Online Shopping and Consumer Phobia

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Online Shopping and Consumer Online Shopping and Consumer PhobiaPhobia

Patrick Kierkegaard

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Online Shopping and Consumer PhobiaOnline Shopping and Consumer Phobia

• The Internet offers consumers a multitude of benefits including ready access to information, instantaneous communication, and twenty-four-hour shopping.

• The increase in broadband connections has lead to more shoppers embracing the speed and efficiency of online shopping.

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• Interactive Media in Retail Group (IMRG)– £80 billion of consumer spending is either on

or influenced by the internet• £30 billion of retail spending is online (10% of total

retail sales)• £20 billion of other consumer spending takes place

online • £30 billion of offline retail sales are impacted by

internet information, research or activity

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• IMRG found in it’s May 2006 survey of over 3,900 consumers that:– 52% of respondents intended to reduce their

high street spending in 2006. – 45% of respondents intend to increase their

internet spending this year (Baiggori, 2007).

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• Forrester Research (2007) predicts that: – Online retail sales in Europe will more than double in

the next five years as the number of online shoppers grows to 174 million.

– In the second quarter of 2006, on-line retail reached $45 billion, and that number is expected to surpass $211 billion by the end of the year.

– Driving the growth: an increasing number of women bringing their shopping power to the Net.

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• A number of consumers are still reluctant to convert from Internet browsers and high street shopping to potential online purchases.

• An Internet shopping survey reveals a number of people are suffering from Internet Shopping phobia.

• A study commissioned by Enterasys Networks in 2006 revealed that the public has a deep distrust of using the Internet to shop online.

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• Just half of the UK population have ever shopped online and 43% of us are putting off shopping or banking online because of security concerns.

• E-commerce still has a long way to go to earn the trust of the public. (WhatDigitalCamera, 2007)

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• A report issued by Consumer Reports WebWatch (2005) stated:– A quarter of Internet users have stopped

making online purchases for fear of identity theft.

– 80% of Internet users are concerned that someone might steal their identity from the personal information available on the Web.

– 86% have made at least one change in their behaviour because of fears of identity theft.

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• So what is driving the user’s anxiety and reluctance to shop online? – Risk– Fear – Anxiety

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• Online shopping anxiety is closely related to computer anxiety

• “the irrational anticipation of fear evoked by the thought of using or (actually using) computers, the effects of which result in avoiding or minimising computer usage.” (Brosnan, 1998)

• Several researches have found that computer anxiety is negatively related to computer use and attitudes towards computers (Jackson et al, 2003; Durndell and Haag, 2002)

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• Much of the relevant literature focuses on the perceived risks associated with online shopping and consumer attitudes that foster or inhibit online exchange.

• The theory of perceived risk has been used to explain consumers' behaviour. – Online consumers are concerned with those risks inherent in buying on the Web

such as credit card fraud and not receiving the right products (Bhatnagar et al. 2000)

– Perceived risk of online shopping and perceived ease of use of the Web site have been shown to influence attitude towards online purchasing (Heijden et al. 2001).

– Consumers are apprehensive when they cannot be sure that purchases will allow them to achieve their buying goals (Cox and Rich, 1964).

– Consumers perceive Internet shopping to have higher risk than in-store shopping (Tan, 1999).

– Jarvenpaa & Todd (1997) reported that perceived risk influenced attitudes toward online shopping, but not the intention to shop online.

– Vijayasarathy & Jones (2000) found that perceived risk influenced both attitudes toward online shopping and intention to shop online.

– Other studies similarly found that perceived risk negatively influenced consumers' attitude or intention to purchase online (Liu & Wei, 2003; van der Heijden, Verhagen & Creemers, 2003)

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• The most common concept of perceived risk used by researchers defines risk in terms of the consumer's perception of uncertainty.

• The uncertainty can be about the outcome or about the adverse consequences of buying a product (or service). These may produce anxiety.

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• Six components or types of perceived risk have been identified: – Financial– Product performance– Social – Psychological – Physical – Time/convenience loss

• Forsythe and Shi (2003) characterized four risk types: financial, product performance, psychological, and time/convenience loss

• Lim (2003) examined a different set of perceived risks: technology, vendor, and product risk.

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• Financial risk is defined as a net loss of money to a customer and includes the possibility that one's credit card information may be misused which is a major obstacle to online purchases (Maignan and Lukas, 1997).

• Product risk: The consumers' inability to physically inspect products (Spence et al., 1970 and Bhatnagar et al., 2000) and making a poor economic decision through an inability to compare prices, being unable to return a product, or not receiving a product paid for (Jarvenpaa & Todd, 1997; Vijayasarathy & Jones, 2000).

• Product performance: The risk that a product will not function as expected (Bhatnagar et al., 2000; Jarvenpaa & Todd, 1997; Tan, 1999; Vijayasarathy & Jones, 2000, Horton, 1976).

• Psychological risk: refers to disappointment, frustration, and shame experienced if one's personal information is disclosed. The Internet is often perceived as likely to violate users' privacy, a major concern of many Internet users (Maignan and Lukas, 1997, Jacobs, 1997 and Benassi, 1999).

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• Time/convenience risk may refer to the loss of time and inconvenience. Two leading causes of dissatisfying online experiences that may be thought of as a time/convenience risk include a disorganized or confusing Web site and pages that are too slow to download (GVU's 9th WWW User Surveys, 1998). Convenience concerns psychological cost and other forms of non-monetary costs such as time, effort and stress (Aylott and Mitchell, 1998; Cassill et al., 1997).

• Social Risk is associated with the loss of social interaction, are closely associated with online purchasing behaviour. Perceived risk seems to deter Internet users from shopping online frequently and from spending significant amounts of time and money.

• Technological risk is associated with the fear of using the technology due to loss of security, fraud and technical errors that have been widely reported both in the interactive and mainstream media

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Security and Privacy• A common perception among consumers is that communicating

credit card information over the Internet is inherently risky due to the possibility of credit card fraud (Bhatnagar et al., 2000; Furnell & Karweni, 1999; George, 2002; Hoffman, Novak & Peralta, 1999; Jarvenpaa & Todd, 1997; Jones & Vijayasarathy, 1998; Liebermann & Stashevsky, 2002).

• Swaminathan, Lepkowska-White, and Rao (1999) reported that consumers in their study seemed less concerned about the security of online transactions.

• Ranganathan and Ganapathy (2002) found that security was a major factor in discriminating between high and low intentions to purchase online.

• A 2007 Zogby Interactive survey has found that worry about identify theft has now reached most online Americans—91% of those polled said they are concerned that their identity might be stolen and used to make unauthorized purchases.

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Consumers' concerns about privacy:• Security Risks follow from the consumers' fear that the open Internet

network would allow their personal data to be compromised (Andrianie, 1999).

• The unauthorized acquisition of personal information during Internet use or the provision of personal information collected by companies to third parties (Furnell & Karweni, 1999; George, 2002; Hoffman et al., 1999; Lim, 2003; Wang, Lee & Wang, 1998).

• A large number of Internet consumers do not trust Web providers enough to exchange personal information with them (Hoffman et al., 1999; Liebermann & Stashevsky, 2002).

• Increasing privacy concerns is the likelihood of a decrease in purchasing online (Hoffman et al., 1999).

• George (2002) found that a belief in the privacy of personal information was associated with negative attitudes toward Internet purchasing.

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Fraudulent card transactions • Although online transactions only account for around

11% of all credit card transactions, they account for 23% of all fraudulent card transactions.

• Fears of bank card fraud and identity theft prevent more than half of consumers from shopping online if it requires providing a bank card number over a web site

• Unisys Corp.’s Trusted Enterprise Index survey:– 16% of 1,744 consumers surveyed say they strongly agree with

the statement “Worry about bank card fraud and identity theft has prevented me from on-line shopping when it requires me to provide a bank card number over a web site.”

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Phishing and pharming• Phishing and pharming continue to plague many financial

institutions and e-commerce websites. Phishing• A form of online identity theft that employs both social engineering

and technical subterfuge to steal consumers' personal identity data and financial account credentials. – Social-engineering schemes use 'spoofed' e-mails to lead consumers to

counterfeit websites designed to trick recipients into divulging financial data such as account usernames and passwords.

– Technical subterfuge schemes plant crimeware onto PCs to steal credentials directly, often using key logging systems to intercept consumers online account user names and passwords, and to corrupt local and remote navigational infrastructures to misdirect consumers to counterfeit websites and to authentic websites through phisher-controlled proxies that can be used to monitor and intercept consumers’ keystrokes.

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• The Anti Phishing Working Group (APWG) has reported that in January 2007, the number of phishing spoof sites reached an all time high of 29,930 unique phishing URLs reported in January, an increase of more than 25 percent from December and nearly 5 percent from the previous high in June, 2006.

• APWG saw a total of 135 brands being hijacked in January with numerous non-traditional websites spoofed such as social network portals and gambling sites.

• APWG notes that more brokerage company websites and many more International banks’ brands were spoofed and hijacked in January. The number of crimeware variants reached an all time high in January of 345, up from 340 in December, 2006, rising 1.5% from that month, which was the previous highpoint for keylogging crimeware variants detected in a single month.

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• There can be little doubt that anxiety induced by fear of online shopping technology constitutes a real phenomena.

• The statistics and studies show is that people still fear online shopping and mistrust the technology.

• There is still a common perception amongst cardholders that shopping online is a very risky activity and a number of Internet users fear online shopping!

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• Companies should address these concerns to:– Convince some of the e-commerce virgins to take the

plunge– Build greater confidence amongst those who are

occasional cyber-shoppers. • Numerous studies have suggested that the most

appropriate and effective way of minimizing online risk is through establishing trust.

• Specific antecedents of online trust appear to be fundamental to perceived risk: – security of payment, privacy of personal information and

confidentiality of processing, product quality, reliability of fulfillment and timeliness and quality of customer service.

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Online Shopping and Consumer Phobia

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