Examining role of perceived customer value in online shopping.

Author:Tapar, Archit Vinod
Position::Report
 
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Abstract

With the increasing penetration of Internet, online transaction is fast becoming an important mode of shopping, owing to factors like availability of wide varieties of products at cheaper rates and unparalleled convenience in today's fast-paced life. In an online setting customer are exposed to various kinds of risks, like performance, psychological, financial, social, online payment, and delivery risk. The merchant needs to overcome shoppers' perceived risk and increase their purchase intentions. Based on the extant literature, this paper provides an empirical evidence for the vital role the perceived customer value plays between risk and purchase intention, in online shopping.

Keywords: perceived risk, perceived customer value, purchase intention, online shopping.

JEL Classification: M39; O33; D81

INTRODUCTION

E-commerce has seen a tremendous growth in the recent years. Many factors have contributed to this unprecedented growth like -increased internet and smart phone penetration, time saving, availability of varied and cheaper products, convenience and ease of shopping, no pressure from the salesperson, etc. [McQuitty and Peterson, 2000; Szymanski and Hise, 2000]. As on December 2014, the valuation of Indian e-commerce market was INR. 8.15 billions [Internet and Mobile Association of India, IAMAI].

The increasing cross-border business prospects in the online market space is making the e-commerce more lucrative for the retailers [e.g. Donthu and Garcia, 1999; Lynch, Kent, and Srinivasan, 2001]. But this shift from offline to online shopping has posed uncertainty and issues to the consumers related to privacy, product-quality, delivery, etc. Such worries lead to the build-up of perceived risk in shoppers' buying decisions [Cases, 2002].

There are many studies that have discussed the role of website as a risk reduction function in an online shopping [e.g., Jiuan 1999, Cases 2002, Park and Kim, 2003]. Most studies have also dealt with identifying the association between consumers' perceived value and purchase intention in online context [e.g. Yang and Peterson 2004, Hsinand Wang, 2011], Sweeney, Soutar, and Johnson [1999] examined the role of consumer's perceived risk within quality-value relationship in retailing context and identified the need for examining the association in different shopping methods, one of them being the online retailing. Chen and Dubinsky [2003] also stated that buying online may not only lead to changes in the perceived customer value but also factors influencing it. Thus, our focus of study would be to address the existing gap in the literature and add clarity to the risk perception and purchase intention relationship.

OBJECTIVE OF STUDY

The present study focuses on customers' perceived value of website as a mediator through which perceived risk will affect the purchase intention of consumers while shopping online.

The study addresses the following research questions:

* Does consumers' perceived value of websites have any impact on association of purchase intention and consumer perceived risk in online setting?

* Does consumers' perceived value of websites have any impact on association of purchase intention and different types of perceived risk?

The following parts of the paper consist of theoretical understanding of concepts, the propositions derived based on the above objectives of the study, research methodology to be adopted for the study, and finally the implication, limitation, and future research directions.

THEORETICAL BACKGROUND

Perceived Risk

Robert Bauer was the first to introduce the concept of 'perceived risk' in the area of consumer behavior research. In his opinion "any action of the consumer will produce consequences which he / she cannot anticipate with anything approximating certainty, and some of which are likely to be unpleasant" [Bauer 1960, p. 24]. This uncertainty leads to risk perception amongst the consumer during purchase. Bauer [1960] emphasized that consumer behavior is influenced by "perceived risk" (or subjective) and not by a "real world risk" (or objective). "Perceived risk refer to the nature and amount of risk professed by a consumer in contemplating a particular purchase decision" [Cox and Rich, 1964, p. 33]. While purchasing goods or services in ecommerce setting, consumers are exposed to additional risk over the conventional [brick-and-mortar] risk owing to lack of personal contact, intangible and remote nature of transactions [Cases, 2002].

The extant literature on risk [e.g., Jacoby and Kaplan, 1972; Schiffman and Kanuk, 1994; Kurtz and Clow, 1997] has essentially discussed four dimensions of risk--(i) performance (ii) financial (iii) psychological, and (iv) social risk. In online shopping, delivery risk is an additional risk that we would consider for the present study. Delivery risks refer to risk arising out of inconsistency between the product that is ordered and the product being delivered [Ward and Lee, 2000]. Furthermore, consumers may perceive risk while paying online through debit, credit, or online banking, as they are required to share personal information while executing the payment.

Perceived Customer Value

"Perceived value is the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given" [Zeithaml 1988, p. 14]. The extant literature views perceived customer value as a trade-off between relative price vis-a-vis relative quality...

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