UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------------------------------------- Dang Hue Phuong SOLUTIONS TO ENHANCE CUSTOMER TRUST TOWARDS ONLINE SHOPPING AT LAZADA VIETNAM MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2015 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------------------------------------- Dang Hue Phuong SOLUTIONS TO ENHANCE CUSTOMER TRUST TOWARDS ONLINE SHOPPING AT LAZADA VIETNAM ID: 22130057 MASTER OF BUSINESS ADMINISTRATION SUPERVISIOR: NGUYEN THI NGUYET QUE .PhD Ho Chi Minh City – Year 2015 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST TABLE OF CONTENTS CHAPTER 1 PROBLEM IDENTIFICATION .1 Overview of The Company .2 Problem Situation Analysis .1 Justification of problem existence .2 Justification of problem importance. 08 CHAPTER 2 ALTERNATIVE SOLUTIONS .1 Exploration of potential causes .2 Cause and effect map of low customer trust. 17 CHAPTER 3 SELECTED SOLUTIONS AND CHANGE PLAN .1 Justification of The Best Solution. 26 CHAPTER 4 SUPPORTING INFORMATION .1 Interview Transcripts and Explanation in detail.2 Customer Trust and WebQual Questionnaire .3 Grouping Result of Customer Trust and WebQual Questionnaire.
66 i!! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST LIST OF MAIN FIGURES Figure 1.3: Initial cause and effect map .4: Effects and Consequences of Low Customer Trust .1: Causes of Low Customer Trust .2: The cause-and-effect map of Low Customer Trust. 15 ! ii!! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! CHAPTER 1 PROBLEM IDENTIFICATION 1.1 Overview of The Company Nowadays shopping online become a modern trend in the world because its convenience and fast. Therefore, it has been growing rapidly not only in developed countries but also in developing countries. According to VECITA – Vietnam E-commerce and Information Technology Agency, Vietnam has 90.73 million people and 58% in that go online to purchase in 2014.
It is a significant number to show that Vietnam is also start up to grown in e-commerce now. RECESS LIMITED COMPANY (“Lazada”) Main address : Floor 15th, Empress Tower, 138-142 Hai Ba Trung, Dakao ward, District 1, Ho Chi Minh City Phone number : (08) 3942 1188 Fax: (08) 38 3941 4223 VAT code : 0308808576 Lazada was born in early 2012 at Vietnam to target serving more than five millions consumers. The investor of Lazada is The Group of Rocket Internet – The International Group of Information and Technology. They came from Germany and have been set up at six countries over Asia now, included Philippines, Indonesia, Singapore, Malaysia, Thailand and Vietnam.
With all experiences, it quickly developed in 2014 with 500% traffic growth and 550% revenue growth year on year in Vietnam’s e-commerce market (Figure 1. Additionally, in same year, ! 1! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! Lazada has possessed 26% of market share and keep the first position in Vietnamese e- commerce market (Table 1.1 – The growth of traffic and revenue in Lazada Vietnam YOY in 2014 Source: Lazada Marketing Regional analysis 30%! 26%! 25%! 19%! 18%! 20%! 15%! 10%! 6%! 5%! 2%! 2%! 1%! 1%! 1%! 1%! 0%! ! Table 1.1 - Market share of Vietnam e-commerce in 2014 Source: VECITA report ! 2! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! However, with the data as Table 1.2 below from March 2015 to October 2015, the traffic of Lazada drop down significantly from 49.9% to 33% from July to August in total E- commerce’s market share (Figure 1. Specifically, average traffic people came to Lazada website daily was about 500,000. But recently, it was about 300,000 to 350,000 sessions per day.
Additionally, the quantity of orders on Lazada decreased also. In July, total number orders of Lazada was 1.5 millions with the basket size about fifty dollars per order, drop down 1.2 millions in August with the basket size just only about thirty five to forty dollars per order. Month March April May June July August September October (2015) Lazada 36.2 – Market share of Lazada from March to August 2015 Source: Lazada Marketing Regional analysis Figure 1.2 – Market share of Vietnam e-commerce in July and August 2015 Source: Lazada Marketing Regional analysis ! 3! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! In additionally, customers’ complains about quality of products also increased and many articles, which affect badly to reputation of Lazada appeared. With this situation, Lazada kept spending the Marketing expense rate consistantly or even higher from 100% to 121% (Table 1.3) to calm down social media and push the traffic, orders and net merchandise value (NMV) increase as before.
% MKT expenses % NMV Jun 95% 89% Jul 100% 96% Aug 121% 68,8% Table 1.3– Marketing expense and NMV rate of Lazada Vietnam from Jun and August 2015 Source: Lazada Marketing Regional analysis From that, we could see there is a existent problem in Lazada Vietnam organization which leads to symptoms of decreasing traffic, order and NMV strangely, also many complains and negative articles. The crisis mission now is to find out the real problem that existed in the organization to pull back customers to purchase on Lazada website. That is the only way to help increase NMV of company to remain its first rank in the e-commerce market. ! 4! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! 1.2 PROBLEM SITUATION ANALYSIS 1.1 Justification of problem existence To understand how internal department acknowledge about the problem of organization, author started to interview nine employees in Lazada, included, one in team Sale, one in team Operation, one in team LEX, one in team Commercial, and two in team Customer Service, one in team Finance Accounting and finally two in team Marketing.
Moreover, with three more managers, Head of Marketing, Head of Campaign and Head of Partnership in Lazada to find out how the level C group and consolidate the problem of company (refer to session 4.1-Interview Transcripts in chapter 4). The result came to Figure 1.3 – Initial cause and effect map as below. In three main factors such as more competitors, investing Marketing expenses ineffectively and decreasing purchase intentions from interview internally, author continuously choose the main factor to discover the real problem of the company, which is the most important and possible to solve at Lazada now. Firstly, to more competitors’ factor, this problem is external problem with certainty of nature in the marketplace.
While there is existent need in society, it will appear suppliers and competitors, too. It could not be exceptional with the rapid speed development of Vietnam e-commerce nowadays. It is also external problem of all organizations, not only Lazada. To solve problem in organization, it could not be designed in this short-term research.
It needs to collect data for general e-commerce situation to decide. Secondly, to investing marketing expense ineffectively, author could not decide exactly at her position Partnership Manager in Marketing. This is a overall structure topic, which involved not only level C of company but also International Group – Rocket Internet of Lazada’ strategy. Likewise, about Marketing expenses, it will be necessary to a detailed plan with more analysis ! 5! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! and diagnosis.
And certainly, it will mostly depend on the fact of investment situation for Lazada. Therefore, the author finally and carefully decided to select Decreasing purchase intentions/ behaviors factor group to do the research. In this group, Low Customer Trust is the central problem, which many Lazada customers pay more attention to solve in this research.3– Initial cause-and-effect map (Detail of Figure 1.3 are explained in chapter 4) More competitors in VN e-commerce recently Wrong target customers Investing MKT Don’t have VIP expenses Loyalty Program ineffectively Buying Multi - Organizational Assurance policies Long-time refund order Return Drop down Unrealistic images Long-time traffic and of products delivery NMV Decreasing Fake products purchase Decreasing Quality Low customer trust intentions / of product behaviors Orders were Discount price still canceled expensive because of resellers and out of stock Customers’ privacy were divulged ! 6! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! Customer Trust is firm belief or confidence in the honesty, integrity, reliability, confident expectation, hope in future and justice of customers who purchase products or service of an organization (John Todor, 2006). Therefore, Customer Trust is emphasized as a main factor determines customer loyalty (D’Ambra and Xiao, 2010).
According to Trust Barometer of Edelman in 2005, 80% of people stop buying products or services from companies when their trustworthiness comes into question. Otherwise, Strader and Ramaswami (2002) discovered that customers could pay more about 7% to 10% for sellers who they trusted. Customer Trust online is defined by the security of the website (Schneiderman, 2000) and the intention of decision purchasing (McKnight et al. There are three causes affect to Customer Trust on e-commerce such as company reputation, service quality and website quality (Kim and Tadisina, 2007).
Refer to the questionnaire and results of questionnaires in chapter 4, with ninety two survey questionnaires of customers, sixty four customers used to buy online, and twenty nine persons used to buy on Lazada website, surprisingly fourteen of them agreed or completed agreed (that means 48,28%) that they don’t trust to buy on Lazada by unrealistic images of product, ten others are neutral (that means 34,48%) and five lefts are disagreed (that means 17,24%). It means almost half of 48% interviewees who used to buy on Lazada website confirm that they don’t trust to buy products on Lazada website. Thus, this result number shows that Low Customer Trust is existent and worth to solve in Lazada now. Moreover, author continuously interviewed five different online shoppers to convince about why author chose Customer Trust as the main central problem of Lazada (refer to Table 4.
All of them were asked about their customer trust to three famous e-commerce site in Vietnam now. To Lazada, there are four on five interviewees feel that they don’t believe ! 7! LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SOLUTIONS TO ENHANCE CUSTOMER TRUST ! ! or afraid of service delivery. To Adayroi, there are three of five interviewees, who doubt because it is still young. To Tiki, there are also three of five interviewees, who don’t know what to buy on site.
However, Adayroi has just opened but they knew how to use Marketing tool to attract customer trust as they promise to deliver products only during 6 hours. And they are still successful until now. Because Tiki has focused on book category so that they are quite successful to get their segmentation customer trust. From these proofs, author concluded that Lazada should to improve their customer trust while it is not only their problems but other competitors are doing better to improve this factor.2 Justification of problem importance Literature review outlined that in e-commerce, trust has been essential affected to customers’ purchasing intention/ behaviors (Meng-Hsiang Hsu et al.
According to Reichheld and Schefter (2000) if a company could retain a customer for 5%, they will increase profit for 25-95%. Thus, it is very important to solve the problem customer trust in Lazada case to avoid losing profit and NMV of the company. Another consequence of customer trust performance is Word Of Mouth (WOM) intention. Customer trust directly influences word of mouth intention (Achmad Nizar Hidayanto et al.
Customers who buy online are internet users so that they interact actively each other on the internet. Many customers usually share their opinions and experiences of a product or service which they have just bought on internet. Hence, if they are good products or service, it will keep reputation for the company.