Initial Trust and Online Consumer Behaviour

The Absence of Online Consumer Trust

The absence of online consumer trust is likely to deter them from engaging in e-commerce, which is one of the major barriers to vendors succeeding on the Internet medium. This study intends to look into the first trust and purchasing intentions of online users. The study is done in relation to Taiwanese online book retailers.

Approach

The research examines consumers online initial trust by using four major categories of determinants: perceived technology, perceived risk, company competency, and trust propensity. It also investigates the impacts of both online initial trust and familiarity with online purchasing on purchase intention. The research model is statistically tested using the websites of four online bookstores in Taiwan. The website selected by each respondent is unfamiliar.

Findings

It is found that perceived usefulness, perceived security, perceived privacy, perceived good reputation, and willingness to customize are the important antecedents to online initial trust. It is also discovered that different levels of trust propensity moderate perceptions toward the website and online with respect to online initial trust, including perceived usefulness, perceived security, perceived privacy, perceived good reputation, and willingness to customize. Both online initial trust and familiarity with online purchasing have a positive impact on purchase intention.

Originality/Value of the Paper

The research provides insight into the development of online initial trust by consumers, and the relationships between online initial trust and purchase intention. The research model was created and then tested in the context of online bookshops in Taiwan.

Keywords

eCommerce, Online Initial Trust, Purchase Intention, Model

INTRODUCTION

Evidence suggests that the principal reasons why people do not purchase via the Internet are related to online security and policy, reliabilities of companies (Gefen, 2000), and website technology. Online trust is an important determinant for websites to succeed in the marketplace (McKnight and Chervany, 2001; Balasubramanian et al., 2003; Grabner-Krauter and Kaluscha, 2003; Koufaris and Hampton-Sosa, 2004), and for retaining long-term relationships with consumers (Reichheld and Schefter, 2000; Gefen et al., 2003). A definition of trust is “the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party” (Mayer et al., 1995: p.712). A high degree of trust not only stimulates and meets consumers’ high expectations of satisfying transactions, but also eliminates uncertainty, perceived risks, and interdependences in most online transactions (McKnight and Chervany, 2001; Pavlou, 2003). In addition, the higher the degree of consumers’ trust, the higher the degree of purchase intentions of consumers, and the easier it is for companies to retain consumers (Jarvenpaa and Tractinsky, 1999; Gefen and Straub, 2004).

This study will focus specifically on online initial trust and purchase intention.

The main research question for this study is ”how do consumers form their initial trust and purchase intentions?” The research question is divided into three parts:

(1) How do online consumers form their online initial trust?

(2) How do personal dispositions influence initial trust?

(3) Does a consumer’s initial online trust affect their purchase intention?

This research selected the Taiwanese e-bookshop industry for its investigation. The online bookshop industry is one of the most mature (Barnes and Vidgen, 2001; 2002), and in Taiwan it has the highest volume of online consumers.

The paper is organised as follows. In the next section we provide a review of the salient literature; based on this we also create a research model that we will test in the research. This is followed by the research method adopted for the study. Sections four and five provide the findings of the research and discussion respectively. Finally, the paper rounds off with conclusions, implications and suggestions for future research.

Literature review and research model

Trust is an important element affecting consumer behaviour. This section elaborates on the theories and determinants underpinning the formation of online initial trust, and the relationships between online initial trust and purchase intention. The section culminates in the hypotheses and research model adopted for the study.

Online trust

Online trust plays a key role in creating satisfied and expected outcomes in online transactions (Pavlou, 2003; Yousafzai et al., 2003; Gefen and Straub, 2004; Wu and Chang, 2005; Flavian and Guinaliu, 2006); where trust exists it increases consumers’ beliefs that e-vendors will not engage in opportunistic behaviour (Gefen et al., 2003). Gefen et al. (2003) summarise the conceptualisations of trust from prior research as: (1) a set of distinct beliefs consisting of integrity, benevolence, and ability; (2) a general belief or trusting intentions that another party could be trusted, or ”the willingness of a party to be vulnerable to the actions of another” (Mayer et al., 1995: p.712); (3) ”feelings of confidence and security in the caring response of the other party” (Rempel et al., 1985: p.96; and (4) a combination of these factors. Yoon (2002) describes the mechanisms of online trust as: security assurance, reputation, web searching, fulfilment (i.e., willingness to customize), presentation (i.e., web quality), technology, and interactions (e.g., e-forums). These mechanisms are categorised into three dimensions of online trust: (1) technical-based: web searching, technology and presentation; (2) uncertainty of transactions and security: security assurance; and (3) competency-based: reputation, fulfilment, and interactions.

Online trust and perceived technology

A website assists e-consumers in interacting with e-retailers, in searching for or acquiring information from websites, and in completing the steps of online transactions; moreover, online consumers emphasise both ”the instrumental value of the technology and the more immersive, hedonic value” (van der Heijden et al., 2003: p.42). The technology acceptance model (TAM) (Davis, 1989; Davis et al., 1989) could partly explain the elements affecting consumers’ online trust and purchase intentions (Gefen et al., 2003; van der Heijden et al., 2003). TAM is based upon three key positive variables: perceived usefulness, perceived ease-of-use (Davis, 1989; Davis et al., 1989; Koufaris and Hampton-Sosa, 2004), and enjoyment of technology (Venkatesh and Davis, 2000; van der Heijden et al., 2003). Perceived usefulness refers to the belief that a particular system would enhance job performance and benevolence toward a website; perceived ease-of-use is the belief that a particular system would be free from effort (van der Heijden et al., 2003); enjoyment of technology is regarded as a factor motivating a consumer’s desire to transact online. Useful and easily understood information on websites reduces asymmetric information, processes information behaviour, lifts the degree of online trust, and positively influences purchase intention (Koufaris and Hampton-Sosa, 2004; Kuo et al., 2004; Cao et al., 2005). Consequently, the perception of usefulness, perception of ease-of-use, and enjoyment of technology positively impact on consumers’ online trust:

Online trust and perceived risks

Perceived risk is an uncertainty in the purchase environment where consumers may consider the purchase outcomes and the importance or serious results associated with making a wrong or unsuitable decision (Hunter et al., 2004). Perceived security involves threats that create ”circumstance, condition, or event with the potential to cause economic hardship to data or network resources in the form of destruction, disclosures, modification of data, denial of service, and/or fraud, waste, and abuse” (Kalakota and Whinston, 1997: p.853). Perceived privacy is defined as ”the consumers’ ability to control (1) presence of other people in the environment during a market transaction or consumption behaviour, and (2) the dissemination of information related to or provided during such transactions or behaviours to those who were not present” (Goodwin, 1991: pp.152). Online trust can reduce the levels of perceived risk associated with transaction processes (Pavlou, 2003; Koufaris and Hampton-Sosa, 2004). In terms of perceived security, websites could increase consumers’ online trust by decreasing perceived environmental risks or by raising security (Warrington et al., 2000). In terms of perceived privacy, consumers may disclose their private information to websites when reliability and credibility are recognized; this subsequently reduces consumers’ concerns of privacy and security and helps to build online trust toward the websites (Culnan and Armstrong, 1999). In terms of hypotheses:

Online trust and company competency

A company’s competency can also influence consumers’ online trust and purchase intention (Balasubramanian et al., 2003; Koufaris and Hampton-Sosa, 2004), including features such as company size, good reputation, willingness to customize (Koufaris and Hampton-Sosa, 2004), and interactions with online consumers. Most consumers assume that a large company has better capabilities to fulfill their wants and demands (Jarvenpaa et al., 2000) and increase their online trust (Koufaris and Hampton-Sosa, 2004). It is also proposed that a company with positive reputation does behave opportunistically, willingly continues to maintain its reputation (Doney and Cannon, 1997; Figueiredo, 2000; Jarvenpaa et al., 2000), and responds to consumers’ concerns about products or services (Pennington et al., 2003). The perception of a company that is willing to customize has a positive relationship with consumers’ online trust and loyalty, and drives consumers to more actively participate in transaction processes (Koufaris and Hampton-Sosa, 2004). The availability of inter-consumer communications assists online consumers and helps to influence the perception of trustworthiness about a company; in this way, consumers are treated as a shared ’family’ by sharing information/value-beliefs, and feeling belongingness (Luo, 2002). Thus, in terms of hypotheses, the perceptions of a company’s competency and online initial trust are inter-related:

Online trust and personal trust disposition

Personal disposition to trust, also referred to as trust propensity, is defined as a general tendency or inclination in which people show faith or belief in humanity and adopt a trusting stance toward others (Gefen, 2000; McKnight et al., 2002; Ridings et al., 2002). Trust disposition has an essential impact on the initial formation of trust, because consumers may vary in their readiness to trust others when they have insufficient information, especially in an unfamiliar situation (Gefen, 2000; Koufaris and Hampton-Sosa, 2004). People may have different degrees of online trust toward the same signals; as a result, personal trust disposition may positively affect online trust (Lee and Turban, 2001; Yoon, 2002):

Purchase intention

Online transactions can be considered to consist of three key steps: information retrieval, information transfer, and product purchase (Pavlou, 2003). The information retrieval and exchange steps are regarded as intentions to use a website; however, product purchase is more applicable to an intention to transact with a website (Pavlou, 2003). Purchase intention is defined as the situation which manifests itself when a consumer is willing and intends to become involved in online transactions (Pavlou, 2003). Online transactions have three different characteristics from traditional transactions: (1) interactions use extensive technology; (2) the uncertain, temporal, impersonal character of the online transaction environment; and (3) open, unpredictable, and technological infrastructures during the processes of online transactions (Ba and Pavlou, 2002; Pavlou, 2003). The unique nature of Internet environments is relevant to the acceptance of e-commerce and consumers’ purchase intentions (Pavlou, 2003). Consumers evaluate a web store through online trust positively influencing their attitude toward conducting online purchases at the site; moreover, their attitude affects their purchase intentions (Wang, 2003). Online trust positively influences purchase intentions (Yoon, 2002; Grabner-Krauter and Kaluscha, 2003; Pavlou, 2003; Gefen and Straub, 2004):

Moreover, prior purchasing experiences are positively related to purchase intentions in e-commerce (Shim et al., 2001; So et al., 2005). ”Familiarity deals with an understanding of the current actions of other people or of objects, while trust deals with beliefs about the future actions of other people” (Gefen, 2000: p.727). Familiarity provides two approaches to building trust, including: (1) offering a framework for future expectations, and (2) creating substantial ideas of consumers’ expectations based on previous interactions (Gefen, 2000). Online consumers with strong purchase intentions in e-commerce usually have previous online purchase experiences that assist in decreasing their uncertainties (Shim and Drake, 1990):

Research Model

The hypotheses specified above define the research model. Accordingly, the conceptual model that we intend to examine is depicted in Figure 1.

METHODOLOGY

To investigate online initial trust, Taiwanese participants were asked to visit an unfamiliar Taiwanese e-bookshop website for the first time, and search for a particular product. In terms of the product, books are regarded as low price and low touch items, which creates a worthy sample for potential online customers (Gefen et al., 2003). The survey adopted a sample frame of undergraduate and postgraduate students in Taiwan (aged from 18-30); the student sample shares similar characteristics, economic ability, and consumption behaviour. Adopting students as survey sample is typically considered more applicable to online consumers (Njite and Parsa, 2005). The study provided links on several online forums (such as bbs://ppt.cc, bbs://bbs.ntu.edu.tw, and http://www.hellouk.org) requesting volunteers. Data collection lasted two weeks.

In part 1 of the web-based survey, participants were required to fill-in personal information. In part 2, the participants were asked to choose and visit one of four online bookstores (books.com.tw, KingStone, silkbook.com, and Sanmin) for the purpose of examining their online initial trust (Koufaris and Hampton-Sosa, 2004). Each respondent was visiting a particular website for the first time and we used a screening process to ensure this. Next, the respondents were required to search for a particular book, gather certain details, and thus become more familiar with the chosen website (Gefen, 2000; Koufaris and Hampton-Sosa, 2004). After the searching activities, participants were required to fill-out the remaining parts of the questionnaire, indicating responses to positively-worded questions on a seven-point Likert scale from 1 = strong agree to 7 = strongly disagree. This part of the questionnaire contained the instrument for testing the research model and was based on the literature review.

The research utilized statistical analysis and SPSS 12.0 software to examine the research hypotheses. The data analysis included: (1) descriptive statistics, (2) reliability, validity and correlation analysis, (3) regression analysis (for H1a to H3), and (4) Analysis of Variance (for H4).

Findings

Primary data collection focused on undergraduate and postgraduate students in Taiwan; these users tend to have high levels of Internet experience. In all, 103 usable questionnaires were collected and analyzed. Of the sample, 43.7% were male and 56.3% were female. Not surprisingly, the education level of respondents was 65% college/university and 35% Master’s. Some 80.77% of the respondents lived in the north and middle of Taiwan. Some 59.2% of the respondents had previously purchased books online. In addition, respondents with more years of experience using the Internet had significantly more experience of online book shopping.

The research used Cronbach’s α to investigate the reliability of each construct (see Table II). All of the α coefficients achieved at least 0.70; therefore, the resulting scales are acceptable and sufficiently reliable (Nunnally, 1967). The overall Cronbach’s α was 0.973. Furthermore, all components of the survey have been statistically validated in previous research. Regarding content validity, the questions in the online questionnaire were based on previous research and theories; therefore, it was shown that the content of the survey is valid.

The correlations between online initial trust and other variables were very significant.