Buying Korean Products through Overseas Direct Purchase as a Distribution Means in China

Abstract

Purpose: This study focuses on the buying Korean products by Chinese consumers through overseas direct purchase as a distribution means (tool) because they are interested in Korean products because of their excellence. Major variables are national brand, curiosity, price, product quality. Research design, data, and methodology: To make effective analysis, several tools and programs for analysis are used with SPSS Statistics ver. 23.0 and AMOS 23.0. Results: National brand, price, product quality have affirmative impacts on satisfaction and repurchase through overseas direct purchase. But curiosity does not have. Among them the most important variable is product quality. This is the same as Chinese consumers think product quality is the most valuable one when buying Korean products through overseas direct purchase. Next one is price. The last one is a national brand. Conclusions: Among the variables of overseas direct purchase, product quality has the biggest impact on satisfaction and repurchase positively. This means that many Chinese consumers are interested in product quality manufactured in Korea. Also Korean product quality is better than that of China until now. Korean companies should, strongly and continuously, have to improve the quality of Korean products because China focuses on product quality in the distribution process in the national base.

1. Introduction

Nowadays all the people in the world are interested in buying foreign products regardless of nationality. In the past most Korean consumers were fond of foreign ones especially American ones or Japanese ones. But now, the situation has changed. We, Korean consumers are not only foreign ones because we think we try to improve our products’ quality owing to high technology. So the quality of our products are improving day by day. With our efforts, both domestic and foreign consumers focus on Korean products. Especially Chinese consumers, including Asian countries, are interested in Korean products. Even after THAAD problem occurred, Chinese consumers have bought, especially, cosmetics among Korean products.

The reasons why Chinese consumers are interested in Korean products are diversified. Firstly, Chinese economic power has grown largely compared to that of the past. This is derived from the economy’s growing, income’s raising, the need for caring themselves (Nematollahi, 2019; Sanny et al., 2020; Phong et al., 2020). And second, they focus on the marketing strategy. In the past, they generally paid a little attention to marketing (Vargo, Koskela-Huotari, & Baron, 2017) stemmed from traditional marketing by Kotler and Levy (1969). But now the markets have changed and appeared from several points of views. According to these points, Johanson & Vahlne (2011) insisted on moving away from the aspects of buyer-seller dyads, and conceptualizing markets as networks. Second Giesler & Fischer (2017) thought that market is dynamic and plastic and takes different formats to the diversified interactions among multiple heterogeneous market reasons. Also among many scholars, especially Giesler & Fischer (2017) have thought from a market system dynamics perspective. Their ideas are connected with markets as a management and organizational research. So Kourula, Moon, Salles-Djelic, & Wickert (2019), are studying these situations from the phenomena of privatization and globalization. They described privatization comes from the liberalization of markets and coupled with privatization, globalization eroded the nation status. This meant the shift from governmental actors (own countries) to multi-stakeholders (foreign countries).

So naturally most consumers changed their eyes from domestic to foreign countries. Even more high technologies, for example, website technologies, security accelerated their eyes to foreign ones located at near distance. These similar American cases, free trade, are studied by Coskuner-Balli & Tumbat (2017) and Quebecois government case is studied by Baker, Storbacka, & Brodie (2018). In this case, the concepts for managing the nation’s image and identity are very important ones in the eyes of multinationals eventually. These researches are connected with foreign trade and eventually overseas direct purchase.

As globalization is growing more and more, the trade among countries is more popular and so free trade is prevailing from all over the world. Especially in Korean case, Asian consumers are focusing on Korean products including China, Vietnam, Indonesia, etc. But among them, China is one of the most popular countries from Korean perspective.

Therefore the objectives are as follows.

First, this study looks for the Buying Korean Products through Overseas Direct by Chinese consumers.

Second, why they are interested in Korean products and buy them and this research looks for major factors popularized by Chinese consumers.

2. Theoretical Background

2.1. Overseas direct purchase as a distribution tool

Overseas direct purchase, as a kind of distribution tool, is defined as the form of transactions which domestic consumers buy some products from foreign online shopping malls or from agency’s websites through PC, mobile phone, other devices and the purchased products are delivered to consumers’ countries. These websites and mobile devices can also provide purchasing service (Wu & Lee, 2017). For example, if Koreans buy some products from foreign online shopping malls or websites, some products are delivered to the right Korean from foreign countries. Vice versus.

Sometimes, the term “overseas direct purchase overseas” is referred to as “direct purchase”. In order to reasonably buy products with cheaper prices or necessary items which are not in their own country most consumers want to buy them from foreign countries than in Korea, so they used to buy them from overseas directly. These situations usually occurred from all over the world.

In Korea, especially Chinese consumers used to buy Korean products by way of overseas direct purchase. Dai & Lee (2019) agreed that generally, Overseas direct purchase is used to be the purchase of products through websites or mobile devices from foreign country to home country because of buying goods with cheaper price than domestic prices, or higher quality foreign brands than home one.

With the booming in current online shopping, "overseas purchasing" has been talked frequently as a way of resource integration (Tian et al., 2017). Generally some in case of lower prices in foreign countries, they are not selling in China, and while others are in shortage in China, but many kinds of brands are not sufficient.

In addition, the classification of a wide variety of goods in accordance with the category, saving the users’ time, builds better and safer channels for users and these sites (Tian & Lee, 2016). Also they make the overseas shopping online easier (Wu & Lee, 2017).

2.2. The market development in China

There has been remarkable progress for e-commerce volume from 2013 to 2019. Especially its volume size has been growing since 2013. iiMedia Research (2020) shows the data from 2013 to 2019. In 2013 the volume was 10.2(RMB￥1trillion), and after stead growing since 2013, it was 35.8(RMB￥1trillion) in 2019. The volume was more than 3 times than in 2013. The growth rate is gradually developed in accordance with volume ().

Table 1: E-commerce Volume (from 2013 to 2019)

Source: iiMedia Research (2020)

This data shows that the volume will be larger and larger in the near future. Especially because of Corona-19, not only domestic but also foreign consumers have to make use of e-commerce including websites, mobile devices etc. so the volume will be much more larger than now. Foreign consumers want to buy something from foreign country, they had better use overseas direct purchase to buy other country’s products. Similar situations will appear all over the world.

depicts that there is the same one now and also will be the same situation in the future in China regardless of annual growth rate.

According to

, the size of overseas direct purchase was 0.41(RMB￥1trillion), in 2013 and after stead growing, in 2019 it was 2.64(RMB￥1trillion). The size was more than 3 times than in 2013. But in 2020 the expected volume will be 2.77(RMB￥1trillion) and in 2021 3.01(RMB￥1trillion). The growth rate is gradually developed in accordance with volume (

)

Table 2: Overseas Direct Purchase Size (from 2013 to 2019).

Source: iiMedia Research (2020), Qianzhan

[Figure 1] shows the data toward volume and growth rate of overseas direct purchase. According to

, its volume increases very sharply and its growth rate is also going up every year. According to [Figure 1], its volume started from 1.1 in 2010 to 10.5 in 2019 by 10 times for 10 years.

Figure 1: Volume and Growth Rate of Overseas Dire ct Purchase (from 2010 to 2019)

Source: Ministry of Commerce of the People’s Republic of China (2019). E-commerce in China.

According to E-commerce in China (2019), the country of origin of Chinese consumers' overseas direct purchases is mainly Japan (20.8%), the United States (16.0%), and Korea (10.7%). Compared to the previous year's registration, (12.0%), (29.8%) and (55.1%) increased respectively. Japan overtook the United States and Korea to become the most preferred country for Chinese consumers. As products purchased directly from overseas, cosmetics (34.6%), food (27.1%), and daily life products (11.2%) were found respectively. On the other hand, in the 3rd quarter of 2020, Korea's online overseas direct sales amounted to 1.61 trillion won, an increase of 5.9% compared to same time of the last year, and overseas direct purchases increased 13.8% to 9, 581 billion won. In addition, as the Chinese government reduced tariffs on goods in some countries and regions and facilitated international transportation procedures, the number of users is increasing. In the future, more and more consumers purchase overseas products through overseas direct purchase due to increased income and policy benefits of Chinese citizens.

2.3. Key factors in distribution process in China

There are some factors about overseas direct purchase from previous literature reviews. Based on them and Chinese concerns. This paper collected key factors among them with a view to this theme. Namely in this paper, National Brand, Curiosity, Price and Product quality are independent variables as most important ones.

2.3.1. National brand

Anholt (1998) studied how many nations make their own brands including USA, UK etc. Now many scholars use two terms “country brand” and “nation brand” in their own studies as interchangeable terms. But they agree that nations can be branded. In general, the components of a national brand differ from companies, products, etc. The national brand consists of various activities by the subjects of the perspective like the economic part, cultural part, images etc.

By Gudjonsson’s work (2005), a national brand helps a nation to protect or enhance national business activities, so bring up the living standards of its people, and prosper national wealth. Of course Rodner and Kerrigan (2018) insisted on the difference between national brand and place brand. Also, Dinnie (2008) integrated culture into the national brand. This means that national brands contain cultural brands. For example, the Chinese government has established Confucius Institutes and reinforced its influence in thirteen African countries by giving scholarships for African students to stay and study in China, and encouraging Chinese companies to make its business activities in Africa. Therefore, a national brand is a kind of strategy to make a better national image for foreign and domestic people attractively. Shortly in this article, national brands include economical brands, cultural one like “Korean wave”, “Hallyu”, “K-pop”, “Korean TV drama”. Also Quan, N., Chi, N., Nhung, D., Ngan, N., & Phong, L. (2020) insisted that especially Korean cosmetic companies have tried to make their own brands by performing proper marketing strategies.

Also including researches of Anholt (1998), Gudjonsson’s work (2005), Rodner and Kerrigan (2018), Dinnie (2008), Quan, et al. (2020), most above studies proved that national brand made affirmative influence on satisfaction and repurchase. Based on the previous studies, following hypotheses can be made up.

H1-1: National brand will have an affirmative effect on satisfaction in overseas direct purchase.

H1-2: National brand will have an affirmative effect on repurchase in overseas direct purchase.

2.3.2. Curiosity

Most people will encounter emotions from many aspects in daily life. In general, in every case an emotional impact used to affect decision making when especially important. It is a kind of basic impulse. When we call it curiosity as one of the emotions. Therefore curiosity is a desire when human beings want to seek new knowledge or stimulation as an important motive factor. So the degree of curiosity depends on stimulation level. High curiosity affects high consumers' purchase intentions and then leads to buying behavior impulsively. Vice-verse.

According to Hill’s work (2015), in case of high curiosity about certain products, eventually it has an affirmative effect on buying or shopping, and curiosity can also affect consumer behavior. In other words, curiosity should be connected with purchase intentions. So more curious, more intention to buy generally. But curiosity is able to consist of several resources.

According to Krista (2013), curiosity about products through websites or word of mouth is connected with purchase intention to certain degree. Particularly, Korean cosmetics are affiliated with Korean Wave for Chinese consumers. Quan, et al. (2020) insisted that Korean cosmetic companies have always built their own brands by paying attention to consumer behavior and have brought the highest quality for their products. Their analyses are related with curiosity.

Therefore, the purchase intention makes influences on the intensity of curiosity when buying regardless of online or offline shopping.

Based on these studies of Hill (2015), Krista (2013), Quan, et al. (2020), the following hypotheses can be made.

H2-1: Curiosity will have an affirmative effect on satisfaction in overseas direct purchase.

H2-2: Curiosity will have an affirmative effect on repurchase in overseas direct purchase.

2.3.3. Price and Product quality

Kumar et al. (2014) performed the study of the buying behavior factors influencing consumers when buying products and found that psychological, individual, social and cultural factors were influential ones. In addition. As a result, product quality, consumer behaviors, brands, etc. strongly influence the purchase decisions when buying Korean products. The researcher investigated that customers had affirmative attitudes about Korean products since Korea has a higher level of trust in fashion and the K pop trend is more popular.

Kajapriya and Surya (2015) showed the most influenced factors affecting female consumers when buying products are “product quality factor” beside brand. This is the same result as that of Latha (2017). His survey showed the most influencing factor was price. Eventually the price is related to price quality. In general higher price and higher product quality.

These works of Kumar et al. (2014), Boonmee (2015), Kajapriya and Surya (2015), Latha (2017) are able to make the following hypotheses.

H3-1: Price will have an affirmative effect on satisfaction in overseas direct purchase.

H3-2: Price will have an affirmative effect on repurchase in overseas direct purchase.

H4-1: Product quality will have an affirmative effect on satisfaction in overseas direct purchase.

H4-2: Product quality will have an affirmative effect on repurchase in overseas direct purchase.

2.3.4. Satisfaction and Repurchase

Wu & Lee (2016) adjusted e-TAM (extended technology acceptance model) to websites or smartphone applications. In this study, if consumers can use websites or mobile devices with easily accessible web apps, it has a positive effect on the satisfaction of web apps.

Franke & Piller (2003) described two reasons for customer satisfaction. Namely, customer satisfaction is made at the time when a product is bought or service is provided and used and during the owning process of a product or experiencing service. Verhoef et al. (2009) defined that customer satisfaction is the enjoyable level of a product or a service experience to meet their needs or expectations. Yoo & Park (2020) said that customer satisfaction can derive his or her purchase intentions and purchase intentions lead to purchase behavior regardless of planned or impulsive actions. And higher purchase intention, higher actual real purchase behavior. Therefore it is necessary for a company to perform successive research and make efforts to upgrade customer satisfaction and to draw purchase behavior.

Information access is related positively to satisfactory consumer experiences, such as time-saving and positive evaluation toward the product (Mikalef, Glannakos, & Pateli, 2013; Anderson et al., 2014). Also, Lee (2020) found out the same opinion, namely, the web access has an affirmative consumer satisfaction and repurchase.

On the proof of Wu & Lee(2016), Franke & Piller (2003), Verhoef et al. (2009), Yoo & Park (2020), Mikalef et al., (2013), Anderson et al., (2014), and Lee (2020), the next hypothesis can be established.

3. Research Model

This model has four factors (national brand, curiosity, price, price quality) as independent (exogenous) variables and repurchase as dependent (endogenous) variable, and satisfaction as mediation one. All variables in this study are proved as good ones from previous studies. So [Figure 2] presents the proposed research model on this study.

Figure 2: Research Model

depicts the structure of the questionnaire associated with the proposed research model on this study.

Table 3: The Structure of Questionnaire

4. Empirical Analysis

4.1. Data Collection and Measurement

For data collection, I surveyed Chinese consumers who have experiences in buying products utilizing overseas direct purchase for twenty days from August, 12 to September, 15 in 2019 by survey method and obtained a total of 242 valid questionnaires for analysis after excluding 32 incomplete or assuming untruly ones. The analysed methods are as follows. In order to prove the convergent and discriminant validity, exploratory factor analysis (EFA), confirmatory factor analysis (CFA) of the items. The convergent and discriminant validity, EFA were tested using SPSS and CFA was performed using AMOS ver. 23.0. After those testing, a structural equation model was used for hypotheses testing. In this study, the measurement scale was 5 Likert scale. They are “strongly disagree”, “disagree”, “common”, “agree”, “strongly agree”.

4.2. Measurement item evaluation

4.2.1. Demographic characteristics

Demographic characteristics were shown

Table 4: Demographic Characteristics

4.2.2. Reliability and Validity analysis

In this research, for the reliability and Validity analysis, an exploratory factor analysis was done and the Cronbach‘s α coefficient was checked. Based on the principle component analysis, the factor extraction method was applied. And the factor was derived based on the eigenvalue of more 1. The factor rotation method was VARIMAX. The Cronbach‘s α coefficients of all items are larger than 0.7. The results of exploratory factor analysis are shown on [Table 5] and [Table 6]

Table 5: Exploratory Factor Analysis

NB = national brand, CU = curiosity PR = price, PQ = product quality

Table 6: Exploratory Factor Analysis

SA = satisfaction, RE = repurchase

4.2.3. Confirmatory factor analysis

The confirmatory factor analysis was done using AMOS 23.0 to prove the statistical verification of validity based on the exploratory factor analysis.

All variables of Cronbach‘s α coefficient are more than 0.8 ranging from 0.801 to 0.925. And construct reliability (CR) ranged from 0.837 to 0.923. Average Variable Estimated (AVE) was from 0.725 to 0.834. Because of these values internal consistency and convergent validity were proved. The results of confirmatory factor analysis are on the

. According to the confirmatory factor analysis, the model fitness is satisfactory with χ²=247.416, DF=192, P=0.000, CMIN/DF=1.288, GFI=0.913, AGFI=0.900, NFI=0.945, IFI=0.956, CFI=0.963, RMSEA=0.041(p=0.000). The composite reliability (CR) and average variable estimated (AVE) satisfy the criteria suggested by Bagozi and Yi (1988). On the background of their criteria, each factor loading value is statistically significant. [Table 7] is the result of confirmatory factor analysis

Table 7: Confirmatory Factor Analysis

NB = national brand, CU = curiosity, PR = price, PQ = product quality, SA = satisfaction, RE = repurchase

4.2.4. Discriminant Validity analysis

The square root of average variance extracted (AVE) proved the discriminant validity between each factor with already proven single dimensionality. As shown in the [Table 8] the value of AVE square root, the value on the diagonal line, was higher than 0.5 and was higher compared to the value of the correlation. According to [Table 8] , these figures means that the correspondent differences in the items results have been validated between different constructions.

Table 8: Discriminant Validity through Correlation Analysis 

4.3. The result of hypotheses testing

Amos 23.0 was used to verify the hypotheses. The indexes (χ²=247.416, DF=192, p<0.005, CMIN/DF=1.288, GFI=0.913, AGFI=0.900, NFI=0.945, IFI=0.956, CFI=0.963, RMSEA=0.041) means satisfactory level. The results of hypotheses tests are presented in [Table 9] and [Figure 3]. According to the results, all hypotheses except curiosity factor are accepted. Namely H3-1, H3-2 are rejected with p-value 0.103, 0.142 respectively.

Table 9: Results of Hypothesis Analysis

Figure 3: Results of Research Model Analysis

5. Conclusion

5.1. Results Summary and Implications

This study focuses on verifying buying Korean products from Chinese consumers through overseas direct purchase according to both theoretical aspects and practical aspects in China.

The results of this are summarized as follows.

First, among the variables of overseas direct purchase, product quality has the biggest impact on satisfaction and repurchase positively. This means that many Chinese consumers are interested in product quality produced in Korea. Also the qualities of Korean products are much better than those of China until now. Therefore most Korean companies should, strongly and continuously, have to improve the quality of Korean products because China focuses on product quality in its national base.

Second, the result shows that national brands have an affirmative influence on satisfaction and repurchase. The standardized coefficient of a national brand has an influence on Chinese consumer’s satisfaction and repurchase. In other words, when Chinese consumers buy the same kind of products, national brands play an important role in their purchasing behavior. And when they want to buy foreign products by way of overseas direct purchase, the national brand is an important standard one. Because they can make decisions whether they buy the same kind of products, they want to buy Korean products possibly. Therefore national brands will deliver better opportunities for Chinese consumers to buy Korean products. The more national brand, the higher satisfied Chinese consumers.

In addition, national brands can make consumers visit again, and thus improve to earn profits more.

Third, price has an affirmative influence on satisfaction and repurchase. This meaning is that when Chinese consumers hope to buy Korean products, price plays an important role in purchasing decisions. So a good price is able to improve the satisfaction and repurchase effectively. Especially the prices of Korean products have a little cheaper and charm compared to those of other foreign products to meet consumers. A reasonable price can gather and come to buy Korean products.

Particularly, in the future, for marketing promotions, price will give them good impressions in their minds. This is an important factor to keep them loyal consumers in theoretical and practical aspects.

Fourth, product quality has the most strong and positive impact on satisfaction and repurchase. This result is the same one about what is the most factor when Chinese consumers want to buy something necessary in their life. Most of them think that product quality is the most important variable when buying products. This result enables the possibility for Chinese consumers to buy Korean products and to promote Chinese consumers’ satisfaction and repurchase. The better quality of Korean products, the higher satisfied and repurchased. At this step, more important is to keep up with good quality.

Fifth, curiosity has no significant impact on satisfaction and repurchase. This means that especially in case of new products or services, usual early adopters have to buy them at any sacrifices in the past. But now they don’t move according to mere curiosity through overseas direct purchase even though that kind of purchase has severe limitations on time and space. So most Korean companies focus on improving or developing remarkable functions. But in the real world, it is a little difficult to do them. In order to conduct it so successfully, it is necessary to make study in both academics and company level consistently.

Sixth, after using Korean products, satisfaction has a positive impact on repurchase because Chinese consumers get by satisfaction. And it enhances consumers’ repurchase. And this is the same one consistent with other famous research. The satisfaction has a larger impact on the repurchase. Specifically, knowing and conducting the right way to meet Chinese consumers are very important practically through overseas direct purchase.

Seventh, after all, most Korean companies keep in mind that Chinese consumers may have their wills to buy Korean products whether they are expensive or not. Product quality is the most important one and next possibly in case of the same quality, price is the major one. The third is the national brand. Especially, to Chinese Korean product is best one because of its high quality, cheaper price compared to foreign countries. At that point, Korean companies have superior competitive power to export Korean products to China. Their strength should be reinforced continuously.

5.2. The limitation and future direction of the research

This research aims to analyse the buying Korean products through overseas direct purchase on satisfaction and repurchase in accordance with the previous reviews. However, it has some limitations.

First, this study carried out the influences of national brand, curiosity, price and product quality on buying Korean products for satisfaction and repurchase through overseas direct purchase. In the near future, necessarily, to increase the important variables as much as possible and perform deeper research through establishing a more powerful model.

Second, this research focuses on Chinese consumers as research object. In the future research, it is of necessity to enlarge the sample data and perform comparative analysis because of not only very big countries but also many kinds of ethics. They have different buying behaviours each other to the regions. So, these points should be considered enough.