UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS ONLINE SHOPPING VS. IN-STORE SHOPPING: AN ANALYSIS OF CHOICE BEHAVIOR BY PHAM NHU MAN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS ONLINE SHOPPING VS. IN-STORE SHOPPING: AN ANALYIS OF CHOICE BEHAVIOR A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By PHAM NHU MAN Academic Supervisor: Dr. TRUONG DANG THUY HO CHI MINH CITY, DECEMBER 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT I would like to express my deep gratitude to my supervisor Dr.
Truong Dang Thuy, for his guidance, support and encouragement, whereby I could complete the program. I would like to thank Dr. Pham Khanh Nam for his valuable advices for my thesis. I would like to thank Mr.
Do Huu Luat for his support and guidance during the process of data collection. I also would to express my thanks to VNP officers who support me during my thesis process. I would like to thank my family for their encouragement and support during my master program. i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT This study examines the consumer’s choice between online and in-store shopping for a specific product of books.
For this purpose, a survey of 352 book buyers was implemented to collect revealed and stated preference data. Conditional logit and mixed logit models are used to analyze the choice. We found that 40 minute travelling to store and come back is worth VND 22,303 to VND 33,849, and that willingness to pay for one day earlier delivery is from VND 15,617 to VND 19,028. We also found that shoppers are more sensitive to online price than to price in store.
Those who are office workers and those who spend more time to access the internet are more likely to shop online. Moreover, in-store shoppers with higher income are less sensitive to price than those who have lower income. Especially, shoppers with high income are more concerned about travel time than those with low income. The female shoppers are more patient waiting for the delivery.
In addition, respondents evaluated that the convenience of payment method, the quality of books, ability to read books before purchasing and large variety offered products, are important and effect partially on their choice. ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS LIST OF TABLES. v LIST OF FIGURES. vi CHAPTER 1: INTRODUCTION.
Overview of Vietnam’s retail sector. Trend in shopping behavior in Viet Nam. Research questions and objectives. The scope of study.
Organization of the thesis .6 CHAPTER 2: LITERATURE REVIEW. Binary Choice models. Frequency of online shopping. Random Utility Models (RUM).
Structural Equation Models (SEM). 15 CHAPTER 3: RESEARCH METHODOLOGY. The choice of online shopping versus traditional store shopping. Revealed preference data: methods of collection.
The stated preference data: methods of collection including choice experimental design. The stated preference method. Choice of experimental design. Sample size and sampling.
38 CHAPTER 4: RESEARCH RESULTS. The Basic model. The Full model. Valuation indicators of time and cost attributes.
Store attributes and the choice probability. 61 CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS. 69 iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail. 76 iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 3.
1: The store choice attributes description. 2: Individual characteristics variable description .3: Attributes and levels in stated choice experimental design .4: The attribute’s levels of online and physical store .5: Designed choice sets.6: The presentation of a sample choice set 1 in block 1 .1: Survey location and number of respondents .2: Descriptive statistics of the sample .3: Descriptive statistics analysis of consumer attitudes .4: Revealed data between online shoppers and in-store shoppers .5: Summary statistics of alternative-specific attributes .6: Estimation results of the basic model .7: Estimation results of the full model .8: Willingness to pay of time and cost attributes. 57 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 1.1: Vietnam’s retail sales and online retail sales from 2013 to 2015 .2: Percentage online shoppers of the online accessing in Vietnam .1: Choice model between online and in-store shopping .1: Frequency of Internet access and Internet access devices. 2: The percentage change in online shopping probability given the change in purchase price, shipping fee and delivery time.
3: The percentage change in online shopping probability given the change in purchase price, shipping fee and delivery time. 4: The percentage change in online shopping probability given the change in purchase price, shipping fee and delivery time. 67 vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1. Overview of Vietnam’s retail sector Vietnam has recently emerged as an attractive retail market thanks to the young population, with 70 percent in the age between 15 and 64.
It is foreseen that the market size in Vietnam increases in terms of population as well as purchasing power. The urban population, which is the most potential for the retail market, is expected to increase most rapidly at 2.6 percent annually from 2015 to 2020, the highest in the region (Worldbank, 2015 and United Nation, 2014). The urban population is further increased by the process of urbanization and rural- urban migration. In addition, Vietnam appears to be the most energetic emerging economy with a rising living standards and intensifying disposable incomes.
The Boston Consulting Group (2013) has remarked that Vietnam has the highest growth speed of the wealthy and middle classes in the region, which is predicted to increase by 21 million compared to 12 million from 2012 to 2020. These consumers, whose monthly income is higher than VND 15 million (USD 714), will be a key group of potential customers for retailers. In addition, the improving infrastructure is also a factor that makes Vietnam an alluring market for retailers. Many international retail groups as Metro Cash & Carry, BigC, Emart, Aeon, Takashimaya, AuchanSuper and many others have entered the market.
These international retailers, together with domestic players such as Co-op Mart, Vincom Mall have created intense competition in the retail sector of Vietnam. CBRE (2014) remarked that among the cities in the Asian for retail market enlargement, Hanoi and Ho Chi Minh City were rated in the top 10 municipalities. Hanoi was ranked third after Shanghai and Beijing as the metropolis with the vivid retail market in the area. In recent years, Vietnam’s retail industry has manifested effective growing rates, with retail revenues rising by 60 percent in the period of 2009 – 2013, and is estimated to approach US$109 billion in 2017.
Therefore, the retail sector has an enormous potential for new investors. The two main retail channels are traditional retail and electronic tailing (e-tailing). Traditional retail in the form that exchanges of goods or services directly to customers in the general stores, convenient stores, supermarkets, hypermarkets (a superstore incorporate of 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com a department store into a supermarket) or shopping malls. Thanks to the advancement of information technology and internet network facilities, e-tailing has been established.
E- tailing requires the customer’s access the Internet and visiting the stores’ websites in order to purchase goods or services. In online shopping, the purchasers can see the images of the products, explore information about the product specifications, the manufacturer, ingredients, texture, features, prices, and finally can choose the suitable payment methods. All of these are completed by those mouse clicks. By that way, the shoppers save their time, efforts and vehicles to transport products.1 shows the online retail sales in comparison with total retail sales from 2013 to 2015 in Vietnam.
The sales of e-tailing, although being low, is increasing rapidly by more than 35 percent annually. 160 144,2 140 120 110 100 80 66,5 60 40 20 2,2 2,97 4,07 0 2013 2014 2015 Online retail sales (billion USD) Total retail sales (billion USD) Figure 1.1: Vietnam’s retail sales and online retail sales from 2013 to 2015 Source: General Statistics Office of Vietnam (2013, 2014, 2015). Trend in shopping behavior in Viet Nam The rapid growth of Information and Communication Technologies (ICT) resulted in the remarkable change in consumer’s behavior and their preferences. Consumers tend to prefer products or services that best serve the convenience of their busy lives.
Online shopping meets some requirements of convenience. Nielsen (2014) stated that Vietnam is ranked number three in ASEAN region after Singapore and Philippines regarding the uses of mobiles for online shopping, accounted for 58 percentage of people using mobile phones to access 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com the internet. Furthermore, social networks such as Facebook, Twitter, Zalo, Youtube, and online shopping applications like Lazada, Adayroi, Shoppee, Tiki and many others are creating great community connections in the present society. A huge percentage of Vietnam online shopping is conducted informally via these social networks and applications.
The increasing busy life, the convenience of online shopping, and the development of ICT has made online shopping growing rapidly. VECITA (2014) revealed that Vietnam online shopping sales revenue was valued US$2.97 billion with online purchase per capita was estimated at USD145 per year, accounting for 2,12% of total retail sales. The most purchased products were fashion items and cosmetics (28% of total online sales), furniture and electronics (25%), computer and phones (16%), food and beverage (16%) and industry and construction (15%). VECITA (2015) indicates that the average per capita online purchase spending was estimated at 160 USD annually, revenue reached 4.07 billion USD, up 37% comparing to 2014 and accounting for around 2.8% of total retail sales.
The best purchases were clothing, footwear, cosmetic (32% of total online sales), followed by technology and electronic equipments; household appliances; books, stationery, flower, and gifts.2 presents the percentage of online shoppers account for total number of Internet access in Vietnam.2: Percentage online shoppers of the online accessing in Vietnam Source: VECITA (2013, 2014, 2015). The online retail sales in Vietnam, ranging from 2 to 5% of total sales, is comparable to other countries in the region. However that ratio is still lower than country such as China (13. This implies there 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com may be great potential for the e-tailing sector in Vietnam.
And studying the behavior of shoppers to learn what drives them to online shopping may help the sector to grow. Research questions and objectives The main goal of this study is to analyze the consumer choice between online shopping and in-store shopping. Particularly, the study aims at identyfying attributes that affect the choice of consumers. In other words, what can push people are more likely to shop in-store? What can drive consumers towards online shopping? We examine factors related to the time and monetary costs for shopping that affect the choice between online and in-store channel using a random utility framework.
Factors such as price, ordering time, travel time and costs, delivery time and other attributes of shopping are considered. These factors determine utility and under the random utility theory, we assume that consumers would choose online or physical store in order to maximize utility. A random utility model with time and money attributes is employed to examine the store choice for shopping books. Other factors related to the consumer such as socio-demographic and attitudes are also considered as factors affecting the choice.
These issues directly influence the choice of choosing either online shopping or in-store shopping.