The issues of risk, trust, and customer intention: A search for the...

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The main purpose of this study is explaining the relationship between customers trust, perceived risk and online purchase intention. However, we added e-servicescape as the antecedent of customers trust, perceived risk, and purchase intention. The respondents were 120 online shop customers. The data was processed using SmartPLS 2.0. We found eServicescape to be an antecedent of both customer trust and perceived risk, and customer trust to be the antecedent of purchase intention. However, we found that the relationship between customer trust and perceived risk, as well as perceived risk and purchase intention to be insignificant. Our findings and managerial implications are discussed.

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Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
THE ISSUES OF RISK, TRUST, AND CUSTOMER
INTENTION: A SEARCH FOR THE RELATIONSHIP
Michael Adiwijaya*, Thomas Kaihatu**, Agustinus Nugroho**, Endo Wijaya Kartika*
* Petra Christian University, Indonesia
** Ciputra University, Indonesia
Abstract
The
main
purpose
of
this
study
is
explaining
the
relationship
between
customers
trust,
perceived
risk
and
online
purchase
intention.
However,
we
added
e-servicescape
as
the
antecedent of customers trust, perceived risk, and purchase intention. The respondents were
120
online
shop
customers.
The
data
was
processed
using
SmartPLS
2.0.
We
found
e-
Servicescape to be an antecedent of both customer trust and perceived risk, and customer trust
to be the antecedent of purchase intention. However, we found that the relationship between
customer trust and perceived risk, as well as perceived risk and purchase intention to be
insignificant. Our findings and managerial implications are discussed.
Keywords: E-Servicescape, Customer Trust, Perceived Risk, Purhcase Intention
JEL Classification: G31, P12
DOI: 10.22495/rgcv7i1art11
1. INTRODUCTION
such as credit card guarantees
mechanisms (Pavlou & Gefen, 2004).
and
feedback
The history of Internet in Indonesia began at the
early years of 1990. During those years, the internet
network was known as paguyuban network. With the
recent development of technology in Indonesia,
internet becomes more commercialized, involving
online buying and purchasing. According to Asosiasi
Penyelenggara Jasa Internet Indonesia (APJII), there
were 88.1 million Indonesian internet users as of the
year 2016, with 48% users act as daily users. Thus, it
can be said that the online potential market is
considerably high in Indonesia.
On one hand, the internet has impacted the
business world significantly. Businesses are able to
conduct their international activities determining
their growth globally (Negash et al 2003; Teo & Pian
2004). Such activities include business transactions,
global operation of enterprises, and information
sharing between an enterprise and its suppliers and
customers to maintain their relationships before,
during, and after the process of transactions
(Hoffman et al, 1997). This will help sellers to
enlarge their market of operations, and buyers to
acquire sufficient product information prior to
purchasing said product (Roche, 1995). This
phenomenon creates an urge to create innovative
business practices which operate online, or also
known as e-business or e-commerce (Avlonitis &
Karayanni, 2000).
On the other hand, the rise of internet use
among businesses creates a risk. The online
business model usually involves third-party
companies acting as mediators between sellers and
buyers. Therefore, the risk of online crime arises
alongside the benefits of internet (Hong & Cho,
2011). Some examples of the risk include identity
theft and credit card fraud. Online enterprises use
series of strategies to counter the risk, mainly
revolving around strengthening the technological
infrastructure to build customers’ trust with tactics
Previous researchers found that the perceived
risk in doing online buying plays a significant role in
the customers’ buying intention (Eastlick & Lotz,
1999, Haris & Goode 2010). They elaborated that the
perceived risks include credit card security and non-
refundable product policies even when the
customers feel unsatisfied. It is described that while
the online platforms present wider range of
products, customers lack the ability to physically
assess the products, resulting in the risk of mis-
judging the product quality and ergonomics. In
short, their trust towards online brands determines
whether they would purchase a product via online
platform or not.
Based on our previous focus group discussion,
the root of customers’ trust issues can be caused by
the lack of clear activities conducted by some online
enterprises which leads to the distortion of
information presented to the customers. First, online
businesses require small office space to conduct
their operational activities. Often, they choose SOHO
(Small Office Home Office) as their office base,
where their staffs conduct three main activities
which are daily operational purchase, product
distribution and selling, and product return or
refund. These activities are done using limited
number of human resource personnel. Thus, some
human errors are inevitable. Second, the online
business model usually comprises of companies
acting as the online platform provider, and
individuals or companies acting as the product
sellers. Often, this creates confusion, in which the
responsible parties, should there be problems
during the purchase process, are unclear. These may
instill fear in the consumers’ online purchase
intention process.
Both previous researchers and our focus group
discussion findings indicate a strong relationship
between consumers’ trust and consumer’ purchase
82
Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
intention. However, there are some findings which
timeliness of delivery is also important. Next, the
contradict this. Tang & Chi (2005, indicated that
need for assurance in the transaction process is
trust has no strong relationship with online buying
necessary. This is due to the risk of product defect
intention. They explained that trust should build
or inappropriate product specifications.
customers’ attitude prior to their behavior. Apart
As
trust
is
built
on
the
fulfillment
of
from that, Chen (2012) found that sellers’ integrity,
consumers’
expectation
(Barber,
1983),
online
as a part of trust, has no significant impact towards
enterprises need to pay attention to their customers’
online buying intention. This is surprising, as a lot of
behavior as in the online market, consumers possess
buying
decisions
are
determined
by
the
sellers’
lack of power and control in the transaction process
reputation.
Usually,
this
is
indicated
by
the
(Chai & Kim, 2010). Therefore, these consumers’ are
“approved
seller”
stamp
given
by
the
platform
willing
to
do
the
online
transaction
process
provider or the number of stars given by their past
regardless of the process’ weakness or risks (Kimery
customers. Thus, it is safe to say that the role of
& McCard, 2002).
trust
in
predicting
purchase
intention
is
The higher the consumers’ trust towards an
inconclusive.
online brand, the lower their perceived risk towards
Our research addressed this problem, focusing
online transaction involving the brand (Williamson,
on
the
antecedents
of
online
shopping
behavior
1993,
Gefen,
2002).
This
emerges
from
the
which is seen from consumers’ point of view. We
consumers’
feeling
of
safety
during
transaction
chose to use consumer’s perceptions because online
(Jarvenpaa and Todd, 1996). The rationale is that
business strategies are in the end, aimed towards
trusted
brands
usually
have
their
online
selling
the consumers. The success of these strategies relies
portfolio,
highlighting
testimonies
of
satisfied
heavily
on
whether
the
enterprises
succeed
in
customers. This will increase the consumers’ level of
converting
a
consumer
into
loyal
buyer.
We
trust towards the brands, and creates a perception
hypothesized that trust plays an important role as a
of
safety
in
doing
online
transactions
via
these
purchase intention catalyst. Thus, it is important for
brands Thus, it can be said that consumers’ trust
enterprises operating in the online market to find
impacts their perceived risk on online buying. It has
out what factors trigger online purchasing behavior
to be noted, however, that perceived risk is highly
significantly.
subjective
(Woodruff,
1997),
as
it
involves
one’s
Building trust in an online market is not an
point
of
view
which
most
likely
is
different
easy task. Zeithaml, et al. (2002) believe that trust is
compared to others. Therefore, managing risk is a
built
upon
an
environment
projecting
efficiency,
vital skill needed by online enterprises.
safety, and fulfillment of needs. Enterprises should
This
research
rationale
is
built
upon
the
build an online platform referring to those aspects.
explanations above. It will explain the relationship
The environment of online platform is often labeled
between trust and purchase intention. However, we
as
e-servicescape.
Urban,
et
al.
(2000)
further
also would like to delve further into the antecedent
explained
that
security
of
both
transaction
and
variable
of
both
risk
and
trust,
which
is
e-
privacy are mandatory, as well as the clarity of
servicescape,
and
these
variables’
relationship
information
regarding
the
availability
of
stock.
towards
online
purchase
intention.
The
research
Moreover, as the competition is more intense, online
framework we use is as follows:
enterprises’
service
such
as
the
reliability
and
Perceived Risk
E-Servicescape
Purchase Intention
Trust
Figure 1. Research framework
It is expected that this research will contribute
concept
consisting
of
atmosphere,
layout,
and
towards customer trust and purchase intention. It
functional
aspects
which
are
complemented
by
will also address the perception of the online buying
signs, symbols, and forms. Szymanski & Hise (2000)
environment and the perceived risk in doing online
found
that
there
are
significant
relationships
transaction from the point of view of Indonesian
between
convenience,
merchandising,
website
online buyers.
design,
and
financial
security
with
online
satisfaction. This is backed up by Zeithaml et al.
2.
LITERATURE REVIEW
(2002) who stated that online service quality is
assessed based on efficiency, fulfillment, and
2.1. E-servicescape
privacy.
Baker (2002) stated that the physical environment of
2.2. Online Trust
products and services are affected by the interaction
between customers and the atmosphere, design, and
social factors of the said products and services.
Whereas according to Bitner (1992), servicescape is a
Trust is a major issue in the interaction between
customers and a company, especially in e-commerce
based business. Gefen (2000) stated that the object
83
Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
of customer trust is the performance of a company
purpose of online environment research (Szymanski
or vendor which said customer interacts with. In
& Hise, 2000).
online business, this interaction process bears a risk
Yen & Gwinner (2003) posited that trust should
which is caused by the uncertainty of technological
be the main aspect of successful online services.
infrastructure for information sharing as well as the
Thus, it is mandatory for online enterprises to focus
parties involved in a transaction (Grabner-Kraeuter,
on increasing and maintaining consumers’ level of
2002). In other words, there is a risk for customers
trust to be successful in their online activity. The
in
doing
online
transaction
because
the
initial stage of online purchase is the evaluation of
accountability of the online vendor as well as the
online platform visually (Mandel & Johnson), as the
parties involved, such as the payment or shipping
attractiveness
of
the
platform
reflects
an
online
vendor, is uncertain.
enterprise’s credibility, and credibility creates the
McKnight
&
Chervany
(2002)
explained
the
feeling of trustworthiness (Harris & Goode, 2004).
phenomenon of online trust as the tendency for a
This will at the same time decrease the level of
customer to believe and place their expectation in a
perceived risk of doing online transactions. Chang &
website, website vendor, and internet. Thus, it is
Chen (2008) amplified this by stating that aesthetic
proposed
that
one
way
to
understand
the
appeal
plays
a
significant
role
in
improving
phenomenon is to examine the attributes of the
consumers’ online trust.
trustee.
The
process
of
assessing
the
online
environment
continues
by
judging
whether
the
2.3. Perceived Risk
platform is useful and easily operated. In fact, Kim,
et al. (2003) explained that layout and functionality
Customer’s decision to purchase, modify, or
postpone the purchase process is heavily affected by
their perception of risk in doing transactions. Kim et
al. (2003) stated that this perception of risk, or
perceived risk, is customer’s belief that there is
potential negative risk which surfaces in a certain
condition or situation. This is heavily subjective in
nature, as each customer may have different
perceptions regarding a situation, which includes a
situation where this customer does an online
transaction (Kimery & McCard, 2002). This amplifies
Mitchel’s (1999) findings stating that the perceived
risk is often used by customers as a consideration in
forming certain behaviors as they would often try
more to avoid mistakes compared to maximize
utility in purchase process.
dimension is the main criterion assessment used by
consumers to evaluate an online platform.
Customization (Lynch, et al., 2001), interactivity
(Fiore & Jin, 2003), and function design (Menon &
Kahn, 2002) of a platform are the most fundamental
aspects which are assessed by customers which will
lead to the increase of online customer trust. This
dimension will also reflect an online enterprise’s
performance, which is tied closely to perceived risk
as it ensures consumers that negative outcome
potential resulting from the transaction process is
minimized.
The financial security dimension plays a
significant role in building customers’ trust.
Szymanski & Hise (2000) stated that this aspect is
considered to be crucial. The number of complains
and the content of testimonies can be read easily by
2.4. Purchase Intention
potential customers. The more positive the review is,
the greater the trust will become. However, the
Purchase intention can be classified into a
component of consumers’ cognitive behavior which
explains why an individual possesses an intention to
make a purchase (Ling et al., 2010). The higher the
consumers’ purchase intention are, the more likely
they are to make an actual purchase. Schiffman &
Kanuk (2011) explained this phenomenon by stating
that the consumers who possess positive purchase
intention will create positive loyalty towards a brand
which later leads to an act of purchase. Laroche et al.
(1996) stated that to measure purchase intention,
one has to take consumers’ consideration and
negative reviews will impact the potential customers’
perception on the online enterprise, and therefore
projects that there will potentially be negative
consequences should the online transaction be done.
This will increase the customers’ perceived risk
(Kim, et al., 2003).
Hypotheses 1a: e-Servicescape will be positively
related to customer trust.
Hypotheses 1b: e-Servicescape will be negatively
related to perceived risk.
Hypotheses 1c: e-Servicescape will be positively
related to purchase intention.
expectation into account. This measurement is
needed because understanding customer’s purchase
2.6. Trust and Perceived Risk
intention will help companies to profile potential
market segment and predict future demand of a
product or service (Urban & Hauser, 1993).
Perceived risk is perception of the potential result of
consumers’ assessment of an online transaction,
whether it is successful or not (Kathyrn & Mary,
2.5. E-servicescape, Trust, and Purchase Intention
2002). Potential means that there are possibilities of
both negative and positive consequences of the
The dimensions of e-servicescape, which are
aesthetic appeal, layout and functionality, and
financial is adapted from offline store environment
(Wolfinbarger & Gilly, 2001). These dimensions
explain the process of interaction between
consumers and the store ambience, design, and
social factor (Bitner, 1992, Baker, 2002) which then
translated into online platform interface for the
online transaction. Thus, customers lose their ability
to properly judge the safety of the transactions as
there are too many variables to be considered such
as hackers, technology, and hostile vendors. In this
kind of situation, trust plays a significant role in
reassuring that there will not be any problem with
the transaction (Ratnasingam, 1998).
Meyer (1995) explained that customers’
perception of an enterprise’s ability, benevolence,
84

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