Determinants Affecting Overseas Direct Purchase of Korean Products Among Chinese Consumers

Abstract

Purpose: Finding out major factors on motivation to purchase Korean products through the analysis of overseas direct purchase in China and through empirical analysis, strategic implications or specific action plans and significance of the overseas direct purchase are investigated out. Research design, data, and methodology: In the process, to make more effective analysis, several analysis tools and analysis programms are used, IBM SPSS Statistics 23.0 and IBM SPSS AMOS 23.0 with 264 questionnaires. Conclusions: Among the factors of the overseas direct purchase, all variables (product diversity, brand image, information validity, convenience, easy payment) are available on satisfaction and repurchase intention. They have affirmative impacts on the satisfaction and repurchase intention. And the satisfaction has a positive impact on the repurchase intention. The brand images and the product diversity of Korean products can induce consumers to visit again and improve managerial performance. In the future, the brand image and ways of purchasing behaviors improve the truthfulness of consumers. Results: The significance of this study is to find out 5 key factors through overseas direct purchase. And we should try to apply the implications drawn from the findings as marketing strategy. So finally we should focus on widening, enlarging and enriching China market gradually.

1. Introduction

The rapid development of the Information Technology (IT) is making China a great change in socioeconomic system. The growth of the IT industry is reinforcing restructuring of China's economy. Also it will play a major role in promoting development. At the same time, the Chinese government places great emphasis on e-commerce. This situation derives Chinese people to have their strong attitudes toward overseas direct purchasing through its international e-commerce platforms. So the size of B2C market is growing more and more.

Especially not only cultural industry like Korean drama, music, game etc. but also consuming goods like cosmetics, electronic items are exploring their popularity to Chinese people. These environmental changes, nowadays, are accelerating purchasing behavior from Korea for Chinese. Simultaneously Korean internet shopping malls are serving in Chinese language to buy foreigners‘ buying easily and supporting direct delivery services. Additionally, they can buy Korean products with China‘s Yuan or pay check with alipay etc. through overseas direct purchase conveniently.

Besides China‘s economic environment, Chinese government strongly has expelled its reform development and opening policy since 1978. After implementing Chinese strong policies, China‘s economic development over the past 40 years has made the world remarkable, with an annual average economic growth rate of 9.5% (National Bureau of Statistics of China, 2019). In particular, after joining the World Trade Organization (WTO) in 2001, China's foreign trade has grown significantly, and its amount of trade has tremendous with quick introduction of internet connecting the world one. For these reasons, China's Cross-Border E-Commerce has grown tremendously. According to the 100EC, China's cross-border e-commerce amounted to about 9 trillion yuan in 2018, an increase of 11.6% over 2017, and cross-border ecommerce continues to be the driving force for China's national economic growth (CNNIC, 2019).

Table 1: Size of cross-border e-commerce(trillion yean)

Source: CNNIC (2019).

Cross-border e-commerce refers to B2C-type of e-commerce, which is carried out by consumers who want to have foreign goods and where overseas transportation takes place (Wu & Lee, 2017). There are two forms of Overseas Direct Purchase, which is the opposite of Overseas Direct Sale when foreign consumers use domestic internet shopping malls (Hong & Park, 2017). Overseas direct purchase is also called 'overseas direct purchase' as a shopping method that allows consumers to purchase high quality products abroad easily and cheaply through overseas internet shopping malls or purchasing agency sites (Bao & Lee, 2018). Currently, online overseas direct purchase (hereinafter referred to as overseas direct shopping) is widely used worldwide.

According to this trend, China's overseas direct purchase market is 785.8 billion yean in 2018, an increase of 39.8% over the previous year, and is expected to be about 150 billion yuan by 2020 (Table 2). This trend means that the market size is becoming larger and larger over the time in China. The most important reason to purchase Korean goods by Chinese is that Korean goods have better quality compared to foreign ones. According to previous studies, standards to by purchase foreign products are quality, design, product evaluation, national preference in order, respectively. Especially product brand was the first choice standard in the past, but, now two factors of quality and design are more important ones. This means that focuses to purchase foreign products are changing from brand to personal concern or interest

Table 2: Overseas direct purchase market (billion yuan)

Source: iiMedia Research (2019)

The consumers who buy overseas goods through these direct buying are called Hai Tao. According to iiMedia Research (2019), by the end of 2018, China's Hai Tao exceeded 100 million, an increase of 34% over the previous year, 150 million this year and 200 million by 2020 (Table 3). This situation is that because of the increase of number of Hai Tao, our Korean products will have many chances to be sold to Chinese people through overseas direct purchase

Table 3: Number of Hai Tao (million yean)

Source: ibid.

2. Theoretical Background and Major Changes in China

2.1. Changes in Chinese Economy

China has experienced rapid growth of around 10% in economic growth over the past 30 years since the reform and opening. As income increases along with sustained economic growth, the Chinese people's desire for quality of life is growing gradually. As a result, the purchase demand of overseas products is increasing. This fact is a kind of amazing situation. That means the income is much higher than past by China‘s people. According to the China Luxury Goods Report and China Quality Reports, published by the Luxury Research Center and Asset Quality Magazine in January 2015, the total demand of the world luxury goods market was $ 232 billion, up 7% year-on-year.

China's luxury goods consumption in 2015 was $ 106 billion, 46% of the total consumption. However, main product purchases accounted for $ 25 billion, down 11% from the previous year. Overseas purchases were $ 81 billion, up 9% from a year earlier. Chinese luxury goods were more than 76% of purchases imported by overseas. This meant that Chinese income was grown up and to be higher and their quality of lives were improved better than that of past.

In other words, it suggested expanding consumption, promoting open economic development, and creating new economic growth points. These were linked to overseas direct shopping as encouraging retailers to expand their marketing channels and build their own brands and platforms. Therefore several kinds of overseas direct purchase were developed.

2.2. Theoretical concept and type of overseas direct purchase

According to Tian et al. (2017), "overseas purchasing" has been studied as resource integration frequently. In many famous brands of products, the price in foreign countries some brands are lower than in China, or other countries except China are on sale in case of shortage in China. In order to solve those problems and to enlarge the consumers‘ purchase scope(Shin, 2015), "overseas purchasing" came into being at the right moment(Suk, 2016). Online shopping overseas refers to overseas shopping which means that by way of the Internet to look for information about overseas commodity(Kim et al., 2016), and issue a shopping request through the electronic order(Bai et al., 2016), and then fill in the personal credit card number privately(Kim et al., 2017), afterwards the purchased items will be delivered to the purchaser by overseas shopping site through international express(Lim & Hong, 2017), or by the transit company to collect items and forward those to China(Cho, 2014). The general payment method is on credit card by online payment like PayPal account payment (Wu & Lee, 2017).

Overseas direct shopping is called on the purchase of products by way of overseas direct purchase which are delivered from foreign country to domestic areas(Dai & Lee, 2019). The reasons why China‘s people want to buy foreign goods by online shopping mall or purchase agency are that they strongly hope to buy their goods with cheaper price over domestic prices, and higher quality foreign brands which are shipped to Korea after purchasing them reasonably(Table 4).

Table 4: Types of overseas direct purchase

Also trade volume of overseas direct purchase products is increasing due to increased consumption trend and demand for foreign expensive goods to import.

Its speed is growing very fast. Since 2010, the word overseas direct purchase has been widely used in China for their everyday lives.

According to the contents, the types of overseas direct purchase are divided by 4 kinds largely. These kinds are different from previous one. In previous literature, usually 3kind were studied by famous scholars. But n present study, one more method is included. It is called ―cross border trade‖. In this article, 4 kinds are divided to reach the goal of this research. This point is specific and different from previous one. In that point, this article has merit and special focusing compared to previous one. They(4 kinds) are referred to as ①"directly shipped overseas from seller to buyer," ②"delivery to buyer via agency", ③"overseas purchase through domestic mall", ④―cross border trade(CBT)‖. The method of ―directly shipped overseas from seller to buyer‖(shortly, direct shipping) is like that after consumers buy foreign products through overseas internet shopping mall which provide international delivery service, selling company directly deliver products to the place where consumer want to receive. The method of "delivery to buyer via agency" is like that when consumers buy products through overseas online shopping mall, and deliver them to the warehouse of international distribution company located at local area, after that, consumer receives them by way of international delivery service. The method of "overseas purchase through domestic mall" is like that when consumer who are not accustomed to foreign online shopping want to buy products, they can be supported purchase, order, pay and delivery through purchase agency. The method of ―cross border trade‖ is like that consumer can order and receive overseas products like domestic online shopping conveniently which are imported at domestic cross border trade zone.

Among them, recently, international students and overseas tourist usually make use of cross border trade increasingly as a new type of overseas direct purchase (Kim & Lim, 2015). As the numbers of international students and travelers are increasing, the use rates C2C in addition to the B2C methods are higher and higher in China. The using SNS platforms are like Weixin, Weibo and Weishang, Tmall global, Amazon etc. as business models. Their using rate is also on the rise.

Overseas direct delivery is an intermediate delivery service after a consumer purchases products at an online shopping mall. It refers to the form of receiving them directly from foreign sellers without international shipping agency if the foreign seller does ship directly to Korea or if the cost is considerable.

2.3. Status of China's overseas direct purchase

Direct foreign purchases in China have been performed around since 2000 when the Internet became popular, but in 2010 reasonable consumers made use of shopping mall by using internet under the assistance of the prevalence of e-commerce and smartphones.

That environment grew quickly and was also widely spread in China. Eventually the size of overseas direct purchase is growing tremendously. According to the data, the market size of China's overseas direct purchase has begun to grow rapidly. In 2008 initially, its market size was in its infancy and its number of users was not very high. It has grown rapidly since 2012. In 2016-2020E, the market size was 6.3 trillion, 7.6 trillion, 9.1 trillion, 10.8 trillion and 12.7 trillion respectively. The annual growth rate was at average over 30.0% (iiMedia Research, 2019).

According to Ali Research and Accenture, China's international e-commerce will be an increase of 27.4% on average over the next five years from $ 230 billion in 2014 By 2020, it is expected to reach 12.7 trillion yuan (Figure 1).

Figure 1: Cross Border EC Size in China (2016-2020)(trillion yuan)

Source: modified from iiMedia Research data (2019)

iiMedia Research found that online overseas direct purchase in 2016, the number of shopping users is 41 million, an increase of 18 million compared to 2015. There were 58 million users, an increase of 78.3% in 2017, and in 2018, it is expected to reach 74 million people (Figure 2).

Figure 2 : Major overseas direct purchase items in China(2018)

Source: ibid

Chinese overseas consumers' favorite country is USA, Korea and Japan in order while online shopping. 3 countries are major purchasing areas (iiMedia Research, 2019).

Also according to the survey by iiMedia Research (2019), Chinese consumers mainly purchases Korean products through facing goods, and cosmetics and health foods compared to textiles goods, cosmetics and beauty products in the past. The ratio of facing goods, and cosmetics and health foods are 46.4%, 41.5%, 30.5% respectively.

The online shopping mall operated by a single product is also growing rapidly.

It is fast occupying the market (Kim & Park, 2016). China's overseas fast-moving sites include Hai Tao Cheng, Hao O Tien and Yang Ma Tou. Suning and Wei Bin are also called 'Overseas Alibaba's 'Tmall' and 'Jingdong'. And both are user-friendly, innovative and excellent services that formally offer overseas direct purchase services.

On the other hand, the survey data on why Chinese consumers utilize overseas direct purchase shows that the highest share is 36.2% for 'quality assurance', and second is 34.5% for low prices, third one is 20% for product variety. Beside them, they are interested in delivery, A/S, easy payments etc.

With this situation, today, the B2C type of overseas direct purchase is growing gradually which started in 2012, and has a significant impact on online shopping in China. In particular, in 2014, e-commerce platform such as Tenmao (Tmall.com) and Jingdong (JD.com) were mainly used for Chinese people. But now several kinds of platforms or apps are available. They are shown on Table 5

Table 5: China‘s overseas direct purchase shopping mall

* M2C: manufacturer to consumer, ODP: overseas direct purchase, DD: direct delivery​​​​​​​

3. Research Model and Hypotheses

From the study on the effect of brand image on consumer‘s satisfaction degree, Hong and Pang (2017) studied the brand image of coffee chains through the effect of consumer‘s satisfaction on repurchasing. Yun (2015) studied the intermediation effect between brand image and brand value, consumer‘s satisfaction degree as well as consumer‘s loyalty degree of monopoly bakeries and coffee shops in chain pastry and coffee shops show brand image has significant influence on satisfaction degree. At the same time, Cho (2014) studied he Impact of Swimming Service Quality Perception on Participation Satisfaction, Life Satisfaction, Mental Health in the Elderly.

According to the above arguments, the following consumption of contribution to customer satisfactory from brand image, brand awareness, perceived quality and product diversity could be made.

The information validity is that it provides related information of products and service accurately and simply. In other words, information validity means that whether consumers can get relevant information such as product quality and payment information on overseas direct purchase. If the online shopping mall or sites involves the wrong information, they cannot satisfy the economic value. If so, after all their expectation and the loyalty on online shopping mall or overseas direct purchase will decrease more and more.

Through these sites, users can easily access to prices, evaluation information, as well as the products‘ popularity of the same goods in the mainstream electric business sites at home and abroad (Kim et al., 2016).

Also Endo et al. (2012) insisted that convenience has a positive influence on satisfaction. The results of his research prove that economic efficiency and convenience have a positive influence on the intention of continuous use. Researchers defines that convenience as the degree to which users feel simple and convenient in using products or services in the meantime using convenience as an explanation of ease of use(He, 2019).

Through taking convenience as independent variable, Shen et al. (2010) indicated that convenience has positive impact on the satisfaction and loyalty of mobile Internet of things in the research of mobile Internet service loyalty. The universal meaning of convenience is convenient and easy to use or usage, and the universal definition of convenience means comfortable and good characteristics (Lee et al., 2015). These results are the same with Dai‘s study.

Also convenience is defined as the degree to which consumers can easily access web apps, and convenience has a positive (+) effect on the satisfaction of web apps(Wu & Lee, 2016).

And about the easy payment system, there are some studies of Zhou(2010), Oliveira et al. (2014), Lee et al. (2015) etc. Zhou et al. (2010) found that the task characteristics and technical characteristics influence the fitness of task technology in the study of mobile banking. According to his study, it is predicted that payment is a major factor at overseas direct purchase. Wu and Lee (2017) insisted that these sites also provide purchasing service.

Oliveira et al. (2014) studied the factors that influence the initial trust of mobile banking users, and the company reputation of mobile banking, user's personal trust trends and structural guarantee of mobile payments had a beneficial effect on the initial trust of users. So payment is very important factor to trust users.

Lee et al. (2015) empirically demonstrated the effects of convenience factors (utility, enjoyment, economics) and cost factors on perceived value of mobile wallet recipients in order to increase the service usage time of mobile wallet recipients. As a result, usefulness and enjoyment had a significant effect on perceived value, and cost factor had a significant effect on perceived value. Nowadays in China, most people are using easy payment with their mobiles effectively and simply. More important is that, in this research, easy payment is to use QR code to purchase somethings in China instead of previous payment methods like cash or credit cards.

Also including researches of Dai(2018), Kim et al.(2016), Wu et al.(2017), most above studies proved that satisfaction made affirmative influence on repurchase.

Based on the above researches, following hypotheses can be set up.

H1: Product diversity will have a positive influence on satisfaction.

H2: Brand image will have a positive influence on satisfaction.

H3: Information validity will have a positive influence on satisfaction.

H4: Convenience will have a positive influence satisfaction.

H5: Brand image will have a positive influence on satisfaction.

H6: Satisfaction will have a positive influence on repurchase intention.

Figure 3: Research Model

4. Empirical Analysis

4.1. Research investigation and measurement scale

For data gathering, our survey was performed in ordinary citizens in China who have experiences in buying products through overseas direct purchase for thirty days from November, 1, 2019 to November, 30 by Google Docs and gathered them and a total of 264 valid copies of questionnaires were obtained for analysis. Among valid respondents, 143(54.2%) were males and 121(45.8%) were females. Male proportion was a little higher than female one. The average age of the respondents was 31.2 years. The education level was 184(69.7%) in university or graduated from university.

In this research, the measurement scale was 5 Likert scale. Those are ―strongly disagree‖, ―disagree‖, ―common‖, ―agree‖, ―strongly agree‖

SPSS 23.0 is used to perform statistical analysis including frequency, reliability, and exploratory factor analysis of the collected data. Following that, AMOS 23.0 is done for confirmatory factor analysis to verify validity and hypotheses.

4.2. Reliability analysis

In this research, we conducted reliability analysis to determine whether all items in this study were reliable.

All variables of Cronbach‘s α coefficient reach or exceed 0.836 ranging from 0.836 to 0.879. And construct reliability ranged from 0.813 to 0.889. Average Varience Extracted(AVE) was from 0.613 to 0.723 which means internal consistency and convergent validity were verified. The results of reliability analysis are shown in the following Table 6.

Table 6: Reliability analysis

According to the results of confirmatory factor analysis, the model fit is satisfactory with χ²=374.164, DF=264, P=0.000, CMIN/DF=1.627, GFI=0.922, AGFI=0.901, NFI=0.934, IFI=0.941, CFI=0.962, RMSEA=0.031

When the values of AVEs between two latent variables were bigger than r², so validity is satisfied (Hair et al., 2006). Its result shows on Table 7.

Table 7: Discriminant validity

*Bold : AVE value​​​​​​​

4.3. Hypotheses Test

The results of hypothesis test are as follows. According to the results, all hypotheses are accepted (Table 8).

Table 8 : Results of hypothesis analysis

*Bold : AVE value​​​​​​​

According to the results, all hypotheses were accepted. Namely,

Product diversity has a positive influence on satisfaction. This means that the more diversified the more satisfied. If more kinds of product make purchasers choose something by themselves, therefore they maybe are satisfied. 

Brand image has a positive influence on satisfaction. This meaning is that the better image the more satisfied. When purchasers have good images on product, they almost maybe have satisfaction on it. 

Information validity has a positive influence on satisfaction. This means that the more information the more satisfied. If purchasers get more information about product which they want to buy, they will be more satisfied.

Convenience has a positive influence satisfaction. This means that the more convenient the more satisfied. When purchasers use product which they bought, if they feel convenient more, they have to be satisfied.

Brand image has a positive influence on satisfaction. This means that the better image the more satisfied. If purchasers get have better image on product, of course, they will satisfy much more. Especially the items which have good image brands about cosmetics are very popular in both China and Vietnam. Nguyen et al.(2019) proved the same results with Vietnamese like this study with Chinese(Nguyen et al., 2019)

Satisfaction has a positive influence on repurchase intention. This means that the better satisfied the more intention to repurchase. If purchaser may satisfy when using product, they will maybe have repurchase intention on that product next time. This result is the same with both Dai et al.(Dai & Lee, 2018) and Niu et al.‘s studies(Niu & Lee, 2018).

5. Conclusion and Discussion

5.1. Summary of Research Results

This study focuses on the identifying the Korean Products' Distribution through Overseas Purchasing according to not only theoretical aspects but also practical aspects in China.

First, the research results show that the product diversity has positive influence on satisfaction. It can be seen from the results that standardized coefficient of product diversity has influence on consumer‘s satisfaction. In other words, when consumer is purchasing the same kind of products, the diversity of products plays an important role in purchasing behavior. And when China‘s people want to purchase foreign products through overseas direct purchase, product diversity is important standard. Because they can decide whether they buy or not after getting some information about how many kinds of products are there. Therefore easy information gathering and preparing diversified products will give better chance for Chinese to purchase Korean products. The more diversified products, the higher satisfied Chinese.

In addition, the diversity of product types can induce consumers to visit again, thus improve management performance. Particularly, according to practical point, this point is more important in general cases compared to specialty cases.

Second, the brand image has positive influence on satisfaction. This means that when Chinese consumer want to buy Korean products, the image of brand plays an important role in purchasing decision. Good brand image can also improve the satisfaction effectively. Especially the brand images of Korean cosmetics products have the charm and perceived value that satisfy consumers. An attractive brand image can bring consumers best value and satisfaction degree.

Particularly, in the future, in order to promote marketing strategies, the brand image and ways of purchasing behaviors not only combine with simple market but also have lasting interests and improve the truthfulness of consumers. This is important factor in theoretical aspect. More deep research should be performed as theory

Third, according to the results, information validity has positive impacts on satisfaction. At present, most information jointly includes the way of how to use, price, A/S etc. which can keep up with the accuracy of provided information to a great extent, thus it is possible to promote Chinese users‘ satisfaction. The more accurate and valid, the higher satisfied. At this step, more important is to provide accurate and correct information according to the practical point.

Fourth, the research results show that convenience has significant impact on satisfaction. The products and services provided through overseas direct purchase have severe limitation on time. After purchasing or after service, it is difficult to cancel or return products and services even if they are not satisfied. So those users should pay more attention on convenience compared to other factors. If the process is not convenient to make use of malls or internet sites through overseas direct purchase practically, purchaser may use other methods instead of present mall or sites. So maybe they feel inconvenient, the methods of buying through overseas direct purchase will be changed from present on e to another.

Fifth, easy payment of overseas direct purchase has positive impact on satisfaction because users obtain products or services after paying with QR code in China. If payment process is difficult when they want to buy something, satisfaction degree will decline lower and lower. So, especially in case of China‘s people, to pay with yuan or mobile payment should be prepared. Nowadays in China, most people usually make use of mobile-payment at all cases whether they are sellers or buyers or not. In Korea, we should prepare the method payment especially with Chinese people like easy payment with using QR code. In China, most Chinese make use of QR code with mobile when buying or paying at markets. We have to provide easy payment not simple payment.

Sixth, satisfaction of overseas direct purchase has positive impact on repurchase intention because users obtain satisfaction after using commodities purchased and it has positive meaning on improving users‘ repurchase intention, which is consistent with many other researches. The satisfaction has a greater impact on the repurchase intention. In particular, to know and perform the right way to satisfy Chinese people through overseas direct purchase is very important at the practical points

5.2. Implication

In this research, a research model is proposed through the influence of product diversity, brand image, information validity, convenience, easy payment on satisfaction and repurchase intention. Therefore, according to the results of this research, their strategic significance that emphasizes improving consumer‘s satisfaction degree and repurchasing intention is as follows.

Product diversity, brand image have prominent influence on China‘s consumer‘s satisfaction degree and repurchase intention. The brand images of Korean products have the charm and better value that satisfy consumers. In addition, the diversity of product types can induce consumers to visit again, improving management performance. An attractive brand image can bring consumers best value and satisfaction degree. Also, information validity, convenience, easy payment factors play important roles on satisfaction. So to meet China‘s people, all companies had better understand their way of commercial behaviors and habits through overseas direct purchase.

In the future, in order to promote marketing strategies, the brand image and ways of purchasing behaviors we have to not only combine with simple market, but also have lasting interests and improve the truthfulness of consumers.

5.3. The limitation of the research and future research direction

The purpose of this study is to analyze the influence of overseas direct purchase on satisfaction and repurchase intention according previous reviews. However, it has the following limitations.

First, this study carried out the research of the relationship among product diversity, brand image, information validity, convenience, easy payment, satisfaction and repurchase intention through overseas direct purchase. In the future, it is necessary to increase other variables as many as possible and conduct more careful and depth research through designing a more forceful model.

Second, this research takes China‘s people as research subbject. In the future, it is necessary to further expand the sample range and conduct comparative analysis. Especially China is very big country and consists of many ethnics. Also according to the regions, commercial behaviors and habit are different. Next study, these points are fully considered.

This work was supported by the research grant of the Kongju National University in 2018