innovations have further facilitated the growth of eCommerce. With the advent of Visa debit cards, children as young as 13 and consumers who are
averse to credit cards now have the ability to purchase goods online or over the phone. More
significantly however, is the recent proliferation of internet capable devices, such as
smartphones, tablets and computers. With the rapid rise in internet connectivity, consumers are
likely to become more comfortable with online purchases (Infometrics, 2012).
In a pioneering study, Goolsbee (2000) assessed tax-price elasticity for online purchases. Using
data from Forrester Researchs December 1997 survey of 110,000 US households, and
controlling for a variety of factors such as metropolitan boundaries, Goolsbee (2000) assessed
the likelihood of individuals purchasing goods online concluding that the mean tax-price
elasticity for online buyers was -3.5. In other words, given the average US state sales tax rate of
approximately 6%, the enforcement of sales taxes on online purchases would potentially reduce
the number of online buyers by as much as 24%. This tax sensitivity is directly observable in the
1997 data following Goolsbees categorisation of online purchases. In categories where the
consumer was likely to avoid sales taxes, online purchases were significantly higher than
categories where sales taxes were unavoidable (Goolsbee, 2000).
Goolsbee rapidly updated this result, using data from the December 1999 survey, revising his
tax-price elasticity estimate down to -2.4 (Goolsbee, 2000). Interestingly, he also found that
whilst new internet users initially had little tax sensitivity, as they gain experience and become
aware of sales tax advantages, their tax sensitivity increased dramatically
Ellison and Ellison (2009) appear to confirm Goolsbees headline result. Using click-through
data from a shopbot, and quantity data from two websites listed on the shopbot, Ellison and
Ellison (2009) examined the effect taxes had upon US sales of computer memory chips over the
period May 2000 to May 2001. Although the shopbot did not calculate sales tax payable by the
consumer, it listed the retailers home state so that consumers could take sales tax differences
into account. Their results indicated an offline tax price elasticity of 5.94 for every 1% increase
in the offline state sales tax rate, online purchases from within that state are expected to rise by
5.94% as consumers seek to avoid the higher tax rate. This implies that if sales taxes were
enforced, online purchases would fall by approximately 30% more than Goolsbees initial
result.
Inevitably, no study is directly applicable in a different context. However, we believe that Einav
et als (2012) year-long study of eBay data is broadly applicable in New Zealand. If the
8

government were to remove the de minimis loop-hole, this predicts a 45 60% decline in
demand for offshore retailers offset by a 27% increase in demand for domestic internet retailers.
Not only would government revenue rise, but domestic retailers would be revitalised, resulting in
increased employment and higher company and PAYE taxes. We believe this result provides
clear evidence that the government should review its policy. Bailey (1998). Bailey analyzed
prices for books, CDs, and software in Internet and conventional outlets from 1996 to 1997. He
found evidence that prices on the Internet were, on average, higher than prices in conventional
outlets. In addition to analyzing a more recent time period, we refine his methodology to better
account for typical prices in both channels. We also extend his empirical tests to better analyze
differences in price levels, menu costs, and price dispersion between Internet and conventional
channels. While we rely on relatively simple econometrics for this study, a number of interesting
characteristics of Internet retailing are readily apparent: 1) Prices for books and CDs sold on the
Internet average 916% less than the identical items sold via conventional channels. The mean
price for books was $2.16 less and $2.58 less for CDs. 2) Internet retailers change prices in
smaller increments than do conventional retailers. The smallest observed price change on the
Internet was $0.01 while the smallest observed price change by a conventional retailer was
$0.35. 3) There are substantial and systematic differences in prices across retailers on the
Internet. Prices posted on the Internet differ by an average of 33% for books and 25% for CDs.
At the same time, the dispersion of prices weighted by retailer popularity reveals that Internet
markets are highly concentrated, but the retailers with the lowest prices do not receive the most
sales.

OBJECTIVES OF THE RESEARCH

1. To Study Consumers perception towards E-tailers and

Conventional Retailers
2. To understand the reasons behind the growth of online shopping
in India.

Research Methodology
The study is descriptive in nature and survey method will be used to complete the
study.

10

Sample design
Sample size:
100

Sampling element:
The sampling element will be the PGDM students of IMS Ghaziabad.

Tools for data collection

Self-designed Questionnaire will be used for collecting data. The survey will be
conducted online. The data will be collected on a scale of 1 to 5 where 1 indicate
strongly agree and 5 indicate strongly disagree with the statement.

Tools for data analysis

Reliablity test, factor analysis and one sample t-test will be used.

11

Reliability Statistics

Cronbach's Alpha

N of Items
.724

10

RELIABLITY TEST ANALYSIS

Value of Cronbachs Alpha = 0.724

Analysis- Since our value is greater than 0.5 it means that our data is reliable.
The responses given by respondents is reliable.

12

FACTOR ANANLYSIS
Null hypothesis There is no significant relationship between factors
Alternative hypothesis- There is significant relationship between
factors.

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
.691
Bartlett's Test of Sphericity

Approx. Chi-Square
199.261
df

45

Sig.

.000

Analysis- As the p value is 0.00 which is less than alpha value (0.1), therefore
null hypothesis is rejected. Hence there is relationship between factors. KMO
value was found 0.691, which is greater than 0.5 so data is reliable.

13

Rotated Component Matrix

Component
1

q2

.857

q3

.632

q7

.570

q6

.566

q4

.547

q8

.771

q9

.725

q1

.645

q5

.846

q10

.869

14

Factor name

Eigen value
Total

Variable convergence

% of
Variance

1.

2.

3.
4.

There are four factors which play a key role in Consumers Perception
towards E-tailers and Conventional Retailers.

15

Total Variance Explained

Comp
onent

Total

Initial Eigenvalues

Rotation Sums of Squared Loadings

% of Variance Cumulative %

Total

% of Variance Cumulative %

3.046

30.456

30.456

2.262

22.621

22.621

1.316

13.163

43.619

1.645

16.452

39.073

1.269

12.689

56.308

1.477

14.768

53.841

1.033

10.328

66.635

1.279

12.795

66.635

.880

8.802

75.437

.650

6.499

81.936

.595

5.952

87.888

.478

4.781

92.670

.395

3.948

96.618

10

.338

3.382

100.000

Extraction Method: Principal Component

Analysis.

One-Sample Statistics
N

Mean

Std.
Deviation

Std. Error
Mean

q1

100

3.23

1.213

.121

q2

100

3.48

1.132

.113

q3

100

3.61

1.222

.122

q4

100

3.56

1.140

.114

q5

100

3.38

1.080

.108

q6

100

3.47

1.185

.118

q7

100

3.45

1.086

.109

q8

100

3.30

1.030

.103

q9

100

3.28

1.138

.114

q10

100

2.93

1.075

16

.108

One-Sample Test
Test Value = 3

Sig. (2tailed)

df

Mean
Difference

90% Confidence Interval

of the Difference
Lower

Upper

q1

1.896

99

.061

.230

.03

.43

q2

4.239

99

.000

.480

.29

.67

q3

4.993

99

.000

.610

.41

.81

q4

4.913

99

.000

.560

.37

.75

q5

3.517

99

.001

.380

.20

.56

q6

3.968

99

.000

.470

.27

.67

q7

4.144

99

.000

.450

.27

.63

q8

2.913

99

.004

.300

.13

.47

q9

2.461

99

.016

.280

.09

.47

q10

-.651

99

.517

-.070

-.25

.11

17

1 Products sold on E-tailers are always cheaper than Conventional retailers.

HO - Products sold on E-tailers are NOT always cheaper than Conventional
retailers.
H1 - Products sold on E-tailers are always cheaper than Conventional
retailers.
Significant value is .061, which is less than 0.1 hence reject HO

CONCLUSIONS
1.
2.
3.
4.
5.

Products sold on E-tailers are always cheaper than Conventional retailers.

The quality of the products is same on E-tailers and Conventional retailers.
E-tailers are only good for electronics.
Conventional retailers are losing their popularity among youth.
Biggest demerit of E-tailers is that we cant touch and feel the products

before buying.
6. Many Indians dont trust online shopping.
7. E-tailers are using aggressive marketing strategies which are sometimes
unethical.
8. E-tailers deliver goods on time.
9. Only the upper class and the upper middle class people do online shopping
in India.
10. Poor logistics is NOT the biggest challenge for E-tailers.

QUESTIONNAIRE

Topic- A study of Consumers perception towards Conventional retailers and E-tailers.

18

AgeGender-

Rate the questions on the scale of 1 to 5. Scale rating are 1=

2=
3=
4=
5=

Strongly agree
Agree
Neither agree nor disagree
Disgree
Strongly disagree

1.
2.
3.
4.
5.

Products sold on E-tailers are always cheaper than Conventional retailers.

The quality of the products is same on E-tailers and Conventional retailers.
E-tailers are only good for electronics.
Conventional retailers are losing their popularity among youth.
Biggest demerit of E-tailers is that we cant touch and feel the products

before buying.
6. Many Indians dont trust online shopping.
7. E-tailers are using aggressive marketing strategies which are sometimes
unethical.
8. E-tailers deliver goods on time.
9. Only the upper class and the upper middle class people do online shopping
in India.
10. Poor logistics is the biggest challenge for E-tailer

19

Bibliography
1.
2.
3.
4.
5.
6.

www.forbes.com/.../five-trends-driving-traditional-retail
www.capvision.com/media/21
www.ecommerce.about.com ... Ecommerce The Basics of Ecommerce
www.studymode.com Home Entertainment Television Shows
www.philosophe.com/ecommerce/traditional
www.wikipedia.org/wiki/E-commerce

20