When Reputation Engenders Trust: An Empirical Investigation in Business-to-Consumer Electronic Commerce

Consumers’ enhanced risk perception is an important challenge to be met in electronic commerce. The research presented here casts new light on the concept of trust, which is a vital mechanism when it comes to reduce perceived risk. Trust is conceptualized as a multi-dimensional concept comprised of a person’s trusting attitudes toward the vendor, the system and the self as well as his or her trusting intention to buy from a vendor on the Internet. Based upon an online survey among 473 German Internet users, the interrelationships between the dimensions of trust and the influential role of a vendor’s as well as the system’s reputation to engender trust is analysed. Results show that a person’s trusting intention is most strongly influenced by a person’s trusting attitude toward the vendor. The role of reputation to enhance trust is particularly pronounced if the consumer’s experience with a particular vendor or the Internet as a shopping environment in general are low. Implications of the research findings are discussed. INTRODUCTION Even though expectations of the extensive growth of electronic commerce (e-commerce) have been scaled down since Internet euphoria subsided, recent figures show that European consumers’ interest in online shopping, which is the form of e-commerce focused on in this paper, is still growing (GfK 2002). The GfK-study, which was conducted in six European countries, reveals an increase in the number of e-consumers from spring 2001 to spring 2002 in all countries. The highest absolute increase is reported for Germany (from 15.7 million in 2001 to 26.5 million people in 2002). According to a study conducted by the national association of German retailers (HDE), retailer activity in businessto-consumer (B2C) e-commerce also increased (HDE 2002). In 2002, 29% of German retailers offered their customers products and services on the Internet, which shows an increase of more than one-third compared to the year 2000. However, for 2003, the HDE forecasts a transaction volume of online retailing of eleven billion Euros which represents only 2.1% of the whole volume of Germany’s retail industry. This indicates that retail customers still prefer to shop in the traditional environments of bricks and mortar. It has frequently been stated that a reason for consumer reluctance to purchasing online, or to making this a habit, lies in the increased perception of risk and a lack of trust in this form of shopping (Ba et al. 1999; Gefen 2000; Hoffman et al. 1999; Jarvenpaa and Tractinsky 1999). Various surveys attest to consumers’ enhanced perception of risk concerning online shopping. Those surveys show that consumers are considerably uncertain about matters like privacy, security for financial transactions, legal regulations or proper delivery (BCG 2000; eMarketer 2002; NFO Interactive 2001). Perceived risk has been defined in terms of the consumer’s perceptions of the uncertainty and adverse consequences of buying a product or service (Dowling and Staelin 1994). Although risk is perceived to be a factor in most purchase decisions, because a consumer cannot always be certain that all of his or her buying goals will be achieved, it can be argued that it is particularly pronounced in e-commerce as opposed to traditional commerce. This is largely founded in three sources: First, perceived risk is enhanced by the electronic system, DO I: 10 .1 08 0/ 10 19 67 80 32 00 00 92 24 6 Co py rig ht 2 00 3 El ec tr on ic M ar ke ts Vo lu m e 13 (3 ): 1 96 –2 09 . w w w .e le ct ro ni cm ar ke ts .o rg D w n l o a d e d B y : [ S c h m e l i c h , V o l k e r ] A t : 1 5 : 0 4 1 6 M a r c h 2 0 1 0