Customer behavior of online group buying: an investigation using the transaction cost economics theory perspective

Abstract

As online group buying (OGB) businesses increasingly face strong competition, understanding the beliefs, attitudes, and behaviors of their customers is critical. Hence, the purpose of this study is to understand why customers choose one OGB vendor over others. By extending the transaction cost economics (TCE) theory, we explain OGB customers’ purchase behavior. We conducted a two-stage online survey. The first survey (T1) captured the perceptions of the respondents before making a purchase (i.e., purchase intention and its antecedents, namely unpredictability, trust, customizability, and frequency of OGB use). In the second stage (T2), we collected responses from the participants of the first study who committed at least one purchase in the last month. The second survey collected responses about the frequency of OGB use, purchase behavior, and online customer review (OCR). Data were analyzed with partial-least-square-based structural equation modelling technique (PLS-SEM). Results suggest that unpredictability, trust, and customizability influence purchase intention and are influenced by the frequency of OGB use. In addition, customizability decreases unpredictability. Finally, in seeking an answer to how to convert potential customers into actual customers, we found that OCR is a moderator of the relationship between purchase intention and purchase behavior. The findings from the longitudinal study extend TCE theory in electronic markets by capturing the OGB dynamics (i.e., antecedents and effects), the mediating effects (i.e., purchase intention) and the moderating effect (i.e., OCR) in a robust nomological relationship.