Electronic Commerce Research and Applications 2 (2003) 216228

www.elsevier.com/ locate/ ecra

Consumers perceived risk: sources versus consequences
Nena Lim
UQ Business School, The University of Queensland, Brisbane, QLD 4072, Australia
Received 1 November 2002; received in revised form 14 March 2003; accepted 18 April 2003
Abstract
In this study, we examine an important factor that affects consumers acceptance of business-to-commerce (B2C)
electronic commerceperceived risk. The objective of this paper is to examine the denition of perceived risk in the context
of B2C electronic commerce. The paper highlights the importance of perceived risk and the interwoven relation between
perceived risk and trust. It discusses the problem of dening perceived risk in prior B2C research. This study proposes a new
classication of consumers perceived risk based on sources. It highlights the importance of identifying the sources of
consumers risk perceptions in addition to the consequences dimensions. Two focus group discussion sessions were
conducted to verify the proposed classication. Results indicate that Internet consumers perceive three sources of risk in B2C
electronic commerce: technology, vendor, and product.
2003 Elsevier B.V. All rights reserved.
Keywords: B2C electronic commerce; Online shopping; Internet shopping; Perceived risk; Trust; Internet security
1. Introduction Business-to-consumer e-commerce is important
because it profoundly affects individuals purchasing
According to Roman and Fjermestad [1], there are behavior and their socialisation pattern [2]. Fast
ve categories of electronic commerce customer growth of B2C e-commerce has been expected [3,4]
relationship management research: technology, as it is convenient, without sales pressure, and saves
knowledge management, business models, markets, time [5]. Researchers reported that retailers in Asia
and human factors. This study examines the human Pacic generated US$6.8 billion revenues from B2C
factors for business-to-consumer electronic com- e-commerce in 2000. They predicted the revenues to
merce (B2C e-commerce) and focuses on consumers double and reach US$14 billion in 2001 [4]. Never-
perspective. In this study, business-to-consumer elec- theless, despite optimistic predictions, adoption rates
tronic commerce refers to consumers ordering prod- of B2C e-commerce are relatively slow. For exam-
ucts or services and paying for them through the ple, although 50% of Australians use the Internet,
1
Internet . only 20% of these Internet users have purchased
products or services through the Internet [6]. In two
different studies, more than 50% of consumers
abandon purchases before purchases are completed
E-mail address: n.lim@business.uq.edu.au (N. Lim).
1
[3,7].
In this paper, B2C e-commerce, online shopping, and Internet
shopping are used interchangeably. In view of the contradictory evidence, we attempt
1567-4223/ 03/ $ see front matter 2003 Elsevier B.V. All rights reserved.
doi:10.1016/ S1567-4223(03)00025-5
217 N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228
to help businesses understand effects of an important and perceived risk as the likelihood of both positive
perception held by consumersperceived risk [8,9]. and negative outcomes. A number of recent studies
The objective of this study is to clarify the denition of B2C e-commerce have then adapted the Mayer et
of perceived risk in B2C e-commerce. First we al. model [1114].
explain the relation between perceived risk and trust. Literature shows that researchers have different
We then review the existing literature on consumers views about the relations between trust and perceived
risk perceptions. We argue that researchers should risk. Fig. 1 summarizes the four types of relations
provide a clear denition of perceived risk. More- identied by researchers. In case (a), Stewart [14]
over, to provide useful results to Internet vendors, it examines effects of trust in a Web-site and perceived
is important for researchers to identify sources in risk in transaction channel on consumers willingness
addition to consequences of consumers perceived to purchase online. She considers perceived risk to
risk. be a moderating factor on the relation between
consumers trust and their willingness to purchase
products from Internet vendors [14]. In case (b), Kim
2. Perceived risk and Prabhakar [13] suggest that consumers adoption
of Internet banking is determined by a balance
2.1. Perceived risk and trust between trust and perceived risk. If the level of trust
exceeds the level of perceived risk, consumers will
Although studies show that perceived risk is an perform the trusting behavior (i.e., adopting Internet
important factor for online shopping [28,64], there banking). Similar to Mayer et al. [10], they dene
has been much confusion about the relation between perceived risk as a combination of relative advan-
perceived risk and trust in literature. Mayer et al. tages and negative consequences.
[10] argue that risk taking activities in an organiza- Other researchers hold slightly different views.
tional context is affected by both trust and perceived Cheung and Lee [12] suggest that trustworthiness of
risk. They dene trust as a willingness to take risk Internet vendors is affected by four factors: per-

Fig. 1. Relations between perceived risk and trust.
N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228 218
ceived security control, perceived privacy control, According to the theory of consumers perceived
perceived integrity, and perceived competence. risk, consumers perceive risk because they face
Moreover, they describe trust as an antecedent of uncertainty and potentially undesirable consequences
perceived risk in their model (Fig. 1, case c). An as a result of purchases [17,21]. Therefore, the more
empirical test of Cheung and Lees trust model risk they perceive, the less likely they will purchase.
suggests that consumers trust of Internet vendors is Yet consumers often adopt risk reduction strategies
negatively associated with their perceived risk in such as information acquisition before they purchase
Internet shopping [15]. On the contrary, Mitchell [8] [17,33]. Perceived risk is powerful at explaining
considers perceived risk to be an antecedent of trust consumers behavior because consumers are more
and the relation between the two factors to be non- often motivated to avoid mistakes than to maximise
recursive (Fig. 1, case d). utility in purchasing [8] (p. 163). Studies suggest
With the interwoven relation between perceived that perceived risk is important for consumers
risk and trust, should we discretely separate the two acceptance of telephone shopping [20] and mail-
perceptions? Which one should researchers concen- order shopping [2325]. Consumers who use tele-
trate on in their future studies? It is doubtless that the phone shopping perceive risk because they cannot
meanings of trust and perceived risk are closely personally inspect products or compare the quality,
related. Nevertheless, by denition, trust is a more size, or style of products. Consumers also perceive
restrictive concept than perceived risk because trust risk because time may be lost or frustration may
needs to involve two parties: trustor and trustee [10]. result where the purchases are unsuccessful [20].
For B2C e-commerce, consumers can trust or distrust As telephone shopping and online shopping are
Internet vendors. Nevertheless, what if consumers alike, it is likely that similar types of perceived risk
are worried about the Internet and its related tech- also apply to online shopping. With the open and
nologies in general? Strictly speaking, consumers complex nature of the Internet and related tech-
can perceive risk in vendors or Internet technologies, nologies [68], the technologies are beyond the con-
but they cannot trust or distrust Internet technologies. trol of any individual [69]. Together with the exist-
As both technology and human factors are salient for ence of countless Internet vendors, the importance of
the growth of B2C e-commerce, this study focuses perceived risk to B2C e-commerce further increases.
on consumers perceived risk. Such a perception is likely to become a decisive
factor in affecting consumers behavior. The existing
literature always relates security to perceived risk
2.2. Theory of perceived risk when researchers discuss critical factors associated
with the success of e-commerce [26,27]. This is
If individuals perceive risk, they expect some because consumers perceive higher levels of risk
kinds of loss [16]. Psychology research has widely toward B2C e-commerce when they consider securi-
studied risk theory, especially in relation to gambling ty to be insufcient. For example, Ratnasingham [27]
behaviour. Different models were proposed to mea- emphasizes the importance of perceived risk on
sure perceived risk [7073]. The development of the users acceptance of electronic data interchange
theory of perceived risk in the context of consumer (EDI). Fram and Grady [28] report that online
behaviour began in 1960 [18]. According to Bauer, customers are concerned with credit card fraud and
consumers behaviour involved risk because their are willing to purchase only products with low levels
purchasing actions will produce consequences of purchasing risk. After a large-scale denial of
which he cannot anticipate with anything approx- Internet service attack in February 2000, 30% of
imating certainty, and some of the which at least are respondents of a telephone survey indicated that they
likely to be unpleasant [18] (p. 24). Since 1960 would be less likely to adopt B2C e-commerce
[18], extensive consumer research has conrmed that because of the incident [29]. In another study,
perceived risk affects consumers behavior not only perceived risk was found to have a signicant
in North-America [1921] but also across different negative and direct effect on consumers adoption of
cultures [22]. Internet banking [30].
219 N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228
2.3. Classication of perceived risk products as well as time spent on returning
unsatisfactory products [34].
2.3.1. Existing dimensions 7. Perceived personal risk is the possibility that
A general denition of perceived risk in marketing individuals may be harmed because of their
is the nature and amount of risk perceived by a purchase behavior. For example, they are likely
consumer in contemplating a particular purchase to suffer if their credit cards information is
action [20] (p. 33). Nevertheless, if businesses want stolen [35].
to target their resources on the right places to reduce 8. Perceived privacy risk is the possibility that
consumers perceived risk, they need to identify the online businesses collect data about individuals
effects of different types of risk [31]. A review of and use them inappropriately [35,36]. This
past studies shows that researchers have identied dimension of risk includes undisclosed capture
the following nine dimensions of perceived risk of information like consumers shopping habits.
9. Perceived source risk is the possibility that
1. Perceived nancial risk is sometimes called individuals suffer because the businesses from
economic risk. It represents the possibility of which they buy products are not trustworthy
monetary loss arising from online shopping [34]. It is a general perception regarding the
[32,33]. For example, unreliable vendors deliver reliability of vendors such as whether a com-
unsatisfactory products or even fail to deliver pany exists.
products to consumers. In some cases, indi-
viduals spend money to repair problematic Table 1 summarizes the studies that have ex-
products. Alternatively, credit card details of amined the above dimensions of perceived risk. The
individuals can be stolen when transactions X (examined) descriptor indicates a dimension has
occur over the Internet [49,53]. been examined in past studies. The S (signicant)
2. Perceived performance risk is the possibility descriptor indicates a dimension has been examined
that the purchased products do not work proper- and was found to be signicant in past studies. For
ly or can be used for only a short period of time example, Jacoby and Kaplan [32] identify ve types
[23,32]. This dimension of perceived risk is of perceived product risk, namely, nancial risk,
similar to the usefulness or functionality of performance risk, social risk, physical risk, and
products. psychological risk. Based on Jacoby and Kaplan
3. Perceived social risk is concerned with indi- [32], Darley and Smith [37] add the time-loss
viduals perception of other people regarding dimension. In their study of mail-order shopping,
their online shopping behavior [32]. It is the Simpson and Lakner [23] identify four types of
possibility that consumers shopping behavior is perceived risk, namely, economic, performance
not accepted by other society members. physical, and social / psychological.
4. Perceived physical risk is the possibility that In addition to showing perceived risk is a multi-
products are harmful to individuals health [32] dimensional construct, Table 1 highlights that not all
or products do not look as good as the in- dimensions of perceived risk were found to have
dividuals expect [23]. signicant effects on consumers behavior. For ex-
5. Perceived psychological risk is the possibility ample, Lutz and Reilly [38] nd that performance
that individuals suffer mental stress because of risk has a signicant effect on consumers infor-
their purchasing behavior [32]. For example, mation acquisition behavior, but social risk has no
consumers are likely to feel frustrated if their effect. Korgaonkar [31] reports that economic risk is
purchases are unsuccessful. signicantly related to consumers intention to pur-
6. Perceived time-loss risk is the possibility that chase, but social risk has no effect. Based on
individuals lose time because of their shopping Simpson and Lakner [23], Jarvenpaa and Todd [35]
behavior [33]. In addition to shopping time, this identify ve types of risk in online shopping: econ-
dimension includes waiting time for receipt of omic, social, performance, personal, and privacy.
N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228 220
Table 1
Dimensions of perceived risk
Prior studies Perceived risk dimensions
Year Author(s) Financial Performance Social Physical Psychological Time-loss Personal Privacy Source
1971 Roselius [33] X X X X
1972 Jacoby and Kaplan [32] X X X X X
1974 Lutz and Reilly [38] S X
1982 Korgaonkar [31] S X
1985 Gemunden [66] X X X
1986 Festervand et al. [67] S S S
1990 McCorkle [34] X X X X X
1993 Simpson and Lakner [23] S X X X X
1995 Darley and Smith [37] X X X X X X
1996 Jarvenpaa and Todd [35] X S X S X
1996 Van den Poel and Leunis [25] X X
1997 Fram and Grady [28] S
1999 Graphic, Visualization, & Usability Center [5] S X
1999 Korgaonkar and Wolin [46] S S
1999 Vellido et al. [48] S S
2000 Cheung and Lee [12] X
2000 Nyshadham [36] S
2000 Tan and Toe [30] S S
X: Dimensions included in studies. S: Dimensions found to be signicant in the studies.
Their results suggest that personal risk and per- the denition of nancial risk is in line with prior
formance risk are more important than other types of studies. The convenience dimension in that study
risk. refers to consumers perceived usefulness of B2C
e-commerce [44].
2.3.2. Problems of prior B2C research Third, even with proper denition, researchers
The number of studies that examine the inuence simply dene perceived risk differently. For exam-
of consumers perceived risk on their adoption of the ple, some researchers dene perceived risk for B2C
B2C e-commerce has been increasing since Jarven- e-commerce as the lack of security and privacy on
paa and Todds study in 1996 [28,30,4145]. Yet the Internet [30,46]. Based on Peter and Ryan [47],
despite the increasing number of studies, there is no Salam et al. [9] dene perceived risk as a subjective
clear guidance to Internet vendors as to what they expectation of nancial losses. Others refer it as the
can do to reduce consumers perceived risk. We trustworthiness or reliability of Internet vendors [48].
believe this situation is attributed to four reasons. It is obvious that perceived risk is a multi-dimension-
First, some studies provide unclear denition of al construct. Using perceived risk loosely to repre-
perceived risk [13,15,3943]. For example, sent different things results in confusion. Findings of
Limayem et al. [41] examine security and privacy in one study often are in conict or incomparable with
their study but they do not dene perceived risk. those of other studies [32]. To help readers interpret
Without a clear denition, it is difcult to interpret study results, researchers need to be more specic
the results. about the type of perceived risk they investigate.
Second, some denitions provided by researchers Fourth, as shown in Table 1, some researchers are
are misleading [44,45]. For example, Andrade [44] aware of the multi-dimensional nature of perceived
used nine variables to represent three dimensions of risk and have identied nine different dimensions in
perceived risk: performance risk, nancial risk, and their studies. Yet except for the perceived source risk,
convenience. Nevertheless, two of the dimensions in these dimensions represent consequences of con-
fact represent antecedents of perceived risk, and only sumers perceived risk. That is, each dimension
221 N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228
refers to a type of loss consumers perceive to suffer Internet standards [69]. In response to this consum-
as a result of their actions. For example, numerous ers concern, researchers and businesses develop new
studies show that perceived nancial risk is a major technologies and protocols, such as rewalls, encryp-
dimension that determines consumers behavior tion, digital signatures [26,51], and wireless applica-
[5,23,30,31]. What these results fail to show is the tion protocol [52] to improve Internet security.
sources of such perceived risk. Financial losses can Despite these efforts, several studies show that
be caused by manipulation or misuse of nancial consumers high levels of perceived risk of the
information by the intended recipients of credit card Internet and its other related technologies continue to
numbers or interception of credit card numbers by be obstacles to their acceptance of B2C e-commerce
hackers [49]. Financial losses may also be caused by [12,15,53,63]. Therefore, we propose technology to
inappropriate products [45]. Similarly, past studies be the rst source of consumers perceived risk on
suggest that perceived privacy risk is another major online shopping.
deterrent to consumers acceptance of online shop- In spite of the importance of technology factor,
ping [30,36,50]. The question is what businesses can reducing consumers perceived risk toward tech-
do in response to these results. Do consumers worry nologies is only a part of the solution. The second
about privacy invasion because of hackers attacks or proposed source is related to Internet vendor. In a
because of deceitful vendors? To solve the unclear study of business-to-business electronic commerce,
problem related to the existing classication of researchers identify two types of risk: technology-
perceived risk, we believe researchers need to ex- related and people-related [54]. In a similar vein,
amine perceived risk from a different perspective. B2C e-commerce also has technology- and people-
Identifying the sources of perceived risk is useful to related risks. People-related risk for B2C e-com-
2
Internet vendors because it allows them to target merce is associated with vendors and consumers .
their resources in the right places. Because of the ubiquitous nature of the Internet,
consumers can purchase products from vendors
2.3.3. Sources of perceived risk worldwide. Yet the relationship between Internet
In view of the problem of classifying perceived vendors and consumers is impersonal and remote
risk according to consequences dimensions, research- [49] (p. 145). Unless Internet vendors obtain digital
ers need to examine perceived risk from a different certicates from certication authorities such as
perspectivesource dimensions. Identifying the Verisign, consumers will have difculties identifying
sources of perceived risk is useful to businesses, real owners of businesses [55] or ascertaining
because it allows Internet vendors to target their genuine existence of businesses [56]. This kind of
resources appropriately to reduce the perception. In anonymity leads to potential risks such as businesses
addition to vendors, this study identies three other fail to deliver products as promised [14]. It may also
sources of consumers perceived risks in relation to lead to misuse of consumers personal information
online shopping: technology, consumer, and product. by those anonymous but malicious businesses [49].
The rst proposed source of consumers perceived The importance of vendor as a source of perceived
risk is technology-related [69]. The major difference risk is evidenced by an increasing number of studies
between online shopping and telephone shopping lies that examined the effects of Internet vendors charac-
in the fast changing and ubiquitous Internet. Because teristics on consumers behaviour. For example,
of the use of the Internet, the safety of credit card McKnight and Chervancy [57] examine effects of
details and other personal information becomes a vendor reputation whereas Bhatnagar et al. [45]
major concern for consumers [28,45,49]. A recent examine effects of reliability of vendors and Internet
study examines the technological aspect of electronic security of credit card payment on consumers
commerce and nds six impediments to consumers purchase decisions. Cheung and Lee [12] suggest
acceptance of online shopping exist. These include
download delays, limitations in the interface, search 2
In this study, we focus on direct relationship between Internet
problems, inadequate measurement of Web applica-
vendors and consumers, and do not examine the role of inter-
tion success, security weakness, and a lack of mediaries such as guarantors.
N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228 222
perceived security control, perceived privacy control, The four dimensions of perceived risk are dened
perceived integrity and perceived competence affect with reference to the sources as follows:
consumers risk perception. A test of Cheung and
Lees model indicates that perceived security control Perceived technology risk refers to the degree to
of Internet vendors and perceived competence of which individuals believe that if they purchase
Internet vendors are important determinants of con- products or services through the Internet, they
sumers risk perceptions [15]. will suffer losses caused by the Internet and its
The third source of perceived risk is also people- related technologies [28,54,63].
related and is related to consumers themselves. The Perceived vendor risk refers to the degree to
theory of reasoned actions [58,59] posits that social which individuals believe that if they purchase
inuence has a direct effect on behavioral intention. products or services through the Internet, they
That is, individuals behaviours are inuenced by the will suffer losses caused by Internet vendors
beliefs and comments of their families and friends. [12,13,15,55,64].
The more social support individuals garner regarding Perceived consumer risk refers to the degree to
their actions, the more likely they will perform the which individuals believe that if they purchase
actions. Past studies also suggest that social inuence products or services through the Internet, they
affects individuals usage of new technologies will suffer losses caused by social pressure.
[60,61]. Hence, we propose social pressure suffered Social pressure refers to pressure individuals
by consumers to be a source of their perceived risk receive from their families, friends, or col-
on online shopping. leagues [58,60,61].
In addition to technology and human factors, Perceived product risk refers to the degree to
products sold on the Internet are another source of which individuals believe that if they purchase
consumers risk perceptions. Some consumers per- products or services through the Internet, they
ceive risk because they can obtain little product will suffer losses caused by products [45,53,62].
information and have doubts about product quality
[62]. Others perceive risk because they cannot select 2.3.4. Perceived risk dimensions: sources versus
products personally, or products can be defective or consequences
inappropriate for their needs [45,75]. It is important Knowing simply the consequences of risk that
to distinguish between perceived risk related to consumers perceive does not provide much help to
products/ services and perceived risk in the context Internet vendors. Internet vendors can act on re-
of transaction [53]. The former is attributed to the search results only if they know what are causing the
nature [45,62] and value [74] of particular products. risk. In light of the importance of identifying sources
For example, the ability to touch and feel is more of perceived risk, in this section we match the four
important for some products (such as groceries) than sources of perceived risk to the various consequences
others (such as books and CDs). Findings of prior dimensions of perceived risk. Perceived source risk
studies support the importance of different levels of is excluded from the matching because this dimen-
risk associated with products in affecting consumers sion itself represents a source of perceived risk.
risk perception [32,38,45]. These ndings explain Furthermore, perceived personal risk is excluded,
why consumers purchase some products more fre- because by its denition, this dimension of risk can
quently than others on the Internet [6]. Therefore, the be caused by any source. Table 2 summarizes the
fourth proposed source of perceived risk is product- matching results.
related. Perceived nancial risk, perceived psychological
In short, we identify four sources of perceived risk risk, and perceived time-loss risk have three sources.
in relation to online shopping: technology, vendor, Hackers can cause nancial losses to consumers by
consumer, and product. In this study, overall per- stealing their credit card details. Similarly, consum-
ceived risk is dened as the degree to which ers may perceive nancial losses because of poor
individuals believe that if they purchase products or product quality. In other cases, a fear that deceitful
services through the Internet, they will suffer losses. vendors disappear overnight and do not deliver
223 N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228
Table 2
sumer factor is responsible for only one type of
Matching of sources and consequences of perceived risk
perceived risksocial risk. The matching results
Consequence Source
coincide partially with a recent study that identies
perceived risk with product / service with three types
Technology Vendor Consumer Product
of consequences dimensions. Their three dimensions
Financial
comprise functional loss that equals to our per-
Performance
formance loss, time-loss, and nancial loss [53].
Social
Physical
Psychological
Time-loss
3. Research methodology
Privacy
Two focus group discussion sessions were con-
products or services can also lead to consumers ducted to gather qualitative data from Internet con-
perceived nancial risk. Perceived psychological risk sumers and to verify the importance of the proposed
refers to mental stress suffered by consumers be- sources of perceived risk. Participants of the discus-
cause of their online shopping behavior. Consumers sions are consumers in Queensland, Australia. The
are likely to suffer mental stress if their computers focus group discussion was advertised in four local
crash and they cannot nish their transactions. They newspapers. Eighty-four people enquired about the
will feel stressful if the products they ordered do not discussion by phone or by email. We selected 18
arrive on time, or do not arrive at all. Even if participants with different backgrounds, but two
consumers receive the products they ordered, they failed to turn up for the sessions. All participants
will still be stressful if the products are of poor were 18 years or older and had access to the Internet.
quality or unsuitable for their needs. In a similar Both sessions were held on a Saturday in September,
vein, if consumers perceive a loss of time in online 2001. Each session lasted for 90 min. In return for
shopping, the risk perception can be caused by slow their participation, participants received A$50. In
loading time (i.e., technology-related) or slow re- addition, each participant will receive a copy of the
sponse time of vendors. Moreover, consumers may results at the end of this research.
have to spend time in returning faulty products.
Perceived privacy risk is matched to technology 3.1. Demographics of participants
and vendor dimensions. Consumers will lose their
privacy if hackers steal their personal information. The demographics of all the participants are
Yet their personal information can fall into the hands shown in Table 3. A total of 16 Internet users
of third parties simply because Internet vendors sell participated in the two focus group discussion ses-
or exchange the data. Perceived performance risk sions. There were nine females and seven males. The
and perceived physical risk can be caused by prod- participants were all aged over 18. Most (62.5%)
ucts. Alternatively, these two dimensions of risk can were aged between 26 and 35. Seventy-ve percent
occur if Internet vendors mislead consumers. Lastly, of the participants had some university education.
according to the prior denition of perceived social Their annual incomes ranged from A$20,000 to
risk, the only source of this dimension of is related to A$79,999, although nearly half earned A$40,000 to
consumers. A$59,999 per annum. Most participants were ex-
In summary, Table 2 shows that technology factor perienced computer and Internet users. Only two
is a source for four types of loss to consumers: described themselves as inexperienced computer and
nancial, psychological, time, and privacy. Product Internet users. Sixty-two percent of participants have
is related to ve types of losses: nancial, per- purchased online before. Among the experienced
formance, physical, psychological, and time. Vendor online shoppers, 70% spent below A$500 in the last
is related to six different types of consequences of 6 months, whereas 12% had spent more than
perceived risk: nancial, performance, physical, psy- A$1000. Participants have different backgrounds.
chological, time, and privacy. Nevertheless, con- Their occupations include: engineer, high school
N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228 224
Table 3
3.2. Dimensions of perceived risk
Demographics of focus group participants
Demographic variable (n 516) Frequency Percent
The discussion results suggest that participants are
worried about handing personal details to a space-
Gender
Female 9 56.20 less individual. The results support the existence of
Male 7 43.80
three proposed dimensions of perceived risk: tech-
nology, vendor, and product. Although all particip-
Age
ants consider Internet security to be important, some
1825 4 25.00
are concerned more with dealing with unknown
2635 10 62.50
3645 0 0.00 vendors. Others worry about the quality of products
4555 1 6.25
they will get. Yet participants suggest that perceived
.55 1 6.25
consumer risk is irrelevant to their decisions to
purchase online.
Education
Some high school 1 6.25
Graduate high school 3 18.75 3.2.1. Perceived technology risk
Some university 3 18.75
Graduate university 3 18.75
Participants are concerned because they do not
Post-graduate 6 37.50
know who they are dealing with and what is
happening behind businesses web pages. They
Income
,A$20,000 4 25.00 are unsure whether the payment process is safe.
A$20,00039,999 4 25.00
The fear that good hackers will be able to steal
A$40,00059,999 7 43.75
their credit card details is common (I dont
A$60,00079,999 1 6.25
know if they can give money back if someone
misuse my information; Accountability is not
Computer skills
Inexperienced users 2 12.50 clear in case money get lost in the process).
Average user 6 37.50
Some participants worry that if their computers
Advanced user 8 50.00
crash during transaction process, their infor-
mation will be lost in the electronic never
Internet skills
never land (Who has got the information?
Inexperienced users 2 12.50
Average user 7 43.75 Has the transaction gone through?).
Advanced user 7 43.75
Even though many banks nowadays cover con-
sumers nancial losses upon hackers attack,
Online shopping experience
participants are concerned with the privacy of
Never 6 37.50
their personal information.
,5 times 6 37.50
59 times 2 12.50 Though 90% of participants were experienced
1020 times 2 12.50
Internet users, most participants do not know
what cookies are. They are wary of getting
Amount spent in last 6 months
viruses as a result of their involvements in
A$0 6 37.50
online transactions. A misconception of cookies
A$199 2 12.50
A$100499 5 31.25 is that consumers computers will be infected
A$500999 1 6.25
with viruses if businesses use cookies during
.A$1000 2 12.50
transactions.
All participants consider Internet security to be
important. Nevertheless, only one participant
teacher, university student, administrative ofcer, checks encryption protocols adopted by busines-
environmental consultant, project coordinator, dis- ses before he makes any purchasing decision.
ability support worker, housewife, marketing ofcer, Some participants perceive less risk in sites
public servant, actor, system tester, and accountant. which have a lock symbol, even though they do
225 N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228
not understand what kind of security is in place. companies, and they do not who they can
Yet several other participants indicate that they complain to if foreign businesses fail to deliver
will still perceive a high level of risk even if products. Most participants will purchase from
they see a lock symbol. overseas businesses only if someone can refer
To minimize potential losses, two participants them.
acquired a separate credit card with a low credit Participants worry that businesses may sell
limit just for purchasing products or services customer information to third parties. They are
through the Internet. particularly cautious about those businesses that
Most participants have not heard of electronic ask for unnecessary questions during transaction
wallets. processes. As most privacy policies are long
and convoluted, some participants read only the
3.2.2. Perceived vendor risk rst one or two policies. Others glance at every
policy. On average, they read privacy policies
Participants are afraid of not getting what they about 10% of the time. Although participants do
pay for. They dislike dealing with unknown not read privacy policies carefully, they per-
vendors who may not send them the products as ceive high levels of privacy risk if businesses do
promised (Is the company going to disappear not provide privacy policy or the policies are
overnight?). One participant perceives a high difcult to nd.
level of vendor risk because of an experience of Although cookies allow businesses to provide
his friend. That friend once booked and paid for personalized services, participants are wary of
a motel accommodation in the United Kingdom them. Most participants feel their privacy is
through the Internet. When he arrived at the being invaded if businesses put cookies onto
address, he found himself in an industrial area their computers without their knowledge or
with no sight of any motel. permission.
Many participants perceive less risk in reputable
businesses (I wouldnt buy from a company 3.2.3. Perceived product risk
that I wouldnt know somehow). They rely on
references from other people instead of doing it In contrast to the acceptance of buying boots
trial and error. For example, they perceive a low over the Internet [65], participants of the focus
level of risk in Amazon.com because of its good group discussion are skeptical about buying
reputation. A participant got a second set of products that they cannot touch or feel. Most
CDs by express post after complaining to the participants hesitate about purchasing clothes
Amazon for not receiving his CDs; he described because sizes vary and clothes may not t them.
Amazons response as nice and warm. One participant perceives no risk in purchasing
Participants are reluctant to give their credit clothing through the Internet because she had
card numbers to unknown Internet vendors good experiences from purchasing childrens
because they are afraid that their cards will be clothing.
misused. As currently the most common pay- Participants have doubts about the quality of
ment method for B2C e-commerce is credit products that they will receive. Because of
card, this deters some participants from attempt- different standards, some overseas products may
ing to purchase anything on the Internet. be unsuitable for local use. As warranties for
Participants perceive risk in businesses who do products are seldom specied on the Web-sites,
not provide contact phone numbers or physical participants are worried that businesses are
addresses (such as ofce or warehouse address). likely to refuse to take responsibility for dam-
Although one of the advantages of B2C e- aged products.
commerce is the ability to purchase products Some participants are worried about incurring
from overseas, participants are reluctant to do hidden charges such as freight and taxes for
so because they know little about those foreign the products they purchase.
N. Lim / Electronic Commerce Research and Applications 2 (2003) 216228 226
Most participants indicate they will not buy To reduce vendor-related perceived risk, businesses
expensive items through the Internet. could consider providing more company information,
such as names of owners, staff, company history,
3.2.4. Perceived consumer risk physical addresses, and privacy policies on their
Web-sites. Businesses should also enhance their
The discussion results suggest that perceived customer services and avoid asking for unnecessary
consumer risk does not exist. As one participant data. In terms of consumers perceived product risk,
describedyou are alone . . . no peer businesses could consider offering incentives such as
pressure . . . You are not affected by what your warranty or money back guarantee. In summary,
friends or family think . . . Another participant businesses should communicate with consumers,
indicates that although her husband uses B2C deliver technology guarantee and product quality
e-commerce frequently, she is not tempted or guarantee, to inspire condence. Moreover, it is
swayed to do so. important to provide good services, such as accept-
All participants consider going shopping with a ing returned products. Consumers will more likely to
few friends to be a valuable experience (It revisit Internet vendors if they have good experience.
doesnt compare to the real shopping ex-
perience. Physically being there and touching
things . . . ; Its not the same feeling when
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