Solutions to enhance customer trust towards online shopping at lazada vietnam

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


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


SOLUTIONS TO ENHANCE CUSTOMER TRUST

TABLE OF CONTENTS
CHAPTER 1 PROBLEM IDENTIFICATION.................................................................. 01
1.1

Overview of The Company...................................................................................... 01

1.2

Problem Situation Analysis...................................................................................... 05
1.2.1 Justification of problem existence........................................................ 05
1.2.2 Justification of problem importance.................................................... 08

CHAPTER 2 ALTERNATIVE SOLUTIONS.................................................................... 10
2.1 Exploration of potential causes................................................................................ 10
2.2 Cause and effect map of low customer trust..................................................... 12
2.3 Alternative solutions..................................................................................................... 17
CHAPTER 3 SELECTED SOLUTIONS AND CHANGE PLAN......................... 24
3.1

Justification of The Best Solution................................................................. 24

3.2

Change Plan.............................................................................................................. 26

CHAPTER 4 SUPPORTING INFORMATION................................................................ 31
4.1

Interview Transcripts and Explanation in detail.................................... 31

4.2

Customer Trust and WebQual Questionnaire.......................................... 46

4.3
Grouping Result of Customer Trust and WebQual
Questionnaire
59
4.4

Other information.................................................................................................. 61

REFERENCES................................................................................................................................... 66

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SOLUTIONS TO ENHANCE CUSTOMER TRUST

LIST OF MAIN FIGURES
Figure 1.3: Initial cause and effect map.............................................................................................. 06
Figure 1.4: Effects and Consequences of Low Customer Trust.................................................... 09
Figure 2.1: Causes of Low Customer Trust....................................................................................... 14

Figure 2.2: The cause-and-effect map of Low Customer Trust..................................................... 15

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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

VAT code

: 0308808576

Fax: (08) 38 3941 4223

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 1.1). Additionally, in same year,

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Lazada has possessed 26% of market share and keep the first position in Vietnamese ecommerce market (Table 1.1).

Figure 1.1 – The growth of traffic and revenue in Lazada Vietnam YOY in 2014 Source:

Lazada Marketing Regional analysis

30%!
25%!
20%!
15%!
10%!
5%!
0%!

Table 1.1 - Market share of Vietnam e-commerce in 2014
Source: VECITA report
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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 Ecommerce’s market share (Figure 1.2). 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

(2015)
Lazada

36.1%

Others

63.9%

Table 1.2 – 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
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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.

Jun

Jul

Aug

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.


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1.2

PROBLEM SITUATION ANALYSIS

1.2.1

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
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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.

Figure 1.3– 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

Don’t have VIP
Loyalty Program

Buying
Multi Organizational
Assurance

policies

Investing MKT
expenses
ineffectively

Long-time refund
order

Return
Unrealistic images
of products

Decreasing
purchase

Fake products
Decreasing Quality
of product

Discount price still
expensive

Customers’ privacy
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Drop down
traffic and
NMV

Long-time
delivery

were divulged

Low
customer trust

Orders were
canceled
because of
resellers and
out of stock
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intentions /
behaviors


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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., 2002). 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
4.7 in chapter 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
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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.

1.2.2

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., 2013). 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., 2014). 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. If not, it will affect to company not only lose that
customer but also new many other customers by bad purchasing experiences which were shared
too much and too fast on the internet. Finally, if Lazada don’t realize as soon as possible to
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solve out the problem, they will lose customers, lose traffic, lose NMV, lose profit and even
their reputation. (Figure 1.4)
Figure 1.4 - Effects and Consequences of Low Customer Trust

Drop down traffic and NMV.

Low

Decrease profit (Reichheld and

Schefter , 2010).

Customer
trust

Word of Mouth will affect to the
reputation of website (Achmad

Nizar Hidayanto et al., 2014).

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CHAPTER 2
ALTERNATIVE SOLUTIONS
2.1

Exploration of potential causes
There are many causes influence to Customer Trust in Literature review. However,

summarily, author categorized these causes into three main groups – Organization Influence,
Website quality, Knowledge and Experiences (Figure 2.1).
Organization influence included four factors such as Product choices, Vendor
reputation, Company scale and Institutional influences (such as assurance, return or purchase
policy) (Achmad Nizar Hidayanto et al., 2014). To Product choices, if product quality is too bad
with many fake SKUs, the consequence of Lazada will be influenced and lead to Lower
Customer Trust then. Otherwise, for Vendor reputation, if merchant who sell product on flat
form have bad reputation, certainly Customer Trust could not higher on Lazada website. It is
same with Company scale and Institutional influences such as assurances, purchase and return
policies are too difficult to understand on the website, customers will not be encouraged to buy.
All of causes could lead to the problem Low Customer Trust and lead to many consequences
after that.
Website quality, plays an important role to attract, raise and keep customers on the
website for long-time. There are many scale to measure a website quality such as E-SERQUAL
(Zeithaml et al., 2002, and Parasuraman et al., 2005), WEBQUAL (Loiacono, Watson, and
Goodhue; 2002), SITEQUAL (Yoo and Donthu, 2001), eTailQ (Wolfinbarger and Gilly, 2003).
A good quality website will decide customers’ purchase intention on that website whether they
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buy online or not (Liao et al., 2006). According to Achmad Nizar Hidayanto (2014), Customer
trust will be affected by website quality. Therefore, it has to be focus on quality of Lazada
website. There are four main factors of Website quality are ease of use, aesthetic design,
processing speed and Security/ Privacy.
- According to Davis (1989), perceived ease of use refers to the “degree for a person believes
that using a particular system would be free of effort”. Refer to Table 4.5 in chapter 4, the ease
of use also included the ease of understanding and intuitive operation of the website (Eleanor
T.Loiacono et al., 2002). Therefore, the content website need to be easy to read and understand
for customers. Moreover, it should be easy to operate and navigate, too. The easier the Web site
makes it to accomplish a customer’s task, the more users likely accept it (Eleanor Terese
Loiacono, 2000).
- Aesthetic design has seen in many literature reviews that separated into different groups of
causes. But in this research, author put in a separate group, which she collected from interview
also. The aesthetic of a Website is in Visual Entertainment (Eleanor T.Loiacono et al., 2002)
and refer to Figure 4.1 – WebQual Primary Constructs in chapter 4. It is also in Usability of the
Website with the attractive appearance to customers (refer to Table 4.4 - WebQual 4.0
Instrument in chapter 4). Before that in 1999, Shand believed that aesthetic design included
design, interaction, response time and technology.
- Processing speed was simply understood in Usefulness concept (refer to Table 4.5 – Initial
WebQual dimensions in chapter 4). It is about timing to process after interaction with the site.
Therefore, if the speed is fast, customers will be more satisfied with the WebQual.

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- Security / Privacy of the WebQual makes customers feel safe to complete transactions and
secures their personal information on the Website (refer to Table 4.4 - WebQual 4.0 Instrument
in chapter 4). According to Eleanor T.Loiacono (2002) (Refer to Table 4.5 in chapter 4), we
could see that author used the word “Trust” replace for “Security/ Privacy”.
Finally, it is Knowledge and experiences group. In this group, we could see the main
factor is Price and Information of e-commerce. Customers may have knowledge or
experiences of purchasing on Lazada. Therefore they know clearly about the price of products
and service that they used to or usually buy on Lazada website. If Lazada advertises
exaggeratedly about a promotion, customers will figure out and feel that Lazada is cheating
them. It will influence to customer trust (Eugenia huang et al., 2004).

2.2 Cause and Effect Map of Low Customer Trust
Refer to the questionnaire and result of questionnaire in chapter 4, from the final result
of one hundred survey questionnaires that author used to collect, it has fourteen over twentynine customers of Lazada said that they don’t trust on buying Lazada e-commerce (that means
48,28%). In additionally, we also find out the Table 2.1 as below to show us how author
conclude to choose WebQual as the main group factor for this research. In these three groups of
potential causes of Customer Trust, there is only WebQual group, which have all four
dimensions in the group received over 50% agree and completed agree from survey results of
questionnaire, while others still have dimension under 50% agreement.
Moreover, author continuously interviewed four different Lazada shoppers to clarify
convincingly about why she choose Security/Privacy dimension in WebQual factor group is the
real problem of Lazada (refer to Table 4.3 in chapter 4). All of interviewees were asked about
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group causes and dimensions in each group to understand how they feel. The results showed
that four of them all feel satisfied about Organization Influence of Lazada, two of them have
negative Knowledge and Experience of purchasing on Lazada, but four of them all feel
uncertainly about WebQual of Lazada, especially Security / Privacy dimension. Therefore,
author chose the most feasible central problem of Lazada is Low Customer Trust, especially
Security/ Privacy in the group WebQual.
After list out consequences of Lazada if customer trust decrease and list out many
causes could affect to customer trust, we have a completing causes and effects map as below
(Figure 2.2).

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Figure 2.1 - Causes of Low Customer Trust

Product choices

Organizational
influence
(Achmad
Nizar
Hidayanto et
al., 2014)

Vendor reputation

Company scale

Institutional influence

Ease of use

Webqual
(Achmad
Nizar
Hidayanto et
al., 2014)

Aesthetic design

Processing speed

Knowledge
and
experiences

Security/ Privacy

(Eugenia
Huang et
al., 2004),
(Achmad
Nizar
Hidayanto et
al., 2014)

Information

Price

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Low
Customer
Trust


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Figure 2.2 - The cause-and-effect map of Low Customer Trust
Organizational

influence
(Achmad
Nizar
Hidayanto et
al., 2014)

Low
purchasing
behaviors,
attitude and
intention
(MengHsiang Hsu
et al., 2013),
(Mohammad
Al-Nasser et
al., 2014)

Ease of use
WebQual
(Achmad
Nizar
Hidayanto
et al.,
2014)

Aesthetic
design

Decreasing
profit

(Reichheld
and
Schefter ,
2010)

Low Customer
Trust

Processing
speed
Word of
Mouth will
affect to the
reputation of
website
(Achmad
Nizar
Hidayanto et
al., 2014)

Knowledge
and
experiences
(Eugenia
Huang et al.,
2004),
(Achmad
Nizar
Hidayanto et
al., 2014)

Security/
Privacy

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Drop
down
traffic
and NMV


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Table 2.1 – The result of each cause group of Customer Trust
Source: Customer Trust survey questionnaires
No.

Group of
Customer
Trust

1

Organization

Influence

2

Website
quality

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3

Knowledge
and
Experiences

2.3

Alternative solutions
To solve the central problem of Lazada Low Customer Trust, we need to solve Low

WebQual, specifically Security / Privacy factor in WebQual group so that author suggest to
choose some alternative solutions such as Figure 2.3 below.
Figure 2.3 – The alternative solutions of Low WebQual – Low Security / Privacy
Improve security

system (1)
(Eleanor.T.Loiacono,

Improve
Customer
Trust

Improve interactivities
(3)
(Eleanor.T.Loiacono,
2000)
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According to Eleanor.T. Loiacono (2000), data were collected from 510 undergraduate students
at a large southeastern university. Subjects were currently Web users who were on average
twenty years of age. Exactly half of the sample was female. These subjects such as ages and
genders were matched with customers target of Lazada — eighteen to twenty nine years old,
43% females & 57% males (as target customer showed in Table 4.1 and 4.2) of session 4.4 in
chapter 4. These Cronbach alphas of variables as the Table 2.2 below were supported author to
improve her solutions.
Table 2.2– The summary results of variables influenced to WebQual
Source: A Website Quality Instrument research

Variables

Alpha

Security

0.9061

Information

0.8649

Interactivity

0.8583

(1) Security
65% Web users feel it is not worth to the risk of revealing personal information on
website (Hoffman, Novak et al., 1999). 87% of Web users think they should have complete
control over their demographic information captured by Websites (Eleanor.T.Loiacono, 2000).
There are many companies was be sued for selling customer information without permission or
awareness of customers. Therefore, companies have responsibilities to inform to Web users how
they used customer personal information and how they secure them.

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For transactions on website Lazada, customers have to register accounts and input
information for delivery and payment. Hence, company has to make sure that customers’
private information will be safe on website or how company will use them later. Example,
customers pay by cards on website, they have to type their names, number of cards, expire
dates and CVV numbers as screen capture below. It will be too dangerous if private information
was divulged, especially they involve money.

To solve this situation, with a short communication with Citimart CEO and CEO of
Visa, author realized that securing information payment is the most important solution to
improve Lazada e-commerce in recently. To make more safety, Lazada could use coding system
like number or dark spot to cover the private information of customers. Therefore, others will
not see them from outside. Or they should lock up some information, just sending indirectly to
the third party. Example like while customers making card payment, customers just give card
number and name, lately there will be a third party to take the final confirming information as
private code to finish payment process. It will be more safety for customers so that it will
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increase their trust. It is also the solution that international Visa payment organization implied

to increase their quality of system presently.

Personal information data of Lazada is the most interesting sources for other companies,
marketing, banks or telecom organizations. Thus, other companies are ready to hunt by
exchange or even money to buy. Hence, to improve the Low WebQual, Lazada have to improve
their quality in securing their customers personal information. Or even they have to inform
customers why and how they used customer information before they do. It will limit customer
to feel uncomfortable when Lazada spamming to their information later, but Lazada should
consider carefully before they use their customer data. It definitely must use data in business
purpose. And they could also use coding system to their database to protect customer private
information like data table below.

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