The Effect of Perceived Ethics

of Online Retailing on Customer

Trust in E-Retailer

Presented by: Atashi Bedi

Research Scholar,
School of Management Studies,
Punjabi University Patiala.
 Introduction
• E-retailing opens up many new doors for companies.
• It provides a wide range of products for consumers to choose from.
• There are thousands of ecommerce sites on the internet that may
be an extension of the existing retailers or new ventures altogether.
• The biggest challenge with e-retailers these days is to establish
trust in consumers and maintaining it.
• There are many such activities including frauds, spam, misuse of
personal information, identity thefts etc that lead to a mental state
of dissatisfaction in the mind sets of the consumers and they may
start to distrust the website.
• E-retailing has witnessed extensive growth in the recent years and so has
consumers’ concerns regarding ethical issues pertaining to it
• . The ethical issues related to internet usage have brought forward a lot of
concerns for consumers and created tremendous new challenges for the
e-retailers.
• With the growing e-retail market these concerns related to safety and
ethical behavior of sellers’ online activities can deteriorate internet retail
market growth and also restrain consumers from online shopping.
• E-retailers should understand as to what are the various ethical
challenges, how failure of these ethical challenges can lead to
dissatisfaction among consumers, lack of trust in the e-retailers and finally
hindrance in the growth of e-retailing.
• Thus, it becomes very important that e-retailers must understand as to
how e-consumers perceive and evaluate the ethical dimensions of their
web site.
• E-retailing ethics is defined as the responsibility of e-retailers, including their trustworthy, fair
and honest behavior towards customers and safeguarding their interests.
• In e-retailing context, behaving ethically corresponds to accepting responsibility and doing
the right thing.
• To be a reputable e-retailer means to be the one who follows ethical business practices and
have the responsibility to protect personal information of the customers. It also focuses on
building trust through clearly stated business policies’, protect buyers’ privacy and
maintaining site security.
• Ethical behavior provides an advantage for both the firm and consumers as it plays an
important role in creating consumer satisfaction and help firms to realize long-term
achievements.
• “Ethics are moral principle or values that generally govern the conduct of an
individual or a group” (McDaniel, Lamb, & Hair, 2012).
•  
• An ethical issue can be termed as a moral philosophy that involves systematizing, defending
and recommending the concepts of right and wrong behavior. The Internet can very well
become an environment for unethical behavior because of increased use of internet for
various purposes. With the rapid increase in the use of internet for online retailing or e-
retailing the issues of ethical concerns came up in front of the users as they started facing
various problems. These issues included privacy, security, reliability, deception, frauds, use of
personal information of the customers, selling of personal data of the customers to various
other online agencies or companies etc.
 Theoretical background
• Bush et al. (2000) studied about the perception of various marketing executives towards ethics at the societal, industry and organizational level
related to marketing on the internet. They were asked to give their perception regarding 1) regulation of the internet,2)
potential ethical issues via internet and 3) the role of ethics and internet marketing in their organization. The results
revealed that a major impediment to businesses is the issue of security and privacy. Businesses seemed to be unsure about
how it should be regulated and that the perceptions about security are still a major concern and that these perceptions may
be difficult to change. The results suggested that the ethical concerns that emerged appeared to indicate issues surrounding
internet marketing might begin to be solved at the organizational level and that a code of ethics for the internet need to be
developed.
• Whyshall (2000) studied the important ethical connotations for retailing and provided examples of retailers including 1)
Body Shop and 2) The Gap and found out the difficulties considering the use of internet for ethical scrutiny of retailers by a
spectrum of activists and agencies. The study revealed that positive use of the internet to publicise retailers, social
responsibility contrasts with questionable exploitation of the web’s anonymity and state that net not only offers freedom of
speech but also widens opportunities for irresponsible activity with low barriers to entry. The study highlighted the ethical
issues relating to e-commerce and identified privacy both as central to the ethics of e-retailing and as a critical factor in its
interest. The study concluded that positive benefits of the internet are derived from its efficient use of and access to
information with perceived benefits of reduced costs and better access to consumers. Stead and Gilbert (2001) further
reviewed the incredible growth of electronic commerce and presented ethical issues that have emerged. They discussed
security concerns, spamming, websites that do not carry an advertising label, cyber squatters, online marketing of children
products, conflicts of interest and manufacturers competing with intermediaries online. They concluded that the ethical
issues presented in the article were very real and when they emerge the internet spotlights them immediately and that
some ethical issues get swiftly resolved because of both the actual or perceived exposure to and reaction from public or
market .They concluded that rapidly changing technology emerges new ethical issues and that a kind of self regulation must
be provided that supports an ethical e-commerce environment. Roman (2006) developed a reliable and valid scale to
measure consumers’ perception regarding the ethics of online retailers. The study indicated four factors of the scale-
security, privacy, non deception and fulfillment/deception that have a direct affect on consumers’ satisfaction and
consumers trust
 Methodology
Objective
• The first objective of this research is to find out factors that affect consumers’
perceptions towards Ethics of E-retailing.
•The second objective is to find out the effect of perceived ethics on consumer trust in E-
retailer.
•Sampling technique and data collection
•A convenience sample of 100 customers was used for this study. The study used the
snow ball sampling technique to select the customers who could be part of the survey.
•For the purpose of this research data is collected from two large cities of Punjab and
Haryana i.e. Patiala and Ambala respectively. Data was collected by face-to-face
interviews.
•The study is based on primary data generated by using a well-structured, non-disguised
and pre-tested questionnaire. The Questionnaire is based on 5-point Likert Scale.
• The scale comprises of fifteen statements each related to the objectives that are
designed by consulting relevant literature. The respondents were asked to rate all these
statements from 1 to 5 scales.
 Analysis of Data

• Firstly data is analyzed through Factor Analysis. Exploratory factor analysis is

used to identify the underlying constructs and investigate relationships
among variables. The reliability of scale is tested by using Cronbach Alpha
Test.

• Value for cronbach alpha comes out to be 0.929 for the analysis of consumer
perception towards ethics of e-retailing. Also, it comes out to be .945 for
consumer trust .The measure of reliability ranges from 0 to 1 and values lying
in between 0.70 to 0.95 are considered as highly desirable values. So, value
obtained for the scale is above 0.70 could be considered as reliable scale for
further analysis.

• Three factors extracted from the fifteen variables related to consumer trust
explained 67.505% of variance and each factor was defined by at least three
scale items. These specific factors extracted were Reliability, Payment
problem, Usefulness. These factors explain the consumers trust for E-retailing
which were considered to be significant by the respondents.
Factor Analysis Result of Consumers Perception towards Trust in E-retailers
 Results

• The first factor alone has explained 50.931% of the total variance and has been labeled Reliability.
Scale reliability alpha of present factor is .948. The results indicate that consumers always prefer
to purchase products from those e-retailing websites which they consider reliable in terms of the
various offers that they provide to them and the ones who do not indulge in any type of fraudulent
activity. The factor loadings range from .852 to .874. The inter item correlation ranges from .782
to .897 and item to total correlation ranges from .855 to .899. It covers 7.640 of the Eigen Values.
• The Second factor loaded on six variables. This factor can be labeled as Payment Problem as the
six variables revealed that customers who do not have a credit or debit card to make payments
they are not much likely to purchase online and also they fear to provide their card details as any
type of technical problem can cause their transaction to fail. So, payment problem is an important
factor that affects consumers’ perception towards e-retailing. This factor has explained 10.866%
of the total variation in the factor analysis. The factor loading ranges from .677 to .764 and item to
total correlation ranges from .855 to .899. Scale reliability factor of present factor is .870 and it
covers 1.630 of Eigen Values.
• Factor three is correlated with another five items and can be labeled as Usefulness. The results
revealed that consumers perceive the e-retailing website to be authentic and that they do not offer
wrong products to them. Consumers perceived e-retailing websites to be very useful as they offer
them with variety of products which gives them an ease of comparison. This factor has explained
7.399% of the total variation in the factor analysis. The factor loading ranges from .530 to .824
and item to total correlation ranges from .582 to .715. Scale reliability factor of present factor is .
849 and it covers 1.110 of Eigen Values
Factor Analysis Result of Consumers Perception towards Ethics of E-Retailing
 Results
• The first factor alone has explained 52.038 % of the total variance and has been labeled Fulfillment. Scale
reliability alpha of present factor is .967. It included eight variables. The results indicate that consumers find
that e-retailer ethically strong who fulfills all the necessary requirements while purchasing products from e-
retailers. The factor loadings range from .817 to .899. The inter item correlation ranges from .669 to .938 and
item to total correlation ranges from .830 to.929. It covers 10.408 of the Eigen Values.

• The Second factor loaded on six variables. This factor can be labeled as Security as the six variables revealed
that customers must feel Secure before purchasing products from e-retailers. This factor has explained
15.100% of the total variation in the factor analysis. The factor loading ranges from .844 to .897 and item to
total correlation ranges from .878 to .924. Scale reliability factor of present factor is .968 and it covers 3.020
of Eigen Values.

• Factor three is correlated with other another three factors .It can be labeled as sincerity .The results indicated
that consumers find those e-retailers ethically strong those who offer safe transactions. This factor has
explained 9.433% of the total variation in the factor analysis. The factor loading ranges from .852 to .908 and
item to total correlation ranges from .855 to .899. Scale reliability factor of present factor is .944 and it covers
1.887 of Eigen Values.
 
• The fourth factor also loaded on three variables. This factor can be labeled as Transparent as the three
variables revealed that ethical e-retailers carry on transparent business activities and they make all the
transactions clear to the customers. This factor has explained 8.992% of the total variation in the factor
analysis. The factor loading ranges from .833 to .902 and item to total correlation ranges from .821 to .863.
Scale reliability factor of present factor is .921 and it covers 1.798 of Eigen Values.
 
 Analysis
After conducting the Factor Analysis Multiple linear regression analyses were utilized
to establish the relationship between perceived ethics and trust in e-retailers . This was
done by establishing relationship between the Four factors related to Ethics of E-
retailing including Fulfillment, Security, Sincerity and Transparent and three factors
related to customer trust in E-retailers including Reliability, Payment problem and
Usefulness.
Effect of Perceived Ethics on Customer trust in E-Retailer(Reliability)

• A significant regression equation was found

(F(4,90)=32.706, p<0.000), with an R2 of .
592. Participants predicted Trust is equal
to .831+.041-0.65-.125. Further the table
shows the overall significance of the model.
For this purpose ANNOVA approach is
used. This shows that the model is
statistically fit and shows 57% of total
variance in perceived ethics suggesting a
very good fit of the model. This confirms
that the first factor of trust 1.e. Reliability is
affected by the four factors associated with
perceived ethics 1.e. Fulfillment, Security,
Sincerity and Transparent. The
standardized coefficients were respectively .
827, .039, -.067, -.145. These confirm that
Fulfillment makes the strongest
contribution to customer trust in e-retailer.
Effect of Perceived Ethics on Customer
trust in E-Retailer( Payment Problem)
• A significant regression equation was
found (F(4,90)=11.336, p<0.000), with an
R2 of .335. Participants predicted Trust is
equal to .370-.082+.021+.274. Further the
table shows the overall significance of the
model. For this purpose ANNOVA
approach is used. This shows that the
model is statistically fit and shows 34% of
total variance in perceived ethics
suggesting a very good fit of the model.
This confirms that the Second factor of
trust 1.e. Payment Problem is affected by
the four factors associated with perceived
ethics 1.e. Fulfillment, Security, Sincerity
and Transparent. The standardized
coefficients were respectively .387, -.082, .
023, .329 These confirm that Fulfillment
makes the strongest contribution to
customer trust in e-retailer.
Effect of Perceived Ethics on Customer
trust in E-Retailer(Usefulness)

• A significant regression equation was found

(F(4,90)=12.329, p<0.000), with an R2 of .
335. Participants predicted Trust is equal to
.363-+.268+.078-.010. Further the table
shows the overall significance of the model.
For this purpose ANNOVA approach is used.
This shows that the model is statistically fit
and shows 35% of total variance in
perceived ethics suggesting a very good fit
of the model. This confirms that the Third
factor of trust 1.e. Usefulness is affected by
the four factors associated with perceived
ethics 1.e. Fulfillment, Security, Sincerity
and Transparent. The standardized
coefficients were respectively .374, .263, .
084, -.011 These confirm that Fulfillment
makes the strongest contribution to
customer trust in e-retailer.
6.Findings and conclusion
• Findings of the present study are that the Perceived Ethics of E-retailing
significantly and positively affects Customer trust in E-retailers.
• Further the study also confirms the strongest effect of Fulfillment on all
the 3 factors of customer trust including Reliability, Payment Problem and
Usefulness
• To make the customer trust the E-retailers and its activities more the E-
retailer should provide the exact products as ordered on time and fulfill all
its commitments at the time of sale of goods.
Thank you..