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Megan Myre
International Business

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Abstract
The evolution of online shopping has come a long way, and the internet shopping trend seems to be booming particularly fast in the United States. The comparison and contrast between the
United States and Chinese markets proved very informative. Put best by Kwon Jung, KDI School of Public Policy and Management, and Ah Keng Kau, National University of Singapore’s article,
Culture’s Influence on Consumer Behaviors: Differences Among Ethnic Groups in a Multiracial
Asian Country, “Using the Hofstede’s (1980) cultural framework, differences in their cultural orientation are hypothesized. Then, for each cultural dimension, related consumer behaviors are identified and differences in those behaviors are hypothesized according to the predicted differences in each related cultural dimension.”
This information provided the inspiration which dictated the subject to be covered.
INTRODUCTION
Through comparing the differences between the two countries I underestimated the application of other resources, such as technology. The objective is to not only to expand the knowledge of the international business market, but also to investigate the differences in challenges amongst online shopping between the United States of America and China.
There is a tremendous growth in the shopping market along with relater growth as well. Surveys support the high percentages of avid online shoppers and also goes further in depth as to what keeps a customer returning and satisfied. The goal of the research is to explain the many ethical dilemmas and competitiveness between the two countries and examine how shopping behaviors differ between the two countries. There are five major comparisons of focus: The

logistics of comparing strengths and weaknesses, culture, supply and demand, exchange rates,
3 and purchasing powers really contribute into the international business perspective of online shopping.
Extended Abstract
Jun Yu, Ji Eun Park and Joyce Xin Zhou, capture the in-depth discussion between points when they say,
“ Innovative consumers are an important market segment. This paper seeks to investigate whether consumers' innate innovativeness is associated with their shopping styles. Specifically, it aims to explore the relationship between two types of innovativeness – sensory and cognitive and consumer shopping styles.” (6)
USA vs. CHINA online Market
“Once online shoppers get the bug, they're hooked. Seventy percent of more than 3,000 online shoppers surveyed in February say they prefer to shop their favorite retailer online, according to a study commissioned by United Parcel Service Inc.” (10) Weather your shopping for necessities, leisure, gifts, or just because, the materialistic desire between Asia and the United
States can be influential in the purchasing process. “The decisions we make when we buy something are guided by a variety of influences – we want clothes to cover and protect our body but clothing also makes a statement about who we are and about the group we are associated with. Nothing new in this observation – indeed, it is likely that for much of human history clothing has said something about us as an individual, has connected us to a tribe or group and has performed the basic function (more or less) of clothing.(1)

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The desire and convenience of online shopping is a simple concept. Consumers have the opportunity to compare prices, have a greater choice of products, and all from the convenience from their smart phone device or computer. What do consumers want or expect in an online shopping experience after all? What will keep the customers happy and returning for more?
According to the Cross national consumer behavior study In the Journal of consumer marketing,
“By examining the relationships of values, needs, and purchase behavior in two markets, this cross‐national consumer behavior study may help to elucidate the impact of values on shaping consumer needs and purchase decisions.”(13) Are the mobile and social media channels changing the shopping habits and expectations of the consumers? Smart phones are a significant trend that are greatly impacting the online market in both countries, but is that really what is important to the shoppers?
Although my personal opinion may seem biased due to the fact that I favor online shopping, there are still, numerous challenges that the enterprises encounter that can affect the ability to increase online sales, as demonstrated by the survey below. The summarized research below is a US study conducted by UPS explaining what
Americans want and expect.

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(10)

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Failure of Western Companies: Localization
To gain a further understanding of the US and Chinese markets, it is important to highlight large western companies efforts to expand to the Chinese market, their failure and why.
One of the reoccurring topics of Geeks on a Plane Asia (4) has been Chinese duplicate companies; i.e. companies that have copied ideas business models from successful US-based companies. Companies like Twitter, YouTube, Facebook, Google and eBay have been transformed into the Chinese versions of Weibo, Youku, Renren, Baidu and Taobao and have seen wild success.
The reasons for their success vary, including Government regulation, but the leading reason
Chinese companies have succeeded is they iterated on the original product vision to fit the
Chinese market. They did not create Chinese versions or translate existing products – they reinvented. They localized.
W3C.org tell us the definition of localization “refers to the adaptation of a product, application or document content to meet the language, cultural and other requirements of a specific target market”
Chinese online shoppers and users are far different than Americans. Chinese prefer their mouse to their keyboard. They prefer browsing to search. Many Chinese people smoke—indoors, near their computer. How do they type searches and URLs with a cigarette in their hand? They don’t.
They click links with their mouse. ( 2)

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Case Study: eBay Failure and Safety Concerns
The success of China’s Taobao versus eBay demonstrates the importance of knowing one’s target audience. Both have the same basic service, providing a means through which individuals can sell products to other individuals, yet it is the platform and methods through which Taobao operates that specifically captured the Chinese market. EBay required purchasers to pay online using a credit card as is standard in the west. Taobao, understanding that many Chinese do not like to use credit cards online either because of not owning one or because of security concerns, allows customers to pay with cash on delivery. Price was another concern of using eBay, which required sellers to pay a fee for using their service. Taobao instead made profits through advertisements—something that is only a mild annoyance to Chinese website goers compared to a fee. Furthermore, due to the culture of bargaining and establishing trust and relationships before making purchasing decisions, Taobao added a chat feature to allow buyers and sellers to communicate with each other. EBay, fearing that the two parties would use this to make transactions without using their service—perhaps in part due to the service fee—chose not to add this feature. Despite its popularity in the United States, eBay was forced to terminate its China operations in 2006 after losing the market to Taobao.
( http://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/2/ )
THEORY OF NATIONAL COMPETITIVE ADVANTAGES
The theory of national competitive advantage of industries, also known as the diamond theory portrays the domestic rivalry internationally dealing with the online shopping market. Outsourcing greatly affects the United States’ ability to dominate over the Asian market. The well-

known e-reader device Kindle sold out within the first six hours when it hit the Amazon market
8 in November of 2007. After the Kindle 2 and 3 were released at a lower price Amazon announced that the device, for the first time in history on its site were outselling traditional print books. With that being said no United States manufacturer had the capabilities to produce the product within America and production was only possible in China, Taiwan, and South
Korea. Becoming out-sourced to Asia, a lower production cost country; the united States have since lost millions of lower-skilled jobs and employment opportunities in a distribution chain.
This one specific ethical dilemma strongly correlates with the theory of national competitive advantage of industries. The United States factor endowments portrays a strong sense of knowledge and a well educated population with the potential to make the Kindle product, but lacks the physical resources and material needed for quick production. Another role in the diamond theory that can affect international success is the domestic firm strategy. Although electronics in the United States production may not compare with Asia, our domestic structure can be categorized as more organized. For example, online shopping for a digital camera in
America can seem overwhelming due to the amount of options available, but in comparison with Asia the average store carries two-hundred different models of digital cameras on average resulting in higher frustration and indecisiveness.
Julia Zhu, the founder of China e-commerce consultancy Observer Solutions in China explains that the famous United States department store Niemen Marcus was not very successful in
China. “Trying to do e-commerce with operations outside of China would probably be the biggest mistake one can make”.(6) Zhu stated that after moving the online retailer EBay back to the United States from China that many of the users reported that they were not able to gain

9 accessibility into their account. Along with the technical support of EBay, and the failed expectations of Niemen Marcus Zhu also explains the habit differences between Asian and
American shoppers. Robert Tian explains that it is notable that shopping has changed American culture, and how we have become a nation of shoppers now more than ever. “Our mass culture is based on the belief that shopping is a patriotic duty” (p. 14). “No matter where we go or who we are, shopping dominates our lives” (p. 253). (13)
SPENDING HABITS AND GDP IN US, Growth of Middle Class in China
Culture and economy have the capability to make or break spending habits amongst individuals in any shopping environment. McWinney (2009) defines consumer confidence as, “an economic indicator which measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation”.(9) Unfortunately, the American citizens are experiencing a low consumer confidence because the US economy went into a recession, which threatens the stability of incomes and impends spending activity. To increase consumer confidence, the government has to show improvement and give some sense of comfort. How does the government show the American citizens that it is safe to resume their consumption habits? We can look at indicators such as the Gross Domestic Products (GDP) - which is the final market value of goods and services produced. The simplest way of explaining why an increase in GDP is a positive thing is this; if more suppliers are producing, that means people still have jobs, and producers continue to supply because there is a demand which means people are

10 consuming. While the United States may struggle with economy related spending issues, China, on the other, hand is dealing with trust issues.
One common fear of online shopping in both countries is the initial “trust” factor. Trusting just any online site is rare in 2014. It is very essential that the corporation’s web page make a new shopper feel comfortable with privacy, terms and agreements. Along with the initial trust factor shipping rates, delivery times and product availability are also key variables that have the ability to alter a consumer’s final decision of purchasing or not. “Trust is earned over time and it’s very much something that Chinese people do not take for granted,” he said. “Don’t think you’re going to build relationships in your first months in China.” Establishing a partnership with a company already established in the country is a key way to make the entry into the market smoother.”( 10)
In recent years, China has become the beckoning land of opportunity with scores of international companies trying to break in to the Chinese market. As China’s economy matures, it becomes enticing, no longer for its cheap labor but rather for its growing consumer market.
In the coming years, it will only become more important. China’s rapidly expanding middle class is expected to triple their spending over the coming years, reaching $6 trillion by 2020.
Multinational companies cannot afford to overlook China, yet some have found themselves unable to break in to the Chinese market, whereas others have found more success in China than in their home country.
Price is another important marketing factor to consider, and like the localization, requires finding the right balance between two ends of the spectrum. China’s Per Capita GDP is $6,076

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USD, compared with Australia’s $67,723, United States’ $49,922, and United Kingdom’s
$38,589 ( http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx
). Western companies operating in China must adjust their prices to customary levels their Chinese target consumer can afford. Companies also consider price level differences across different regions of the country, as there are vast differences in income levels between Tier 1, Tier 2, Tier 3 and lower cities. However, foreign companies charging the lowest possible price is a mistake; marketing campaigns for luxury foreign products with a highly perceived value could backfire if the price is too low. Luxury goods are a large-demand market in China, where more wealthy people are willing to pay more for valuable goods. In contrast, being too inexpensive results in loss of value and uniqueness, becoming a common product. Companies operating in China also consider the perceived value of their products or services along with the disposable income level of their target audience, and price their products and services accordingly.
ELECTRONIC MARKET VIS BOTH COUNTRIES
Cultures, purchasing powers, and trust also factor into play a vital role in recognizing the differences in the electronic market between the two countries. This research will discuss relevant information by comparing and contrasting the business perspective of online shopping and how it became the way it is today. The online shopping industry is highly competitive throughout many countries. The demands throughout the market are such a crucial factor pertaining to revenue and success for an online retailer. Consumers are capable of traveling to a brick-and-mortar shopping outlet to purchase goods and services, but several factors are increasing the number of online shoppers.

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During the holiday seasons, it is the widely accepted for shopping traffic to be high. In addition, the probability of a new or popular item being in stock is low. From the comfort of a consumer’s own home, they are able to browse, compare prices, check availability and end purchase the same item that could have potentially taken double the time to locate inside of an actual store, if at all. The reality of the fast paced lifestyle of living in China or the United States essentially correlates with not having enough time to physically go shop around. In short, convenience is key. I am only one single individual in the United States who works full-time and also attends school full time, but I know I’m not the only person in America with a schedule like this. Between work, school, homework, housework, and maintaining even the social life does not allow much leisure time for my favorite hobby, shopping! After a long night at work it is extremely convenient to open my laptop and order shoes online at any hour of the day because my schedule didn’t allow time to shop during regular business hours. As far as convenience is being demonstrated with the choice to shop online, Apps make the online shopping experience even easier. The growth of apps for smart phones, or any device for that option allows the buyers to have another format of shopping from almost any location. A UPS customer experience study was conducted by Comscore titled: Pulses of the online shopper, the results pertaining to mobile impacts were beneficial to my research.
Another common advantage is online stores versus a specific location is that the internet market usually offers a vastly larger product selection. While Target might only carry two desks on display inside of your local neighborhood location the website usually offers at least 20 different varieties of desks, while eligible for free shipping. As an extensive shopper myself, I very much enjoy how many more options I have online versus inside the actual store.(11)

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EXCHANGE CURRENCY
There is a significant under-evaluation of the U.S. dollar in China and in Sweden. Although the exchange rates between China and the United States don’t seem too abnormal, it’s shocking to see such a far deviation of the under and over evaluation using the Big Mac Index. In order for the disparity to make sense, I believe the price of the Big Mac reflects the wages of the employees that are serving it. According to Li Lian Ong (2003), non-tradable goods such as wages account for 94 percent of the price of a Big Mac(12). Studies done by Ashenfelter and
Jurajda (2001) state that a typical McDonald’s crew worker in the United States earned $6.50 per hour in 2000, while a worker in China with the same duties earned $0.42 per hour. The Big
Mac Index is a better in-depth measure of wage gaps compared to simply looking at exchange rates. Exchange rates should adjust so that workers making traded goods are paid according to their productivity. But firms that sell non-traded goods and services must compete with firms in the tradable-goods sector for labor - so a country with high-productivity exporting firms will have high wages across all sectors. As a result, the cost of living is higher in rich countries, and simple exchange-rate adjustments overstate real welfare differences. The Big Mac Index was created to measure the purchasing power between two currencies and the expected and actual exchange rates. By using this method, you can evaluate whether a certain currency is overvalued or undervalued against another. If one knows the over evaluation/under evaluation of a currency, then one can accurately predict whether their currency will increase or decrease in value.

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Demand, is the primary factor to Asia’s success in the market. A large chunk of everyday items we wear or use in the United States are “made in china” and that is partially because of their abilities in production not necessarily the online sales specifically.
Conclusion
Sociologist Dr. Zukin suggests, “In a democracy, you shop for what you really want. The appeal of a shopping spree is not that you'll buy a lot of stuff; the appeal is that, among all the stuff you buy, you'll find what you truly want” (p. 112).(5)” While the research indicated the contributing factors of what consumer wants, the cultural differences along with the difference of markets generally concluded the influences of online shopping between the two countries.
While both America and China attain different business goals and have very different demographics of shoppers, neither country seems to be suffering within the online market specifically. The desire of online shopping combined with the convince and strategy leads to a healthy, completive market which enables the international business strategy of online shopping to continue to revolve. The ability to advance the market is immense, after comparing the unique shopping behaviors the variables needed for success are clearly visible.

Future Suggested Research:
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Online Marketing: Chinese Consumer Behavior Opportunity, emphasis: Retargeting
 Online Consumer Regulation and its cultural effects on online shopping
 Chinese Three Tier system spending power and how it effects marketing strategy in
Western business expansion
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