Willingness to purchase is considered to be inversely affected by perceived risk. Stone
and Gronhaug (1993) state that ‘risk is the subjective expectation of a loss’.
Closely associated with risk is trust as it is a potential outcome of risk reduction. Trust
needs to be increased and perceived risk decreased if e-retailers are to engender positive
belief in the organisation’s online reputation. Dimensions of trust include: service
provider expertise, product performance, firm reputations, satisfaction (with past inter-
actions) and similarity. It should be noted that some researchers have suggested that not
all online customers respond in the same manner. Newholm et al. (2004) conclude that
e-retailers should adopt a differential approach to building trust and raise the point that
types of customers and products can significantly affect how retailers should develop
approaches for handling risk and trust. Indeed ‘bargain hunters’ are inherently risk
takers and in this case it becomes the propensity to engage in risk taking, rather than
being risk averse, which drives the consumer behaviour.
The risk seeking element of online purchasing behaviour possibly begins to explain
the success of the online auction platform eBay. Online auctions have seen a massive
upsurge in the number of sales of second-hand goods, which are traded between
unknown buyers and sellers. Each party has limited knowledge of the other’s past trad-
ing performance, the levels of service quality or the condition of the goods and/or
services on offer and yet millions of buyers are willing to gamble large sums of money in
pursuit of goods. The high level of purchasing activity has not gone unnoticed by retail-
ers as many now offer goods for sale within the eBay platform.
Perhaps the key question for the e-retailer to consider is what levels of trust and per-
ceived risk are required for a selected target audience, which will actually encourage
buyers to purchase in an online trading environment. Whatever the level there is perhaps
an even more fundamental implication, which is how to incorporate the excitement of
the unknown into the online offer.
Loyalty
Online customer loyalty has also been well researched. Srinivasan et al. (2002) identified
several variables as being unique to online consumer markets (see Table 10.4). The vari-
ables are:
Customisation– tailored content;
Contact interactivity– dynamic nature of the buyer/seller relationship;
Cultivation– relevance of online content;
Care– attention retail pays to consumer buying behaviour;
Community– online interaction amongst purchasing community;
Choice– expectation of greater choice online;
Convenience– perceived comparative advantage of online shopping;
Character– web site design.
This section has considered the online consumer by looking at some of the variables
that can be used to identify and develop an understanding of the individuals who shop
online. Moreover, it has looked at customer expectations and the key factors that are
likely to affect online purchasing behaviour: risk, trust and loyalty. The next section
focuses on e-retailing and looks at how companies are attempting to meet the needs of
the online consumer.
ONLINE CUSTOMERSDiscussion point
Suggest how each of these variables might be realised in a transactional retail web site.