Influence of Consumer perceived

risk on Online purchase intention

Abstract:
Purpose: The paper aims to examine the relationship between consumer perceived risk and online
purchase intention with mediating effect of trust and moderating effect of WOM. The main
purpose is to identify how consumer perceived risk influence consumer purchasing behavior and
attitudes when they purchase online.

Designed methodology: Survey method was used to collect data from the respondents. It was a
survey of 20 questionnaires which was conducted in University of Engineering & Technology,
Lahore.. 20 respondents participated in a survey. SPSS statistics 23 was used to analyze the data.
Findings: Finding of this study suggest consumer perceived risk when they intend to purchase
online and other factors that intervene when making purchase decisions. The study shows that the
consumer perceived risk has significant negative impact on consumer online purchase intention
and also identified that consumer perceived risk creates lack of trust among consumers which
strongly creates negative impact on the attitude of consumer. Negative WOM also influence the
purchasing decision of consumer when they think to purchase online.
Practical implication: the study provides the useful information to the online retailers about the
risk factors that are associated with ecommerce businesses for consumers. So that they can design
proper strategies for their businesses and minimize the risk factor and to enhance their performance
and create trust in the minds of their customers.
Region/Originality: ecommerce business had created many problems for consumers. Many
online retailers do not have clear knowledge about the risks that are associated with online
businesses that alter the attitudes of consumer which will influence consumer purchasing decision.
The previous studies about consumer perceived risk in online purchase intention are still
unresolved this papers will fill that gap and will provide clear understanding of risk.

Introduction:
E-commerce (web based businesses) tends to sell products online through electronic channels.
Digital technology, has gigantic impact on online businesses. As years passed by, the
advancements, computerized innovation, versatile and web sites turned out to be increasingly
more prominent among the consumers. Consequently, the huge part of the market is
concentrating on e-commerce. It changed the manner in which customers are getting their
items. Web based business turned into a test for customary trade in a method for lessening the
physical exertion and time individual spends looking for an item, additionally, purchaser can
without much of a stretch contrast the costs online all together to get the best product they
 need. Nevertheless, it has few dangers, which falls into place without any issues, as a result of
online shopping. E-commerce still need improvements to be done. (Alreck and Settle, 2002;
Forsythe and Shi, 2003; Garbarino and Strahilevitz, 2004). Internet had changed the business
to e-businesses. (Bourlakis etal.,2008). Contrasted with the conventional retail structure, it is
found out that when purchasers shop online, they will in general see higher risks. (Lee and Tan
2003). There are more risks and less trust in an online business settings contrasted with physical
stores since it is likely difficult to examine the item and the security and protection issues in
the acquiring procedure ((Larocheetal.,2005). Tan (1999) found that risk-averse consumers are
less likely to use online shopping. (Vijayasarathy and Jones (2000) found out that consumer
perceived risk affect consumer attitude and purchasing behavior towards online shopping
Online shopping is known for its unsafe actions in e-market ((Almousa,2011). Buyers' apparent
dangers toward web based shopping has become a critical issue to explore on the grounds that
it will legitimately influence consumer attitude toward online buying and their dispositions will
have a significant impact on online purchasing behavior(Ariffetal.,2014). Almousa (2011)
expressed that risks in e-commerce will adversely influence the aim to buy products online. It
is normal that consumer may feel a specific level of risk when they expect to shop through
internet. When consumer’s perceived risk is high, the probability of customer to purchase or
to repurchase online will be low. It shows that risk will influence the disposition of on the
online buying (Lobb, A. E., Mazzocchi, M., & Traill, W.B. (2006). Negative impacts from the
view of risk have additionally been found to have a negative impact on customers' attitudes
and behaviors towards online shopping (O‟Cass, A., & Fenech, T. (2003), Shih, H. P. (2004),
Van der Heijden, H., Verhagen, T., Creemers, M. (2003). consumers‟ perceived risk of online
shopping must be persistently analyzed to screen the degree to which they apply negative
effect to consumers‟ online attitudes and shopping behavior as well as to avoid them
experiencing post-purchased dissonance. Subsequently, consumers‟ perceived risk ought to
be constantly examined with the goal that they can be proactively overseen and reduce, thus
contributing to the increase in online shopping.
Therefore, this research is done to answer 3 questions
1) Does consumer perceive risk influence online purchase intention
2) How consumer perceived risk influence online purchase intention
3) What is the impact of trust and WOM on purchasing decision of consumers?

Literature review:
Consumer perceived risk:
Seen chance influences all buy choices and buyer conduct, controlling shoppers' readiness to
purchase. The utilization of the Internet is expanding and the Internet is widening quick as a
commercial center. (Sanna Nenonen, 2006). Research has indicated that brand information directly
affects a purchaser's aim to buy from an online retailer and that this connection between brand
information and aim to buy online is intervened by risk. It was presumed that the more data search
a buyer does before acquisition of a book on a marked or non-marked site, the higher their apparent
risk related with buying from the specific site. (Shannon-Jane Ward, 2008). Purchasers saw higher
risk in purchasing proficient administrations than mass administrations, intuitive administrations,
and supporting administrations on the web, while the distinctions among the last three
administrations were not huge. (Xiaoyun Deng, Yiwen Chen, Jinjin Gao, Xiang Sun, August
2010). The hazard that customers see in shopping on the web is multidimensional. (Priyanka Sinha,
Saumya Singh, 2014). Recognizing and confronting risk is a significant way to deal with separate
purchasing obstruction. The investigation presents a suit of strategy and procedure investigate
segments of risks. (Haixia Gao October2006). Gathering buy is a blossoming model of electronic
trade. Seen chance is the emotional obstruction of customers to go to amass buy. To propel
strategies from shoppers and the coordinators of gathering buy to decrease the risk (Wang Li, April
2014). The investigation discloses the multidimensional saw chance in internet shopping that will
be useful for the advertisers in alleviating the risk. The investigation found that the socioeconomics
have a significant task to carry out on purchasers' discernment towards internet shopping. (Charu
Panwar, September 2018). The advancement of web based business has expanded the fame of web
based shopping around the world. The discoveries give helpful model to estimating and dealing
with purchasers' apparent hazard in web based exchange to expand their inclusion in web based
shopping and to decrease their subjective cacophony in the online business setting. (Ariff,
Sylvester, Zakuan, Ismail June 2014). The apparent dangers related with web based shopping
critically affect customer basic leadership. Social qualities give a decent hypothetical premise to
understanding apparent hazard. With such an expanding on the web buyer spending in China and
France and noteworthy social contrasts, better comprehension of web based shopping hazard as
apparent by e-customers in these two nations turns out to be especially significant. (Zheng,
Plaisant, Pecquet, Bernard JR July 2013).

Online purchase intention:

Close and Kukar Kinney (2010) characterized online buying expectation as the goal of online
customers to purchase products and enterprises by means of the web or virtual shopping baskets.
Iqbal et al.(2012) characterized online buying aims as the clients' eagerness to utilize internet
providers, making a genuine acquisition of merchandise and enterprises or contrasting the costs of
items. Buy goal is much of the time utilized as a measure to anticipate the customers ‘actual
purchasing exercises. Prior investigations uncovered that shoppers' apparent hazard will negatively
affect online customers' buy aim for attire (Almousa, 2011; Li and Zhang, 2002; Liebermann and
Stashevsky, 2002; Meskaran et al., 2013; Suresh and Shashikala, 2011; Zhang, et al., 2012). The
higher the impression of hazard ascends among customers, the more it would stop buyers buying
aim. Purchase intention may be classified into a part of consumers’ psychological feature behavior
that explains why a personal possesses associate intention to form a buying deal (Ling et al., 2010).
Purchase intentions are known to be an indicator of to what degree people willing to approach a
certain behavior and how many attempts they are trying in order to perform a certain task.
Consistent with the studies by Liu. People with lack of intention to purchase online is the main
problem in the development of electronic commerce. The upper the consumers’ purchase intention
square measure, the additional possible they're to form associate actual purchase. Schiffman &
Kanuk (2011) explained this development by stating that the shoppers UN agency possess positive
purchase intention can produce positive loyalty towards a whole that later ends up in associate act
of purchase. Laroche et al. (1996) declared that to live purchase intention, one should take
consumers’ thought and expectation under consideration. This measuring is required as a result of
understanding customer’s purchase intention can facilitate firms to profile potential market section
and predict future demand of a product or service. As an example, the theory of planned behavior
(TPB) applied on Thai consumers shows that the intention to shop online was most likely to be
affected by perceived behavioral control and subjective norm, the amount of the attitudes from the
people close to them. As shown by the study Taylor, ever since these two factors can influence
consumers’ purchase intention, thus influencing their behavior towards online shopping and
eventually lead to an actual action Taylor G, Laohapensang O (2009). Some previous studies
suggested that the shopping intention as an exchange for purchasing behavior also needs to be
explored. Even though intention has been determined as a prominent predictor of actual behavior
to purchase online, it should be known that purchase intention does not change into purchase
action.

Trust:
A definition of online trust was formed as "an attitude of confident expectation in an online
situation of risk that one’s vulnerabilities will not be exploited" (Beldad, de Jong, & Steehouder,
2010, p.860). Trust is a significant issue in the collaboration between customers and a company,
particularly in web based businesses. (Geffen 2000). When utilizing new advances, including the
web and internet bases business, trust is viewed as important. new innovation changes and these
progressions regularly make uneasiness among individuals. (Windham & Orton 2000). Internet
shopping requires more trust, since it is more mind boggling than traditional shopping. On open
system, like web. It isn’t simple to build up trust between the purchaser and merchant. (Petrovic,
Ksela, Fallen bock & Kittl, 2003). Trust in sites assumes a significant job in web based business,
since purchasers are probably not going to shop if they do not trust the seller’s website on which
they are shopping (Kim, M.J., Chung, N., Lee, C.K. (2011). Online it is hard to interface characters
with genuine people. along these lines, an online exchange doesn't give a similar chance, as an in
person transaction, to exercise judgment about the other partly (Petrovic 2003). Online trust has
been recognized as a basic segment of a business strategy as it lessens apparent hazard and makes
positive word of-mouth which, thusly, impacts a customer’s choice to purchase. (Chen & Barnes,
2007; Fan, Ming, & Whinston, 2005; Fang, Chiu, & Wang, 2011; Hassanein & Head, 2007).
Reputation and size have been most frequently suggested as factors that contribute to consumer
trust in a seller organization (Jarvenpaa, Sirkka L., Tractinsky, Noam., and Saarinen, Lauri. (1999).
In the matter of trust, complained about the difficulty to ensure whether an online will convey on
its responsibilities or ensure the security of customer’s information (McKnight, D.H., Choudhury,
V., Kacmar, C. (2002).
Word of mouth:
Word of mouth is one of the oldest ways of conveying information((Dellarocas, 2003). It is defined
as exchange of information between consumers it assumes to be an essential job in molding their
conduct and in changing their mind toward items they purchase.( Katz and Lazarsfeld (1966).
previous research shows that consumers prefer WOM much more reliable than traditional media
(e.g., television, radio, print advertisements, etc.) (Cheung and Thadani, 2012). Now a days the
online word of mouth is known as e-WOM (Yang, 2017). Customers progressively utilize online
mediums (e.g., social media, websites, blogs etc.) to impart their insights about the products they
purchase( Gupta and Harris, 2010; Lee et al., 2011). WOM can be either positive or negative in
nature, inferring that one either encourages or discourages the utilization of a specific item. (East
et al., 2007). A recent research shows that specifically negative WOM may have solid impacts on consumer
purchase behavior and attitude, negative opinions spread through and are adopted by the consumer
population at large (Van Noort & Willemsen, 2012). The negative WOM determinants exhibited that
consumers are bound to disclose negative WOM when items are of lower quality (Chen, Fay, & Wang,
2011). When items are not performed as expected ((Moldovan, Goldenberg, & Chattopadhyay, 2011).
Buyers are more impacted by negative O-WOM than by positive OWOM, particularly when it concerns
experience products (Park and Lee 2009). Consumers use negative O-WOM to assess the risk of their
purchasing choice or decision (Khammash and Griffiths(2011).
Hypothesis: Negative word of mouth has slight negative impact on trust

Relationship of Trust and Perceived Risk

Perceived risk is perception of the potential results of consumers’ assessment of an internet group action,
whether or not it's productive or not (Kathryn & Blessed Virgin, 2002). Potential implies that there are a
unit prospects of each negative and positive consequences of the net group action. Thus, customers lose
their ability to properly choose the protection of the transactions as their area unit too several variables to
be thought-about like hackers, technology, and e-retailor. During this reasonably state of affairs, trust plays
a big role in comforting that there'll not be any downside with the group action. Lack of trust shoppers lead
to perceived risk such as security risk, financial risk, time and product risk etc. The Meyer (1995) explained
that customers’ perception of associate degree enterprise’s ability can form their level of trust towards the
enterprise. The upper the score of the trust variables, the lower risk they understand and in reverse.
Therefore, it is often said that client lack of trust can impact customers’ perceived risk negatively.
Hypothesis: Customer lack of trust is negatively related to perceived risk.

Relationship of Trust and Online Purchase Intention

The role of trust in buyer and seller relationships has been of interest to researchers in offline and
online business transactions. The importance of trust is virtually by the separation between the
customer and merchandiser within the online world (Chiu et al., 2009). As describe well by Dash
and Saji (2008), trust for person involves expectation of ability from the e-retailor. ability is
commonly perceived by physical characteristics of the web system, e.g. firm’s size and name
(Bramall, Schoefer, & McKechnie, 2004), website’s characteristics like privacy and security (Bart,
Shankar, Sultan, & Urban, 2005). Lack of trust represents a zero confidence from the customer
that the vendor can opportunities to use the buyer’s. Lack of trust in online shopping has been
found too high to lower intention to buy online. A positive trust relationship would result in a
positive impact on intention to buy online.
E-retailers get a lot of success if they assure the purchasers that their personal data would be safe
and that they can increase their trust by providing facilities that give a lot of safe transactions for
them after they do online buying. (Anahita Bagherzad Halima, 2011). Online dealing includes
extra dimensions as compared to its offline counterpart as an example the pc (mobile, tablet), the
net, the absence of creature physically throughout dealing etc. Technical security measures, easy
navigation, data presentation mode and somebody's verification have a positive and important
influence on trust. (Hamid Reza Peikari, 2013). the web site is that the initial interacting platform
throughout online purchase. The look of the web site helps the shopper in establishing the
connection of trust by providing convenience whereas browsing moreover as online purchasing.
Hypothesis: Customer lack of trust will be negatively correlated with purchase intention.

The model which is used in the study is to examine the influence of consumer percieved risk ,WOM on
Online Purchase Intention through Trust as shown in Figure 1.

Consumer H1 H2 Online purchase

Trust @
perceived risk intention
2

H3

WOM

Figure 1
So, we created hypothesis
H1: Perceived risk has an inverse relationship with trust,
H2: Negative word of mouth has slight negative impact on trust
H3: trust has slight impact on online purchase intention of consumer

Consumer perceived risk has strong relationship with online purchase intention of a consumer.
When there is high risk among consumer their purchasing decision alter.
 Research methodology
A total of 20 survey questionnaire was distributed among university students who do online
shopping. A questionnaire was used to measure the impact of consumer perceived risk, lack of
trust and WOM on online purchase intention of consumer. A Likert scale was used to measure (1=
strongly agree, 5= disagree) 8 item statement of variable consumer perceived risk, 3 item statement
of variable trust, 3 item variable of WOM and 3 item statement of online purchase intention. The
data were analyzed using the Statistical Package for SocialScience23(IBMSPSSStatistics23).

Regression Analysis

Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate

1 .460a .212 .168 .59582

2 .544b .296 .213 .57933

a. Predictors: (Constant), R_mean

b. Predictors: (Constant), R_mean, WOM_mean

Regression analysis was carried out to analyze the relationship between consumer perceived risk
, word of mouth and online purchase intention. it was analyzed has slight negative impact on
online purchase intention of consumer.
Gender
Cumulative
Frequency Percent Valid Percent Percent

Valid female 10 50.0 50.0 50.0

male 10 50.0 50.0 100.0

Total 20 100.0 100.0

Age
Cumulative
Frequency Percent Valid Percent Percent

Valid 16-20 8 40.0 40.0 40.0

21-25 12 60.0 60.0 100.0

Total 20 100.0 100.0

 Position
Cumulative
Frequency Percent Valid Percent Percent

Valid student 20 100.0 100.0 100.0

educational level

Cumulative
Frequency Percent Valid Percent Percent

Valid intermediate 0 0 0 0

diploma 0 0 0 0

bachelors 17 100% 100% 100.0

Total 20 100.0 100.0

internet usage
Cumulative
Frequency Percent Valid Percent Percent

Valid less than 1 h 1 5.0 5.0 5.0

1-2h 3 15.0 15.0 20.0

2-3h 5 25.0 25.0 45.0

3-4h 9 45.0 45.0 90.0

more than 4h 2 10.0 10.0 100.0

Total 20 100.0 100.0

Level of shopping experience

Cumulative
Frequency Percent Valid Percent Percent

Valid beginner 5 25.0 25.0 25.0

intermediate 11 55.0 55.0 80.0

expert 4 20.0 20.0 100.0

Total 20 100.0 100.0

 Frequency of shopping
Cumulative
Frequency Percent Valid Percent Percent

Valid less than 3 times 10 50.0 50.0 50.0

3-5times 4 20.0 20.0 70.0

5-10 times 4 20.0 20.0 90.0

more than 10 times 2 10.0 10.0 100.0

Total 20 100.0 100.0

20 questionnaires were distributed among students and all were successfully filled and were used
for further analysis. Respondents profile revealed that there was equal ratio of man and women,
10 males (50 per cent) and 10 females (50 percent). Most of the students are from the age category
of 21-25 years (60 percent) which represent the typical age of adult population and adult segment
of online consumers. It was followed by 26-30years, 31-35years and above 36 but there was no
respondent from this age category (0 percent). All of the respondents are students (100%). It was
followed by job seeker, employee and retired but we had no respondent from such category. All
the respondents were from bachelor’s degree (100 percent). Majority of respondents stated that
they use internet 3-4h per day (45 percent) followed by 2-3h per day (25percent), 1-2h (15 percent),
more than 4h (10 percent) and less than 1 h (5 percent). Some of the respondents reported that they
are at intermediate level of shopping (55 percent) and rest we beginner (25 percent) and expert (20
percent). The majority of respondents had purchased less than 3 times per year (50 percent) , rest
of respondents had purchased 3-5 times (20 percent), 5-10 times (20 percent), more than 10 times
(10 percent). Descriptive analysis shows the information about respondents.

Correlations
R_mean P_mean T_mean

R_mean Pearson Correlation 1 .460* -.366

Sig. (2-tailed) .041 .113

N 20 20 20
P_mean Pearson Correlation .460* 1 .012
Sig. (2-tailed) .041 .962
N 20 20 20
T_mean Pearson Correlation -.366 .012 1

Sig. (2-tailed) .113 .962

N 20 20 20

*. Correlation is significant at the 0.05 level (2-tailed).

Correlation analysis was carried out to analyze relationship between consumer perceived risk,
trust and online purchase intention. So it was analyzed that when consumer perceived risk
increases, trust decreases and vice versa. Relationship between consumer perceived risk and
online purchase intention has a strong relationship with one another.

Practical implication:
In the first place, it focuses to online retailers where they could give detailed information about
the company and the policies related to security to avoid fraud. Online retailers should improve
the privacy implementation which would ensure people that their personal information is secured
and is kept confidential. Online retailers can minimize financial risk by offering full funded
return policy to consumers, they should offer guarantees and warranties about the products to
reduce financial risk and product risk. To reduce time, risk the company should deliver products
on time to consumer and provide money back guarantee to consumers on damaged products.
When online retailers will minimize the risk factors associated with online shopping
automatically level of trust of consumer will increase and they will intend to purchase online.
Through this study online retailers can design their strategies effectively which will help them in
enhancing their performance and transactions.

Conclusion:
This study explains the relationship between perceived risk, trust and online purchase intention
of consumers. The current study was specifically designed to evaluate factors related to the
moderator and mediator effects of perceived risk and online purchase intentions. Future studies
may include the moderating effects of profession, personality traits or past experiences in the
model to see how moderating variables may influence the relationship of both independent
variable and dependent variable. The mediating role of trust is for research. SPSS was used
throughout the data analyses process. As per the standard norms, Cronbach's Alpha values
should be at least 0.5 which has been achieved for the questions related to both Word of mouth,
Trust and Perceived risk. Trust has been a main factor in purchase intention, customer
relationship building and loyalty (Amaro & Duarte, 2015; Chiu et al., 2009; Kim et al., 2008;
Zimmer et al., 2010). The study’s major original contribution was the analysis of the moderating
effect of trust of the online purchase. The moderation role of trust was confirmed in the analysis
of relationship between perceived risk and purchase intention. Regression analysis was carried
out to analyze the relationship between consumer perceived risk and word of mouth and it was
analyzed that word of mouth is negatively affecting online purchase intention of consumer but it
doesn’t have a slight negative impact on it. The customers perceive that there will always be a
risk in doing online purchase no matter how good the platform is and how high the level of trust
in a certain online platform, their perception of risk will not affect the willingness to do online
purchase.
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