The importance of online retailers' ethics for traditional, online and multichannel customers

This is a self-archived version of an original article. This version may differ from the original in pagination and typographic details. Author(s): Title: Year: Version: Copyright: Rights: Rights url: Please cite the original version: CC BY-NC-ND 4.0 https://creativecommons.org/licenses/by-nc-nd/4.0/ The importance of online retailers' ethics for traditional, online and multichannel customers © Authors, 2022 Published version Skippari, Mika; Kajalo, Sami; Lindblom, Arto Skippari, M., Kajalo, S., & Lindblom, A. (2022). The importance of online retailers' ethics for traditional, online and multichannel customers. In O. Niininen (Ed.), Contemporary Issues in Digital Marketing (pp. 119-129). Routledge. https://doi.org/10.4324/9781003093909-15 2022 11 The importance of online retailers’ ethics for traditional, online and multichannel customers Mika Skippari, Sami Kajalo and Arto Lindblom Introduction Issues relating to ethics and corporate social responsibility are becoming increasingly important for determining retailer performance (Ganesh et al., 2010) and consumer behaviour (Vitell, 2003) in both ofine and online retail settings. Retailers use various strategies to address their ethical practices, which can help them establish and maintain long-term relationships with their customers (Roman and Ruiz, 2005). Consumers are increasingly aware of and concerned about retail ethical issues, such as deceptive practices of retailers (e.g. the exaggeration of product qualities and using aggressive and manipulative selling tactics) and the safety of transactions (e.g. privacy policies and warranties) (Miyazaki and Fernandez, 2001; Roman, 2010). Earlier research on consumer ethics in the retail context has largely focused on exploring how consumers perceive retailers’ ethical behaviours or actions and how these perceptions afect consumers’ behavioural intentions (see Limbu, Wolf, and Lunsford, 2012). Most of this research has been conducted in the traditional retailing context. Due to the recent growth of online retailing, many scholars have begun investigating consumers’ perceptions regarding online retailing (Limbu, Wolf, and Lunsford, 2011, 2012; Roman, 2007, 2010; Roman and Cuestas, 2008). It is largely acknowledged that ethical issues in online retailing are diferent from the ethics of traditional brick-and-mortar retailing (Limbu et al., 2012). Moreover, ethical issues have emerged as one of the most critical challenges to online shopping; it is vital for online retailers to engage with their consumers in a secure, confdential, fair and honest manner that ultimately protects consumers’ interests (Limbu et al., 2011). Many early contributions to consumer ethics in online retailing were conceptual and had a limited focus on consumers’ privacy and security issues (Roman, 2007). More recently, related empirical research has been increasing (Adam, Aderet, and Sadeh, 2007; Limbu et al., 2011, 2012; Lu, Chang, and Yu, 2013; Roman, 2007; Roman and Cuestas, 2008; Yang et al., 2009). However, this research has largely focused on investigating the views of online shoppers; few studies have examined the ethical perceptions of consumers using diferent marketing channels. Contemporary consumers are increasingly using multiple channels when making purchases, and it has been suggested that those who shop online behave in fundamentally diferent ways compared to traditional retail shoppers (e.g. Rohm and Swaminathan, 2004; Srinivasan, Anderson, and Ponnavolu, 2002). As noted by Ganesh et al. (2010), we need more empirical consumer research based on responses from shoppers who shop in traditional and online formats. Therefore, in the increasingly important multichannel DOI: 10.4324/9781003093909-15 120 M. Skippari, S. Kajalo and A. Lindblom environment, it is essential to understand consumer considerations regarding retailer ethics in various marketing channels. In this chapter, we draw on previous research on retailing ethics and consumers’ channel selection to examine how consumers’ perceptions of online retailer ethics vary among consumers using diferent purchasing channels. We utilise Roman’s (2007) framework for analysing Consumers’ Perceptions regarding the Ethics of Online Retailers (CPEOR), which includes the dimensions of security, privacy, non-deception and fulflment. With this framework, our aim is two-fold. We frstly investigate the importance of ethics of online retailers on channel selection among consumers by examining how consumer views about online retailing ethics difer between traditional, online and multichannel shoppers. Secondly, we examine how consumers’ patronage frequency afects their views about the importance of online retailing ethics. The emergence of multichannel shopping Consumers’ channel selection, which is one of the most relevant DM issues (Leefang et al., 2014: Liu, Lobschat, and Verhoef, 2018 – see Further reading), afects current retailing practices and research. Internet-based channels (i.e. online and mobile channels) and advanced technologies have especially created new and innovative opportunities for retailers’ marketing activities and improved the fexibility of their marketing decisions (Verhoef, Kannan, and Inman, 2015). It has been argued that the emergence of digitalisation mixed with the current COVID-19 pandemic is accelerating shifts in consumer behaviour (Pantano et al., 2020), which, in turn, enhances disruption in the retailing industry. This was recently witnessed by increasing numbers of store closures and bankruptcies by traditional retailers, such as Toys ‘R’ Us, Radio Shack and Circuit City (Kahn, Inman, and Verhoef, 2018). Retailers operate in a digitalised environment, which allows customers to work with a single organisation to search for information, purchase products and return products through one or more of the following channels: bricks-and-mortar retail stores, salespersons, mail-order catalogues, telephone sales, online websites and mobile devices (Dholakia, Zhao, and Dholakia, 2005; Kumar and Venkatesan, 2005; Piotrowicz and Cuthbertson, 2014). Consumers are also increasingly shopping across multiple channels in diferent stages of the purchase process, and separate channels serve unique purposes (Dholakia, Zhao, and Dholakia, 2005). For instance, a consumer may use a digital channel for information searching and a physical store for viewing and examining the product but return to a digital channel to make the purchase (Kumar and Venkatesan, 2005). The customer journey is no longer a linear experience that can be described by a purchase funnel model; rather, it is a 24/7, multichannel, non-linear social customer experience (Lemon and Verhoef, 2016). In this digitalised environment, traditional retailers’ conventional operating logic based on tempting customers with broad assortments, low pricing and extended store hours is being challenged. They face increasing pressure to become multichannel retailers by extending their operations to online retailing. Such a transformation is not easy, and it includes both opportunities and challenges for a retailer. Multichannel consumers are potentially more valuable than consumers that rely on a single channel because they spend more money, shop more frequently and interact with the retailer more frequently (Kumar and Venkatesan, 2005). Other studies show that adding a new channel has a positive efect on customer loyalty and frm value by increasing customer revenue, decreasing The importance of online retailers’ ethics 121 search costs and providing better service outcomes to consumers (Homburg, Vollmayr, and Hahn, 2014). However, because consumers have become multichannel customers, frms should provide a strong seamless experience across and within multiple channels to attract and create loyal customers (Verhoef, Kannan, and Inman, 2015). In the digitalised multichannel retail environment, a key challenge for retailers is understanding the diferences between traditional, online and multichannel customers and knowing how to serve all three groups proftably. As noted by several scholars, all three types of consumers difer signifcantly; those who shop online behave in fundamentally diferent ways compared to traditional retail shoppers (e.g. Rohm and Swaminathan, 2004; Srinivasan, Anderson, and Ponnavolu, 2002). The primary factors identifed by past research as important discriminators of online and traditional retail shopping include convenience, perceived risk and ability to search for information about products and price (Ganesh et al., 2010). In addition, recent research has address the role of ethical considerations among consumers using various purchasing channels (e.g. Roman, 2010; Limbu, Wolf, and Lunsford, 2011). Consumers’ perceptions regarding online retailers’ ethics in a multichannel environment Consumers’ ethical beliefs and practices and their perceptions of a retailer’s ethics have signifcant efects on consumer behaviour, and they manifest in diferent ways in various channels. In the traditional ofine retailing context, deceptive and manipulative practices of retailers engender consumers’ distrust, decrease consumer satisfaction and weaken consumers’ loyalty towards a retailer (Roman, 2003; Roman, 2010; Roman and Ruiz, 2005). Compared to the ofine context, consumers in online retailing have diferent resources and opportunities to evaluate retailers’ ethics (e.g. lack of opportunities for face-to-face interactions between consumers and retailers in online retailing) (Roman and Cuestas, 2008). While brick-and-mortar stores can address their ethical behaviour through physical factors, such as store outline or employee conduct, Internet retailers must rely on ofering high-trust persuasive communication to build consumer trust (Grewal, Iyer, and Levy, 2004). Research has also shown that consumers perceive risks (e.g. fnancial risk, product risk and convenience risk) diferently in ofine and online settings (Forsythe et al., 2006). In general, consumers tend to perceive a higher level of risk when purchasing on the Internet compared to traditional retail formats. However, online retailers’ ability to ofer safety cues tends to lower consumers’ risk perceptions (van Noort, Kerkhof, and Fennis, 2008), and this efect is stronger among online than ofine consumers (Biswas and Biswas, 2004). In addition, by ofering reliable privacyand security-related statements on their websites, online retailers can increase consumers’ trust and purchase intentions (Adam, Aderet, and Sadeh, 2007; Miyazaki and Fernandez, 2001; Pan and Zinkhan, 2006). Recent empirical research has largely focused on examining consumer perceptions regarding online retailer ethics. This line of research has focused on measuring the perception of an online retailer’s integrity and responsibility in dealing with consumers in a secure, confdential, fair and honest manner. Many of these studies are based on a scale to measure CPEOR (Roman, 2007), which includes the four dimensions of security, privacy, non-deception and fulflment/reliability. Roman (2007) shows that these four dimensions are strongly predictive of online consumers’ satisfaction and trust. 122 M. Skippari, S. Kajalo and A. Lindblom Roman’s (2007) framework has been utilised in several subsequent studies, and it has proven to be a robust scale for investigating various antecedents and consequences of CPEOR. Roman and Cuestas (2008) examine the efect of perceived ethics on general expertise and WOM testimonials and show that consumers’ general Internet expertise signifcantly improves CPEOR, which is strongly predictive of consumers’ WOM. The results of Yang et al. (2009) show how ethics associated with retailers’ websites can be a signifcant predictor of consumers’ trust in a website. In addition, Limbu, Wolf, and Lunsford (2012) show that perceived ethics of an Internet retailer’s website signifcantly afect consumers’ trust and attitudes towards the website and eventually have positive impacts on purchase and revisit intentions. Scholars have also examined the relationship between perceived online ethics, satisfaction and loyalty (Roman, 2010; Limbu et al., 2011), providing strong empirical support for the mediating role of consumer satisfaction in the relationship between perceived online retailer ethics and consumer loyalty. Roman (2010) also shows that the deception– satisfaction link is moderated by the type of product, the consumer’s attitude towards the Internet and consumer demographics. Accordingly, Lu, Chang, and Yu (2013) examine the link between CPEOR and e-loyalty intention and fnd that increased CPEOR should lead to increased repurchase behaviour. However, the existing literature on consumers’ perceptions regarding online retailers’ ethics has largely focused on investigating the views of online shoppers. Contemporary consumers are increasingly using multiple channels when making purchases; therefore, it is essential to understand how views on online retailing ethics difer between traditional, online and multichannel shoppers. Although previous literature has highlighted the different characteristics of traditional, online and multichannel customers and their preferences, less is known about how consumer perceptions regarding online retailer ethics vary across diferent customer groups. Since the nature of ethical issues varies between online and ofine retailing, we expect to see variation in the way of how consumers using different channels perceive the importance of retailer ethics. Moreover, we assume that the consumers’ patronage frequency afects their views about the importance of online retailing ethics. This is the focus of the empirical study presented here. Methodology This study focuses on consumers’ attitudes towards and ethical perceptions of online retailing. We collected data on such attitudes by surveying Finnish consumers. To gather the necessary data, we collaborated with a department store chain that sent email requests to their loyalty programme customers to take part in an online survey. To capture consumer views across diferent channels, we sent the survey to traditional shoppers, online shoppers and multichannel shoppers. In total, 1,000 emails were sent to customers who had bought only from a brick-and-mortar department store (traditional shoppers), 1,000 were sent to those who had bought only from the webstore (online shoppers) and 1,000 were sent to those who had bought from both channels (multichannel shoppers). Only customers who had made a purchase during the last three months were accepted in the sample. We received usable responses from 684 respondents: 216 traditional shoppers (21.60%), 224 online shoppers (22.40%) and 244 multichannel shoppers (24.40%) (Table 11.1). Table 11.1 shows that the majority of respondents in all three groups are female. This refects the target of our study, which was a department store chain. Among   The importance of online retailers’ ethics 123 Table 11.1 Demographic respondents’ characteristics Traditional shoppers Online Multichannel Total (N = 216) shoppers shoppers (N = 684) % (N = 224) (N = 244) % % % Gender Female 78.1 66.5 84.5 76.6 Male 21.9 33.5 15.5 23.4 Age <19 0.5 0.9 0.4 0.6 19–29 7.0 9.1 16.3 11.0 30–39 13.6 19.5 29.3 21.1 40–49 28.0 27.3 28.0 27.8 50–59 29.9 25.9 19.7 25.0 60 or older 21.0 17.3 6.3 14.6 Household monthly income in euros <1,000 6.4 8.8 5.1 6.7 1,000–1,999 12.3 20.5 15.4 16.1 2,000–2,999 25.1 16.7 22.2 21.3 3,000–3,999 13.8 23.3 18.8 18.7 4,000–5,999 28.6 20.5 26.1 25.0 6,000–7,999 7.9 6.5 7.3 7.2 8,000 or more 5.9 3.7 5.1 4.9 How many times have you ordered products from web stores during the last three months? 0 24.9 1.4 0.4 8.4 1–3 57.7 42.3 40.5 46.5 4–6 13.1 34.5 41.7 30.4 7 or more 4.2 21.8 17.4 14.7 How frequently do you use the Internet? Daily 86.4 94.1 90.1 90.2 Several times a week 12.7 4.1 8.7 8.4 Once a week 0.9 0.5 1.2 0.9 Once a month 0.0 1.4 0.0 0.4 online shoppers, there are more men than in the other groups. Regarding age distribution, online shoppers and multichannel shoppers tend to be younger than traditional shoppers. There is no signifcant diference in income level between the shopper types. As expected, the number of online purchases from any web store in the last three months is signifcantly higher among online and multichannel shoppers. Table 11.1 also shows that all three groups are active Internet users; even among the traditional shoppers, 86.4% use the Internet daily. These fndings suggest that the traditional shopper group might shop online. Thus, their responses are likely to refect the reasons why people might not become online or multichannel shoppers. Overall, Table 11.1 supports our results regarding department store customers, and the data provide possibilities to investigate the diferences between the three studied groups of shoppers.   124 M. Skippari, S. Kajalo and A. Lindblom Results We frstly investigated how channel selection is related to customers’ views regarding online retailer ethics. We used Roman’s (2007) four-dimensional scale (security, privacy, non-deception and fulflment/reliability) to capture the consumers’ perceptions regarding online retailer ethics. We then used a one-way ANOVA test to examine the relationships. Table 11.2 shows how traditional shoppers, online shoppers and multichannel shoppers difer in their views towards the ethics of online retailing. Table 11.2 The importance of online retailers’ ethics by retail patronage behaviour: one-way ANOVA (n = 684) Traditional shoppers Online Multichannel Total Sig. n = 216 shoppers shoppers n = 684 % n = 224 n = 244 % % % Security The security policy is easy to understand. The site displays the terms and conditions of the online transaction before the purchase has taken place. The site appears to ofer secure payment methods. This site has adequate security features. Privacy The site clearly explains how user information is used. Only the personal information necessary for the transaction to be completed needs to be provided. Information regarding the privacy policy is clearly presented. Non-deception The site exaggerates the benefts and characteristics of its oferings. This site takes advantage of less experienced consumers to make them purchase. This site attempts to persuade you to buy things that you do not need. Fulflment/reliability The price shown on the site is the actual amount billed. You get what you ordered from this site. Promises to do something by a certain time are kept. 4.72 5.95 6.02 5.84 5.81 5.92 5.95 5.79 5.77 5.51 6.17 6.12 6.05 6.00 6.33 6.37 6.14 6.21 6.19 6.15 5.97 6.02 5.91 6.54 6.55 6.38 6.10 5.94 .01* 6.37 6.22 .00** 6.43 6.28 .00** 6.32 6.11 .00** 6.14 6.06 .01** 6.26 6.13 .01* 6.19 6.10 .14 6.03 5.93 .16 6.12 5.98 .03* 5.84 5.76 .02* 6.52 6.42 .00** 6.52 6.40 .00** 6.39 6.28 .01** Note: All items were measured from 1 (not important at all) to 7 (very important). *Signifcant at p < .05 level; **signifcant at p < .01 level.   The importance of online retailers’ ethics 125 The results in Table 11.2 demonstrate that there are signifcant diferences among the views that traditional, online and multichannel shoppers have on the ethical aspects of online retailing. 1 Online shoppers and especially multichannel shoppers value the security issues of online retailing much more highly than shoppers who only use physical stores. 2 Online and multichannel shoppers consider two of the privacy items more important, but the third item has no statistically signifcant diference between the groups. 3 In non-deception, two items are considered more important among online and multichannel shoppers, whereas exaggeration of the benefts and characteristics of the online store’s oferings are equally perceived among the shopper groups. 4 Among the fulflment/reliability items, all items are statistically signifcantly more important to online and multichannel shoppers. Overall, the results demonstrate that, for online shoppers and multichannel shoppers, the ethics of online retailing are more important than they are for traditional shoppers. Next, we examined how consumers’ perceptions regarding online retailers’ ethics are linked to their shopping behaviour. In particular, we looked at the interconnection between consumers’ online purchasing frequency and their ethical considerations towards the online retailer. The frequency of online shopping was measured by the number of online purchases during the last three months. Table 11.3 shows that the ethics of online retailers are more important for consumers who have made the most purchases during the past three months. This fnding may Table 11.3 The importance of online retailers’ ethics by number of online purchases during the last three months: one-way ANOVA ( n = 675). 0 purchases n = 57 1–3 purchases n = 314 4–6 purchases n = 204 7 – or mo purchases n = 99 re Total n = 675 Sig. Security The security policy is easy to 4.96 5.97 6.06 6.26 5.95 .00* understand. The site displays the terms 5.28 6.25 6.37 6.43 6.23 .00** and conditions of the online transaction before the purchase has taken place. The site appears to ofer secure 5.33 6.26 6.44 6.62 6.29 .00** payment methods. The site has adequate security 5.14 6.10 6.30 6.36 6.12 .00** features. Privacy The site clearly explains how user 5.51 6.08 6.08 6.33 6.07 .00** information is used. Only the personal information 5.47 6.19 6.17 6.28 6.14 .00** necessary for the transaction to be completed needs to be provided. Information regarding the privacy 5.38 6.17 6.17 6.22 6.11 .00** policy is clearly presented. (Continued)   126 M. Skippari, S. Kajalo and A. Lindblom Table 11.3 (Continued) 0 purchases n = 57 1–3 purchases n = 314 4–6 purchases n = 204 7 – or mo purchases n = 99 re Total n = 675 Sig. Non-deception The site exaggerates the benefts 5.38 5.92 6.02 6.14 5.94 .01* and characteristics of its oferings. The site takes advantage of less 5.39 5.94 6.05 6.33 5.98 .00** experienced consumers to make them purchase. This site attempts to persuade 5.14 5.68 5.87 6.14 5.76 .00* you to buy things that you do not need. Fulflment/reliability The price shown on the site is 5.71 6.40 6.57 6.60 6.42 .00** the actual amount billed. You get what you ordered from 5.54 6.37 6.59 6.64 6.41 .00** this site. Promises to do something by a 5.51 6.24 6.45 6.52 6.28 .00** certain time are kept. Note: All items were measured from 1 (not important at all) to 7 (very important). *Signifcant at p < .05 level; **signifcant at p < .01 level. suggest that those consumers who more frequently engage in online shopping are more aware of the diferent aspects of online retailers’ ethics. There are also no diferences between ethics scales, implying that security, privacy, non-deception and fulflment are all equally important for frequent online shoppers. Discussion and conclusions Scholars have recently begun focusing on understanding the ethical issues in e-commerce from the consumers’ perspective (Limbu et al., 2012; Lu, Chang, and Yu, 2013; Roman, 2010). It is not only the retailer’s ethical and socially responsible initiatives but also consumers’ perceptions regarding ethical issues that afect consumer patronage decisions and channel selections. Our study further extends this line of research and provides additional understanding of the links between consumer ethics and consumer channel selection in retailing. We utilised the concept of CPEOR by Roman (2007) and provided empirical evidence of the linkages between CPEOR, consumer channel selection and patronage behaviour. By adopting the CPEOR approach, we extended prior research that assumes consumers’ ethical perceptions as a complex and multidimensional construct that consists of ethical concerns regarding privacy, security, non-deception and fulflment. We extended earlier research by comparing customers’ ethical perceptions in diferent shopper groups, including not only online shoppers but also traditional and multichannel shoppers. Earlier studies have focused solely on examining CPEOR among consumers who have shopped online. Our results show that online shoppers and multichannel shoppers more highly value the ethics of online retailing than traditional shoppers do. This fnding has several implications. It underlines the strategic importance of