1. Ethics and Customer Loyalty: Some Insights into Online Retailing Services
Presented at 4th Biennial International Business
Banking & Finance Conference
June 23, 2011
Hilton Trinidad & Conference Centre
Trinidad & Tobago
Meena Rambocas & Professor Surendra Arjoon
Department of Management Studies, U.W.I. St. Augustine
Honorable Chairman Dr. David Rampersad
Professors
Other UWI Officials
Captains of industry
Members of the Media
Distinguished Ladies and Gentlemen
Good Afternoon
My name is Meena Rambocas, I am a PhD candidate enrolled in the Department of Management Studies at the UWI St. Augustine Campus and I am here with my CoAuthor Professor Surendra Arjoon also from the Department of Management Studies to present our Paper entitled
Ethics and Customer Loyalty: Some Insights into Online retailing Services

2. INTRODUCTION The Internet : A viable retail channel
The Internet: An environment for unethical behaviour
Ethical Retailing
The internet has created tremendous opportunities for businesses and customers alike. Distribution channel members can extend their reach and visibility to partners beyond geographical boundaries. Although many are acknowledging the importance of the internet and online retail activities it is often seen as an environment that facilitates unethical behaviors.
It is common to hear the term ethical retailing, although what actually constitutes ethical retailing is open to interpretation such as: Honesty, justice, respect, to name a few terms. Discussions on Ethical Retailing is prominent in both literature and in the general media. Discussions on issues such as inequalities of work force or on the sale of imitation goods or the implementation of unfair pricing confronts us on a regular basis. But few studies have ventured into investigating exactly what is perceived to be ethical retailing from a customers perspective.
This deficit in research is surprising given the fact that firms who engage in online retailing are finding themselves in ethical dilemmas consistently. Toysmart is one popular example

3. AN EXAMPLE OF AN ETHICAL DILEMMA
Toysmart was a popular website that marketed and sold educational and non-violent children’s toys over
the Internet.
Through its website, Toysmart collected detailed personal information about its visitors, including name, address, billing information, shopping preferences.
Toysmart posted a privacy policy which stated that information collected from customers will never be shared with third parties. But when it ran into financial difficulties, however, it attempted to sell all of its assets, including its detailed customer databases.
On July 10, 2000, the FTC filed a lawsuit against Toysmart to prevent the sale of the customer information. After that, Toysmart.com went bankrupt (Federal Trade Commission, 2000” (Romain & Cuestas, 2008, p.83).

4. ETHICAL ISSUES Privacy Security Deception Reliability Trust
Customer exploitation
On a daily basis retailers must address several common ethical issues. some issues that are on the forefront are
Privacy , Security, Deception, Reliability , Trust
Customer exploitation
The most popular is Privacy which extends beyond the uncertainty associated with providing personal information on a website, but include the degree to which information is shared or sold to 3rd parties
Security is closely related to privacy and includes protection of credit cards and other information form cyber attacks. It also include other aspect including information theft, fraud or unauthorized changes to records.
Reliability relates to customer trust and belief that obligations will be fulfilled. Whilst according to the The Federal Trade Commission deception refers to the misrepresentation, omission, or any practice that is likely to mislead the consumer.

5. CUSTOMER LOYALTY What is Customer Loyalty
Customer Loyalty – A strategic tool
Customer Loyalty- association with quality, customer satisfaction, trust, brand affect and brand value
The concept of Customer loyalty is also a prominent construct in the marketing Literature
But what is customer loyalty. Loyalty is defined as the degree of continuity in patronage and preference towards a brand.
Creating customer loyalty is a necessity for online retailers as studies have shown that attracting new customers cost online retailers at least 20 to 40% more than it would traditional brick and mortar companies.
There is proven association between loyalty and key consumer related constructs such as :
Customer perception of quality,
customer satisfaction,
trust, affect and brand value.
However there is very little to no empirical research that examines the relationship between customer perception of retailers ethics and the level of loyalty they demonstrate to the retailers. This study examines this deficit from in online perspective.
It specifically ask two research questions

6. RESEARCH QUESTIONS
What factors contribute to Customers Perception of Online Retailers Ethics?
Does Customers Perception of Online Retailers Ethics have any effect on Loyalty?

7. RESEARCH METHODOLOGY Sampling Technique: Convenience sample
Sample Size: 200
Sample Selection Criterion: Purchase at least 1 item online over the last 3 months
Survey Instrument: Self-Administered Questionnaire
Survey Scale:
The Ethics scale : CPEOR scale
The Loyalty scale: SERVLOYAL scale
To answer these questions, a survey was administered to students enrolled at the University of the west Indies St. Augustine Campus.
A total of 200 students were interviewed.
A time factor relating to online purchases was a necessary requirement to participate in this study. Participants were required to purchase at least one item online over the last three months.
Data was collected through the use of self administered questionnaires. A 5 point likert scale was used.
The items in the questionnaire were derived from 2 scales
- The CPEOR scale which measured four facets of ethics and comprised nineteen (19) items
- The SERVLOYAL scale that measured attitude and behavioral loyalty which comprised eight (8) items

8. DATA ANALYSIS: DESCRIPTION OF SAMPLE
Age
Sample
Under 20 14
20-29 66
30- 39 11
40 and Over 9
Gender
Sample
Male
38 %
Female
62 %
Education level %
Undergradate 61
Post Graduate 34
Post Graduate PhD 5
A breakdown of the sample’s demographical profile is as follows:
62 % of the participants were females and 38% were males
The majority of participants were between the age group and were undergraduate students

9. DATA ANALYSIS: EXPLORATORY FACTOR ANALYSIS
Reason for EFA
Items retained for further analysis met the following criteria:
All inter-correlation coefficients were statistically significant at a 95% level of testing
Items did not load on more than two factors.
Exploratory Factor Analysis using varimax rotation was used to reduce the original number of variables into a small number of variables with minimal loss of data.
Factor analysis also allowed the researchers to employ other multivariate techniques to explain the relationships between customers perception of online retailers ethical practices and their expressed loyalties to these ecommerce sites.
the items retained for further analysis met the following criteria:
all inter-correlation coefficients were statistically significant at a 95% level of testing, and
items did not load on more than two factors.

10. ROTATED FACTOR MATRIX
The result of the Factor analysis showed 57% of the variance of customer’s perception of online retailers ethics were explained by two factors:
Factor 1: Explained 43% of variance in customer’s perception of online retailers ethics and comprised of 8 items- these items related to either the site’s security and its reliability. Therefore the factor was labeled Security and Reliability.
Factor 2: Explained 14% of the remaining variance in consumer’s perception of online retailers ethics and consisted of 4 items. These items had related to customer trusting the site. Therefore the factor was labeled trust

11. Re-Specification of the CPEOR Model
.51
Security Features
.71
.53
Security & Reliability
Privacy Policy
.73
.59
.35
Product Availability
.71
.61
.67
The second level of multivariate testing involved the use of Structural Equation Modeling using AMOS 8.
The final model that predicts customers perception of online retailers ethics is detailed on this slide.
The model for Customer perception of retailers ethics consist of two exogenous factors derived from the Exploratory Factor Analysis done previously. Security and Reliability and Trust. Security and Reliability contribute more than trust in customers perception of online retailers ethics which is evident in the higher correlation coefficient (.71) as oppose to trust coefficient of .17.
While these two constructs are distinct, there is a statistical relationship to each other. This is not in contrary to previous findings in measuring customers’ perception of ethics
The model also shows a strong positive association between customer’s perception of online retailers ethics and the level of loyalty they demonstrate to these online retailers.
Overall , The model explains 61% of variation in customers perception of online retailers ethics and 67% of the variation in customer loyalty and as shown in the fit indices is a good fitting model.
Ethics
Customer Loyalty
.82
.32
.87
Misleading Tactics
.17
Customer perception of Online Retailers Ethics Model
Chi Sq =
DF = 40
GFI =
AGFI =
NFI =
.94
Trust
.55
.74
Advantage of customer

12. DISCUSSION AND CONCLUSIONS
Positive relationship between CPEOR ethics and Customer Loyalty
T&T’s CPEOR ethics dependent on :
Security and Reliability
Trust
This study provides empirical support for the direct link between customers perception of online retailers ethical conduct and their level of loyalty to the site
It providence evidence to suggest that T&T customers are cognizant of the ethical conduct of online retailers which in turn influence both their attitudinal and behavoural support for the retailers. Therefore online retailers must implement strategies that will boost customers trust and confidence relative to their operations. But what areas should they invest in?
Well areas that significantly contribute to forming perceptions of course. This study unearth two main areas:
1)Security and Reliability
2) Building trust

13. DISCUSSION AND CONCLUSIONS (Con’t)
Security and Reliability
Trust
Privacy Policy
Security Features
Product Availability
Misleading Claims
Perceptions of being exploited
In terms of Security and Reliability
Online retailers must have a clear privacy policy which customers perceive as genuinely protecting their rights from unauthorized disclosure.
This policy must be prominently displayed on the site. Security features are also important. The customer public must be aware of the presence of security features. By promoting the site’s security focus, customers not only become aware of the personal protection, but devlope a to the positive perception of the site.
Also important is product availability. By ensuring that the stock list is always current the level of skepticism and distrust that is associated with merchandise customers cannot see or touch before purchase is controlled or even reduced.
Trust is also important
Online retailers must also focus on building trust in the T&T market in order to build customer loyalty. This involves desisting from manipulative communication aimed at creating impressions or expectations that cannot be substantiated.
Statements used on the site must be concise. Free from puffery or persuasive undertone as this can only lead to distrust and disloyalties.

14. SIGNIFICANCE OF STUDY
Provide insights for online retailers targeting Caribbean Customers.
Identify key indicators Caribbean Customers consider essential for online sites
Provide an understanding of indicators that contribute to Customers Perception of Online Retailers Ethical Practices
This paper provides valuable insights for online retailers targeting Caribbean customers.
The study identifies key indicators Caribbean customers consider as essential components for online sites. It also provides meaningful level of understanding of the relationship between these components relative to the ethical practices of online retailers.
It also provides empirical support of the importance of customers’ perception of online retailers’ ethics to customer loyalty. This study also enhances our understanding of the loyalty construct as it reveals that consumers’ perception of the ethics of online retailers is an antecedent to customer loyalty.
Customers are likely to keep buying from companies perceived as doing the right thing and to associate positive images with their products. It is therefore imperative that online retailers invest in activities that will create a positive customers perception of their overall ethics.

15. LIMITATIONS & OPPORTUNITIES FOR FUTURE RESEARCH
Sampling technique
CPEOR model and key performance
Can ethical perceptions vary by demographical and geographical consumer characteristics?
Whilst this study provide useful insights it is not without limitations
The 1st related to the sampling technique use din the study- the study was used a relatively small sample size of UWI students. Therefore questions of generalizability may arise
Secondly a useful extension to this model is forging a link between customers perception of online retailers ethics to performance indicators such as market share, profitability, brand equity
Thirdly, perceptions can vary according to demographical or geographical characteristics . it would be an interesting extension to explore whether this model can differ based on such variables

16. THANK YOU