Factors Influencing Purchase Intentions on Social Commerce Applications PDF

Factors Influencing Purchase Intentions on Social Commerce Applications Abstract. The rise of social commerce in Indonesia certainly opened up opportunities for business actors to use it as a tool to reach consumers so they can maintain dan develo...

Factors Influencing Purchase Intentions on Social Commerce Applications Abstract. The rise of social commerce in Indonesia certainly opened up opportunities for business actors to use it as a tool to reach consumers so they can maintain dan develop business sustainability. This study used an associative approached that aimed to find out the influences of several factors such as economy, interaction, necessity, reliability, sales promotion, and trust on the purchase intention of social commerce apps in Surabaya. We utilized the survey approach to collect data by delivering online questionnaires to 313 respondents chosen using the purposive sample methodology. The respondents are individuals who have made purchases on social commerce applications in Surabaya. PLS-SEM method has been used to analyse the data. The result showed that economic, reliability, sales promotion and trust influence customer purchase intentions on social commerce applications in Surabaya. Meanwhile, interaction and need variables have no influence on customer purchase intentions on social commerce applications in Surabaya. Trust is the strongest factor in forming purchase intentions. Business actors need to develop trust by providing real information, products, and services in social commerce apps. Keywords: purchase intention, business sustainability, social commerce, trust, sales promotion. 1 Introduction Indonesia is currently in the period of industrial revolution 4.0, namely Indonesia is trying to transform towards improvement where all production processes use the internet as the main support in industrial activities. With the internet, social media arose as an online medium where people can easily interact, post anything they want, and carry out buying and selling activities. According to a We Are Social estimate, 167 million Indonesians would be using social media by 2023, accounting for 60.4% of the country's total population. Everything can be done digitally with the help of the internet and social media, including social commerce—the practice of directly purchasing and selling products and services via social media. Social media applications that support social commerce are Instagram, Tiktok, Facebook, etc. The existence of social commerce helps people easily carry out shopping activities, so that social commerce today is very popular with the public because it can save time and is more effective and efficient. Based on 2022 social commerce data by DSInnovate, the social commerce market in Indonesia in 2022 will reach USD 8.6 billion, with estimated annual growth of around 55% and is predicted to reach USD 86.7 billion in 2028. Surabaya is the capital of East Java Province and one of the country's second major metropolitan cities after Jakarta. Surabaya people shop directly (offline) and online. In research conducted by Populix, it is known that Surabaya is the city with the most users who use social media for shopping activities with a percentage of 59%, followed by Medan with 55% and Jakarta with 54%. Quoted in Daily Social (29 September 2022), as many as 86% of Indonesian people have shopped online via the social media platform Tik Tok Shop 45%, Whatsapp 21%, Facebook Marketplace 10%, Instagram Shop 10%. When shopping online, there are also several factors that can influence customers' purchasing intentions when shopping. Based on previous research , the factors that influence customer purchasing intentions are economic factors, interaction, necessity, reliability, and sales promotion. In addition another research , there is a trust variable as a factor that influences customer purchase intentions. Researchers conducted a preliminary survey based on previous research on 30 respondents to determine the influence of these variables when applied to Indonesian consumers. The survey results obtained by researchers were that all variables had a strong influence on customer purchasing intentions. Drawing from the findings of the aforementioned pre-survey, which involved social commerce users in Surabaya, as many as 90% of respondents agreed that product prices on social commerce are relatively lower than other sites, as many as 86.7% of respondents agreed that customers can buy any product through social commerce application, as many as 76.7% of respondents agree that product information on social commerce applications is reliable, as many as 93.3% of respondents agree that social commerce applications are interactive, as many as 83.3% of respondents agree that customers want to buy products when they see the price discounts in social commerce applications, as many as 60% of respondents agree that sellers in social commerce applications are honest sellers. And as many as 83.3% of respondents agreed that they would recommend social commerce applications to people around them. Based on these results, the research conducted by the researchers had the same results as the research conducted by , The purchase intention variable was significantly influenced by the variables economics, interaction, necessity, interaction, and sales promotion. This is corroborated by earlier study , which also claimed that the economy has a substantial impact on purchase intention by reducing the selling price of a product or service. These results are also supported by prior research who stated that interaction is associated to purchase intention. Interaction may help create emotional ties and trust with customers, as well as boost their buy intentions. Another study validates similar findings, claiming that necessity has a major effect on buying intention. These findings are corroborated by Al- Gasawneh et al. , who claim that reliability significantly affects purchase intention. Additionally, Bhatti's research supports these findings by indicating that sales promotion significantly affects purchase intention. In the results of the preliminary survey above, the trust variable received support from only 60% of the total respondents, and was the lowest result from this research compared to other variables. With this, it can be seen that in the trust variable there are still 40% of respondents who do not support this variable, even though this variable is very important because trust has a big role in influencing customer purchasing intentions. Discrepancies between the results of the prior study and a preliminary survey of the research team did not immediately illustrate the outcomes of probable discrepancies in research results, if the research was conducted on Indonesian respondents. Based on this, researchers want to conduct further research on this research and focus on Indonesian respondents who live in the city of Surabaya and use social commerce applications to shop online. The rise of social commerce in Indonesia certainly opens up opportunities for business actors to use it as a tool to reach consumers. Seeing the large use of social media for shopping in Surabaya is a phenomenon that is worth researching to find out which factors are the main drivers in driving consumer purchasing intentions in social commerce. This study has the potential to bring fresh insights into the development of consumer behavior theory in the context of social commerce users. Besides, the results of this research are expected to provide practical understanding and recommendations for business actors so that they can maintain and develop business sustainability. 2 Literature Review Economic activity is a human effort to fulfill their needs, because in human life it cannot be separated from the natural nature of trying to maintain and maintain the continuity of life. Measurement of human welfare can be measured by standards of economic satisfaction which can be achieved through economic activities. Previous study by Peng revealed that the economic pillar has a significant favorable impact on consumer intentions. Another study by Sohn et al also had positive results between economy and purchase intention, where discounted prices or offers at low prices were proven to have an effect on customer purchase intentions. Prior research also stated that the influence between economics and customer intentions is also supported, by providing rewards in the form of fees for buying and selling activities can influence consumer attitudes and behavior. H1: Economy has an influence on purchase intentions in social commerce apps. Interactivity is the most critical aspect related to virtual environments and social media. Interaction or interactivity is the ability to help social media users become actively involved in ongoing discussions. New media has presented new opportunities for marketers to increase the interactivity of two-way communication between marketers and their targets. Wang said interactivity also has an important function in shaping online customer purchasing behavior. Several prior research revealed that interaction had a favorable impact on customer purchasing intentions. [9;19]. H2: Interaction has an influence on purchase intentions in social commerce apps. Necessity is something that must be obtained by humans, and if they are not met, they will disrupt humans physically and psychologically. In marketing, the definition of necessity is a condition where humans feel a lack of something or goods, and there is a certain urge to have what they do not have. Previous study has shown that neccesity has a favorable impact on buying intention. Goods or services needed by consumers can be obtained through social commerce applications by looking for the location closest to the customer's location, making the relationship between necessity and purchase intention very influential. Customers' needs for goods give rise to customers' purchase intentions. The higher a person's level of need, the higher the customer's purchase intention. H3: Necessity has an influence on purchase intentions in social commerce apps. Reliability is the ability to carry out the services promised by the waiter by serving consumers reliably and accurately. Reliability is related to the accuracy in how the waiter serves customers, and how service standards are clear, as well as the officer's ability to use tools in the service process. Reliability is closely tied to customers and the company's ability to supply services to them. In several previous studies, positive results were found between reliability and purchase intention [4, 10]. Improvements in reliability can boost consumer trust, therefore enhancing the link between customer intent and purchase behavior. H4: Reliability has an influence on purchase intentions in social commerce apps. Sales promotion is an activity carried out by a company to convey the benefits of using its products or services to convince consumers to use them and is carried out to get easy access to reach a wide market share. This activity can encourage purchasing transactions and consumer behavior that is profitable for the company. Research demonstrates that sales promotion has a favorable impact on customer buy intentions.. Sales promotion, a significant marketing approach, is used to attract customers in three ways: push, pull, and a mix of pull and push, which can improve customer buy intentions. Other research finds that sales promotions in the form of discounts and price reductions greatly influence customers' purchasing intentions. H5: Sales Promotion has an influence on purchase intentions in social commerce apps. Trust is a group of beliefs held by customers regarding certain characteristics of a provider and how the provider/seller will behave in the future. Trust is very important, because it is one of the most effective methods in reducing consumer uncertainty. Previous study reveals favorable outcomes between trust and buy intention, where trust is vital in determining willingness, which demonstrates suggestions, references, ratings and reviews might affect customers' purchasing intentions on social media. The more the consumer's trust in the seller, the more likely it is that the customer will make a purchase; this can occur if the merchant enjoys a positive reputation. Trust is built by the seller by creating and always maintaining a reputation and good faith, can create a sense of trust from customers and customer purchase intentions. H6: Trust has an influence on purchase intentions in social commerce apps. Fig. 1. Research Model. 3 Methodology This study used an associative method with the aim of examining the impact of economy, interaction, necessity, dependability, sales promotion, and trust on the intention to purchase. The data collection method in this research uses survey techniques by distributing questionnaires online via Google Forms. The hair formula resulted in a minimum study sample of 310 respondents. Purposive sampling was used to collect the target respondents, who were persons who had made purchases using social commerce programs in Surabaya. With a cross-sectional approach, data is collected only once for 4 weeks Researchers also use library research as a data source to obtain information data through previous journals, related articles, and various book sources. The operational variables in this study shown in the following table Table 1. Operational variables Variable Definition Indicator a method that results in reduced or higher - Price pricing during the purchasing process in Economy (X1) - Scope order to meet consumer demands and entice customers to make online transactions. - Information Interaction (X2) - Social Links  Emotional factors and a person's affective - Social Web abilities such as mood, feelings and - Network Awareness personality have a big influence on every aspect of human interaction in the - Communication process of life. The interactions that occur between humans and visual communication media also influence their interactions with - Trust the brand and product being communicated. When a consumer desires products or - Offline Connection services, they will seek them out. Marketing - Geographic Necessity (X3) seeks to satisfy wants and desires through Segment product media. - Preference - Social Commerce Content the ability to provide the services provided Reliability (X4) by the organization by servicing customers - Interaction consistently and accurately. - Trust - Brand - Reduced fare everything related to marketing that - Coupon Vouchers Sales Promotion encourages consumer purchases or increases (X5) - Discount distributor productivity - Free Shipping The trust that potential consumers have as a - Utilitarian Attitude Trust (X6) whole can create a sense of purchase intention in social commerce applications. - Hedonic Attitude - Product Information - Desire The online shopper's purchase intention is Purchase - Purchasing Search the final stage, after various cues from the intention (Y) Intensity online shopper. - Preferences Product The indicators of all variables except Trust is adopted from Son et al , while indicator of trust is adopted from Ali et al. The PLS-SEM approach was then used to examine the gathered data. Researchers may concurrently model and estimate complicated interactions between several dependent and independent variables by using structural equation modeling, or SEM. The PLS-SEM technique includes testing the Outer and Inner Model. The first stage is the outer model, which assesses the measurement model's validity and reliability. Outer model analysis requires four stages: convergent validity, discriminant validity, composite reliability, and Cronbach alpha. The following stage is inner model analysis, which evaluates the link between the independent and dependent variables. The inner model analysis method includes numerous critical metrics, including the collinearity test to analyze the structural model, the significance and relevance of the structural model connection, the coefficient of determination (R2), the effect size (f2), and PLSpredict. Following that, hypothesis analysis is performed. 4 Results and Discussion 4.1 Results Characteristics of respondent Table 2. Characteristics of respondent Criteria Frequency Percentage Gender Man 57 18,2% Woman 256 81,8% Age < 20 y.o 19 6,1% 20 - 30 y.o 285 91,9% 31 - 40 y.o 6 1,9% 41 - 50 y.o 1 0,3% > 50 y.o 2 0,6% Education SMA/SMK or below 134 42,8% Diploma (D1-D3) 48 15,3% Bachelor degree) 122 39% Master (S2) 9 2,9% Doctoral (S3) 0 0% Occupation Doesn't work 12 3,8% Student/Students 165 52,7% Teacher/Lecturer 14 4,5% Civil Servants/Government Employees 15 4,8% Private sector employee 56 17,9% Housewife 8 2,6% Freelance (Freelancer) 21 6,7% Entrepreneur/Entrepreneur 10 3,2% Other 12 3,8% Income per _< 1 mio 123 39,3% month (in 1 mio – 2.999 mio 110 35,1% rupiah) 3 mio – 4.999 mio 43 13,7% 5 mio – 6.999 mio 24 7,7% 7 mio – 8.999 mio 7 2,2% > 9 mio 6 1,9% From data collection, 313 responses were obtained from respondents which were used for data processing. This research was dominated by female/female respondents with a total of 256 respondents, a percentage of 81.8%. In terms of age, the majority of respondents (285 in total) were between the ages of 20 and 30 years old, accounting for 91.9% of the sample. For occupations, the majority of respondents were students, totaling 165 and accounting for 52.7% of the sample. The highest monthly income level was less than IDR 1,000,000, with 123 respondents (39.3%). The social commerce application most frequently used by respondents is the Tik Tok Shop application with a total of 252 respondents with a percentage of 80.5%. Meanwhile, the products most frequently purchased by respondents via social commerce applications are beauty products, a total of 138 respondents with a percentage of 44.1%. And the frequency of respondents carrying out shopping activities via social commerce applications is 2 - 3 times a month, a total of 166 respondents with a percentage of 53%. Outer Model  Several validity tests were conducted throughout the outer model's analysis stage, including the validity test. The convergent validity test examines the outcomes of factor loading values for each construct indicator. In convergent validity testing in confirmatory research, the loading factor value that is widely used is an ideal value, so the factor loading limit value used is 0.7, but in the correlation development stage 0.50 is still acceptable. In the outer loading test, all indicators were said to be valid and suitable for further testing. According to Hair et al , the Average Variance Extracted (AVE) test findings are used to evaluate the construct's convergent validity for all indicators. has an average value of the linked indicators, with a minimum of 0.50 required for acceptance. The validity and reliability tests are shown in Table 1. Table 1. Outer model result Convergent Validity Reliability Construct Indicator CR CR LF AVE CA (rho_a) (rho_c) > 0,7 > 0,5 > 0,7 > 0,6 > 0,6 Economy EC1-EC4 0,757-0,875 0,68 0,84 0,847 0,893 Interaction INT1-INT4 0,815-0,846 0,7 0,854 0,856 0,901 Necessity NCS1- NSC3 0,774-0,797 0,61 0,685 0,686 0,825 Reliability RL1-RL5 0,778-0,838 0,66 0,87 0,871 0,906 Sales SP1-SP3 0,766-0,835 0,63 0,714 0,728 0,838 Promotion Trust TR1-TR6 0,778-0,839 0,63 0,881 0,888 0,91 Purchase PI1-PI6 0,771-0,850 0,61 0,872 0,882 0,904 Intention The findings in the table show that each variable indicator has an outer loading value > 0.7 and an AVE value > 0.50. It is possible to infer that all variable indicators match the standards and are certified valid and appropriate for use in further analysis. In reliability testing, each variable has a composite reliability value > 0.60 and CA value > 0.70. As a result, all variable indicators have a high degree of internal consistency. The discriminant validity test in this study was carried out utilizing the Fornell Larcker criteria. Table 2 below shows the results. Table 2. Fornell Larcker Result Sales Intera Neces Purchase Reliabi Economy Promotio Trust ction sity Intention lity n Economy 0,823 Interaction 0,430 0,834 Necessity 0,616 0,573 0,782 Purchase Intention 0,591 0,586 0,628 0,783 Reliability 0,517 0,591 0,618 0,699 0,811 Sales Promotion 0,475 0,490 0,557 0,638 0,553 0,796  Trust 0,542 0,599 0,615 0,753 0,658 0,641 0,793 The findings demonstrate that each indicator's correlation value with the variable itself is stronger than its correlation with other variables, implying that all indicators satisfied the criteria for discriminant validity testing. Inner Model Evaluation of the structural model refers to R2, f2, and PLS Predict. The coefficient of determination (R2) is used to assess the structural model's explanatory ability. R-Square assessment criteria, namely if R2 ≥ 0.75 means there is a strong and exogenous indication that it has a significant influence on the endogenous variable. If the R2 value is 0.50 - 0.75, it means there is an indication of moderate influence, and if the R2 value is 0.25 - 0.49, it means it has a weak influence (Edeh et al, 2023). The effect size is used to calculate the f2 value and assess the independent latent variable's influence on the dependent latent variable. The effect size value (f2) ranges from > 0.02 for small, ≥ 0.15 for medium, and ≥ 0.35 for big effects.. Table 3. R-square and F-square Result Variabel F-Square R-Square Economy - Purchase Intention 0,037 0,684 Interaction- Purchase Intention 0,008 Necessity- Purchase Intention 0,004 Reliability- Purchase Intention 0,081 Sales Promotion- Purchase Intention 0,038 Trust- Purchase Intention 0,150 Table 3 reveals that the Interaction and Necessity variables do not fulfill the f2 test's effect size value of < 0.02, as indicated by the findings. Economy, reliability, and sales promotion have a small effect (f2 1.96. The path coefficient is in the value range of -1 to 1. If the value is in the value range 0 – 1, then it has a positive relationship direction, whereas if the value is in the range -1 – 0, then it has a negative relationship direction. Table 5. Hypothesis Testing Result Original T- Hypothesis Sample P-Value Statistic (O) Economy (X1) → Purchase Intention (Y) 0.144 2.606 0.009 Interaction (X2) → Purchase Intention (Y) 0.070 1.232 0.218 Necessity (X3) → Purchase Intention (Y) 0.056 0.958 0.338 Reliability (X4) → Purchase Intention (Y) 0.238 3.666 0.000 Sales Promotion (X5) → Purchase Intention (Y) 0.151 2.756 0.006 Trust (X6) → Purchase Intention (Y) 0.345 5.301 0.000 According to Table 5, four hypotheses have p-values less than 0.05 and t-statistic values larger than 1.96, implying that all four hypotheses are accepted. While two hypotheses, Interaction and Necessity, have p-values more than 0.05 and t-statistic values less than 1.96. Furthermore, the path coefficient value for each hypothesis is positive, with a range of 0-1. It may be argued that these four variables have a positive and substantial effect on purchasing intention. 4.2 Discussion Economy has a positive and significant effect on purchase intention. These significant research results occur because product prices in social commerce applications are economical, there are discount prices, and prices that are lower than other applications greatly influence customers' purchasing intentions on social commerce applications in Surabaya. This finding is consistent with other prior studies demonstrating that the economy has a considerable impact on the purchase intention variable [4, 6, 14]. This makes the economy a key aspect that can impact consumer purchasing intent in social commerce systems. Companies may create marketing strategies by setting product pricing in social commerce platforms, allowing them to attract and generate purchasing intents from customers. Interaction has no effect on purchase intention in social commerce applications. his conclusion is consistent with prior study, which found that interaction had no substantial affect on purchase intention. However, this finding contradicts prior study [7,19], which shown that contact had a major impact on purchase intention. The insignificant research findings occurred because communication in social commerce applications was not very interactive, communication between buyers and sellers was not smooth, responses from sellers were slow, and the nature of social commerce applications was not proven to be interactive. This study concludes that the relationship between vendors and consumers is not a key component that influences purchase intention. Based on these results, companies and sellers using social commerce applications must start implementing appropriate strategies to increase the interactivity of social commerce applications, so that communication between sellers and customers runs smoothly and increases the level of customer purchasing intentions. Necessity has no effect on purchase intention. The findings of this study contradict prior research, which found that necessity has a considerable impact on purchase intention [4, 8, 20]. This result may occur because customers on social commerce applications feel that they still cannot buy whatever items they want or there are still many products that are not provided through social commerce applications and there is also a lack of location-based services and there are problems with using coupons or vouchers according to the customer's area. It may be inferred that consumers' desire for a product or service is not a significant factor influencing customer purchase intention in social commerce apps. Through this, companies and sellers in social commerce applications can monitor the needs of different customers at any time. Reliability has significant effect on purchase intention. The findings of this study are consistent with those of Sohn et al. , who found that reliability had a considerable impact on purchase intention. Prior study also found that reliability has a major effect on purchase intention, which supports these findings. These significant research results occurred because the information in the social commerce application was reliable. Information on available products, reliable products and reliable social commerce businesses influence customer purchasing intentions on social commerce applications in Surabaya. Based on these findings, we may infer that reliability is an essential aspect that can impact purchasing intention. Companies and sellers on social commerce applications must always ensure that they provide appropriate and transparent information regarding their business and the products they sell, because customers really rely on this information to make purchases. Sales promotion has a significant effect on purchase intention. The findings of this study are consistent with the findings of Sohn et al. , who concluded that sales promotion had a considerable impact on buy intention. These findings are also corroborated by Bhatti's research , which indicates that sales promotion has a considerable impact on purchase intention. These significant research results can occur because discount prices and price reductions influence customers' purchasing intentions on social commerce applications in Surabaya, customers who initially did not think about buying a product will ultimately buy a product that has a discounted price. Based on these findings, it is possible to conclude that sales promotion is a significant element that influences purchase intention. Product pricing strategy can influence the perspective of customers who initially think that the price of the product is expensive, becomes cheap and creates purchase intentions just because there is a discount or price reduction. Through this, companies should organize and carry out marketing strategies well, by making changes to product prices so that they can change the perspective of customers and generate purchasing intentions from customers. Trust has a significant effect on purchase intention. These findings are reinforced by studies by Ali et al. , who found that trust had a considerable impact on purchase intention. In addition, Satriadi et al. found that trust had a considerable impact on purchase intention, which supports the findings of this study. The findings of this study are consistent with the findings of Wulandari et al. , who discovered that trust had a considerable impact on purchase intention. These significant research results can occur because the seller acts in the best interests of the customer, has good intentions towards the buyer, the seller's honesty, the presence of trusted seller recommendations on the application, the ease of finding trusted sellers on the application, and the commitment that the seller keeps to the customer influences purchase intentions. customers on social commerce applications in Surabaya. It is possible to conclude that trust is an important factor that can influence purchase intention. Companies and sellers must be able to implement appropriate marketing strategies so that customers can give complete trust in online buying and selling on social commerce applications. 5 Conclusion With the internet, social media arose as an online medium in which users may freely interact, share anything they want, and conduct buying and selling activities. Social commerce makes it easier for consumers to purchase. Based on the findings of research into the factors that influence customer purchasing intentions on social commerce applications in Surabaya, it is possible to conclude that economic, reliability, sales promotion, and trust variables all have an impact on social commerce customers' purchase intentions in Surabaya. Interaction and necessity have not been proven to have an effect on purchase intention. Communication that is less interactive, responses that take a long time, lack of product variety, and location-based coupons that are difficult to use are thought to be factors that have not yet formed this influence. The study's findings indicate that trust has the largest effect on purchase intention when compared to other variables. This means that a marketing strategy that instills honesty, good intentions, and commitment, as well as a trusted seller recommendation feature can make things easier for customers and influence customers' purchasing intentions. Business actors need to pay attention to products starting from prices, promos, vouchers, what products customers need, as well as developing features used by customers and sellers so that the buying and selling process in social commerce applications is easier to use. In this research there are several limitations, namely the variables which only include a few variables such as economy, interaction, necessity, reliability, sales promotion and trust to determine the influence on customer purchasing intentions on social commerce applications. Apart from that, this research also has limitations in the research sample which only includes the people of the city of Surabaya. Future study can increase the sample to include diverse respondents from all across Indonesia, to obtain better findings, and can add additional factors such as live streaming, brand, perceived risk, and word of mouth to establish the effect of consumer purchase intents in detail. References Y. Yusra. 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