Ahmed Raza Final Thesis Draft

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping
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|Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online

Shopping Environment
By
Ahmed Raza Zafar
BBA Honors
I.D # 10U0023
Thesis submitted in the partial fulfilment for the requirement of the degree of Bachelors in
Business Administration
Majors in Marketing and minors in Media Studies
Lahore School of Economics

April, 2014

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Declaration Statement
All of the work that I have produced is original and properly cited. In case of any plagiarism
(above 20%), my submission will be cancelled.
Ahmed Raza Zafar

BBA Majors in Marketing and Minors in Media
April, 2014

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Acknowledgement
ALLAH Almighty has been truly kind on me without whose will this work might never have
been possible. Remembering the marked nature of man, I trust this work cover all aspects
identified with this study. I owe a million thanks to my parents, teacher Sir Saad Shahid and all
my companions in this field. Every one of whom have guided me on every step. Words may not
be sufficient to thank everybody all around.

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Table of Contents
Executive Summary ........................................................................................................................ 6
Abstract ........................................................................................................................................... 7
Chapter 1: Introduction ................................................................................................................... 8
1.1: An Overview of the Topic ................................................................................................... 8
1.2: Managerial Concerns ........................................................................................................... 8
1.3: Study Objectives .................................................................................................................. 8
1.4: Scope of the Study in Pakistan ............................................................................................ 9
1.5: Contribution ......................................................................................................................... 9
1.6: Research in Pakistan ............................................................................................................ 9
1.7: Related Definitions .............................................................................................................. 9
Chapter 2: Literature Review ........................................................................................................ 10
Chapter 3: Methodology ............................................................................................................... 19
3.1: Research Questions ............................................................................................................ 19
3.2: Framework (Adapted from The study of consumer trust in internet shopping and the
moderating effect of risk aversion in mainland china by Ding Mao, 2010) ........................... 20
3.3: Sampling ............................................................................................................................ 21
3.3.1: Participants.................................................................................................................. 21
3.3.2: Collection of Data ....................................................................................................... 21
3.3.3: Techniques .................................................................................................................. 22
Chapter 4: Analysis of Data .......................................................................................................... 23
4.1: Descriptive Statistics.......................................................................................................... 23
4.1.1: Gender ......................................................................................................................... 23
4.1.2Age (in years) ................................................................................................................ 23
4.1.3: Urban .......................................................................................................................... 23
4.1.4: Income Level .............................................................................................................. 23
4.2: Indexed Variables .............................................................................................................. 23
4.3: Regression Analysis ........................................................................................................... 24
4.4: ANOVA Tests.................................................................................................................... 25
4.4.1: Difference in Consumers Trust w.r.t Years of Education ......................................... 25
4.4.2: Difference in Consumers Trust w.r.t Income Level .................................................. 26
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4.4.3: Difference in Quality of Service Perception w.r.t Income Level ............................... 26
4.5: Correlation ......................................................................................................................... 27
4.5.1: Correlation between Perceived Risk and Consumers Trust ...................................... 27
4.5.2: Correlation between Consumers Trust and Consumer Online Purchase Intention ... 27
4.5.3: Correlation between Reputation of the Online Shopping Websites and Consumers
Purchase Intention ................................................................................................................. 28
4.6: Reliability Analysis............................................................................................................ 28
4.7: Confirmatory Factor Analysis ........................................................................................... 29
4.8: Model Fit............................................................................................................................ 29
Chapter 5: Discussion ................................................................................................................... 30
5.1: Discussion on Results ........................................................................................................ 31
5.1.1: Moderating Role of Trust in Online Shopping ........................................................... 31
5.1.2: Perceived Risk in Online Shopping ............................................................................ 32
5.2: Limitations of the Study .................................................................................................... 32
5.3: Conclusion ......................................................................................................................... 33
5.4: Implications ....................................................................................................................... 33
5.4.1: Theoretical Implications ............................................................................................. 33
5.4.2: Managerial Implications ............................................................................................. 34
5.5: Further Recommendations ................................................................................................. 35
References ..................................................................................................................................... 36
Appendix A: Questionnaire .......................................................................................................... 39
Appendix B: Diagrams and Figures .............................................................................................. 43
Appendix C: Measurement Model ................................................................................................ 50

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Executive Summary
Previous researches have studies the antecedents of online shoppers trust and then studied its
effect on the consumers perceived risk and online purchase intention. Majority of studies have
used antecedents of online consumers perceived risk as their independent variable, consumers
trust as mediating variable and purchase intention as dependent variable. Moreover they have
tried to explain the consumers perceived risk using website reputation, service quality and
website friendliness. We will be testing companies websites user friendliness as a possible
antecedent of consumers trust to study its effect on their perceived risk about the company and
on their online purchasing intention.

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Abstract
The purpose of this paper is to find the customers perceived risk in customers purchasing
behavior in online shopping. The main question which this paper wants to address is the fear in
customers during online shopping about quality of the product, its price and delivery. In order to
address this question use of SPSS is bring into consideration along with the research
methodologies. After our research it has concluded that there is always perceived risk in
customers mind while doing online shopping which is very difficult to removed. Also this paper
has discussed the existing literature on the said topic and discussed the shortcomings and scope
in Pakistan.

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Chapter 1: Introduction
1.1: An Overview of the Topic
With new technology and new methods in marketing it comes new research questions in the
mind of researcher. This is also one of the new areas which need to be researched. In this paper
we have discussed the risk aspect of consumers while doing online shopping. This risk is genuine
and it comes because of information asymmetry. This information asymmetry is because of
customers inability to observe the object which he or she wants to buy. This naturally brings
questions in customers mind and with that risk of bad quality and any other fraud. While
discussing the above question this paper talks a sequential approach in order to make it easy for
readers to understand the complexity of the problem. After introduction this paper will discuss
literature review which talks about the existing theories about the said topic. After literature
review there is a detail and in-depth analysis of data with the help of SPSS by using regression,
ANOVA tests, correlation and reliability test. This part is also followed with the interpretation of
these results. Moving on this paper talks about the most important part in which we have link
existing theoretical approaches to the results we obtained from SPSS. If this matches with our
result of SPSS will give boost to our research question. In the final part of the paper
recommendation and limitations of this particular area has been discussed shortly. In the end
before conclusion scope in Pakistan and managerial implication are discussed.
1.2: Managerial Concerns

In order to complete the study or making it valuable by taking right number of samples with
different age groups which belongs from different societies & both gender accordingly because
who doesnt fit for the research can ruin the whole work.
To be complete, a study into the value of consumers trust and online buying intention require an
in-depth live analysis of subjects of various ages as they have different intentions regarding
online buying. Such a project would require more time that is permitted by the deadlines attached
to this thesis project. However, it is a project that could be considered for the future.
1.3: Study Objectives

The objectives of this paper are to investigate factors affecting consumers trust towards Internet
shopping in Pakistan and how it influences their purchase intention. Another objective is to further

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examine the relationship between consumers trust and consumers purchase intention and it is also
investigating the factors that persuade or limit consumers online buying intention.
1.4: Scope of the Study in Pakistan

There is a lot of scope in Pakistan for online shopping and especially youth of Pakistan is doing a
lot of shopping online. With the help of government support and required legislation related to
this business and proper channelizing this business, it has a lot of potentials. Not only is this but
the use of social media also important. And as mentioned earlier mostly youth is involved in this
shopping so this makes the business more attractive.
Also in Pakistan the urban population is increasing rapidly which will bring more people to
urban centers of Pakistan. Hence more use of internet and social media, this will further boosts
this business. So all this makes Pakistan so attractive for this business.
1.5: Contribution
The study on factors impact consumers trust on consumers perceived risk in online shopping
environment has been conducted previously by many researches. But there is no research on this
topic in Pakistan as dynamics of Pakistan may differ from other countries so my research paper
would be taking into account the viewpoint of Pakistani consumers how they perceive and
behave to online shopping environment.
1.6: Research in Pakistan

There has not been any substantial research being done in regards to this literature with respect to
Pakistan. This research paper of mine will be the first milestone in this research topic.
1.7: Related Definitions

Reputation - is defined as the extent to which consumers believe a selling company is honest and
concerned about its customers (Doney & Cannon, 1997).
Service Quality - is related to gaining consumer trust and building long-term customer relationship
by providing high-quality services (Grefen, 2002; Kim, Xu, & Koh, 2004), including guarantees
(Grefen, Karahanna, & Straub, 2003), warranties (Grazioli & Jarvenpaa, 2000; Pennington, Wilcox,
& Grover, 2003-2004).

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Some researchers have also highlighted the importance of businesses website quality as a
determinant of consumers trust. These include McKnight, Choudhury, & Kacmar, 2002; Araujo,
2003; Kim, Xu, & Koh, 2004. as stated earlier user friendly websites which are perceived as easy
to use and of good quality are more likely to build high level of customer trust (Wakefield,
Stocks, & Wilder, 2004; Want & Benbasat, 2005).
Risk aversion - is defined as the extent to which people feel threatened by an ambiguous
situations, and have created beliefs and institutions that try to avoid these (Hofstede & Bond,
1984).
Chapter 2: Literature Review

As Hoffman et al., 1999 said that low penetration rate of online shopping despite high use of
internet is pointing towards a big problem. Some researchers believe that lack of consumers trust
for online shopping has resulted in disappointingly low rates of sales for various businesses.
Cheung (2010) pointed that lack of empirical research concerning the area of online shoppers
trust prevents marketers to develop appropriate strategies for targeting their market. Absence of
research concerning antecedents and consequences of trust for online shoppers has posed severe
problems in finding true problem for slow rate of online sales even for businesses that have
exceptional success regarding physical sales. Moreover he said that limited research papers that
do focus on empirical findings relevant to the topic [e.g. Jarvenpaa et. al., 1999] tend to focus on
very small models. and therefore lack of complexity prevents them to adequately explain the
problem hence limiting their ability to guide marketers regarding the adoption of appropriate
marketing strategies (Cheung 2010).
The notion of trust has been thoroughly studied by various researchers over time (e.g. bargaining
Schurr & Ozanne, 1985, industrial buyer-seller relationships by Doney & Cannon 1997,
distribution channels by Dwyer, Schurr & Oh, 1987, partner cooperation in strategic alliances by
Das, 1998 and the use of market research by Moorman et al, 1993).
Study of the notion called customer trust across various disciplines provide useful basis for
studying it in marketing context (Cheung 2010). However, as Mayer and Davis (1995)
mentioned, that lack of clarity regarding the antecedent of consumer trust is what makes the
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study of this notion difficult. For instance in Kini & Choobineh (1999) definition of trust, its
antecedents where also made part of the definition. Moreover lack of empirical support regarding
the topic makes certain hypothesis uncertain.
Propensity to trust which is a moderating variable of the research plays an important role in
determining the effect of consumer trust about their perceived risk of the online vendor and on
their purchasing behavior. People with different cultures and personalities tend to vary in their
propensity to trust (Hofstede, 1980).
Furthermore propensity to trust can be viewed as a
personality trait that leads to expectations about the trustworthiness of others (Hofstede, 1980).
Mayer et al (1995) suggested that trust propensity moderates the effects of the trust antecedents
on the formation of trust. Hence it can be claimed that higher the consumers propensity to trust
the higher will be the effect of consumers confidence on business online sales by means of
lower perceived risk about the business (which is another consequence of consumers trust).
As Doney and Cannon, (1997) discovered that consumers perceived risk about the business is
inversely related with their trust. Consumers who tend to have higher confidence in an online
business will obviously perceive it to be less risky to buy from them and vice versa. This
hypothesis is also verified by Selnes in 1998.
Past studies have confirmed, with empirical evidence, the role of consumers trust in Internet
shopping (Gefen & Straub, 2004) and have argued that the most primary obstacle for prospering
online businesses or sales is lack of consumers trust (Jarvenpaa, Tractinsky & Vitale, 2000;
Hoffman, Novak & Peralta, 1999).
Bao, Zhou and Su (2003) mentioned consumers risk aversion as the primary factor behind lack
of consumers trust. Risk aversion being the antecedent of consumers trust can be used in
explaining consumers online buying behavior (Mao 2011).
Before studying the effects of consumers trust on their perceived risk about businesses, it is
important to clearly understand the theoretical definition of trust (as used by majority of
researchers in their various researches). Trust as defined by Mayer, Davis and Schoorman (1995)
is the willingness of a party to be vulnerable to the actions of another party. Therefore
according to the definition, greater trust calls consumers to undertake higher risk by undertaking
a particular task. Hence business consumers possessing greater trust are expected to be the
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pioneers in using business new onien facilities and therefore will be of high value to their
respective companies as generation of positive word of mouth as a result will ensure success of
businesses online activities.
Some other researchers have defined the term which might be useful for some other researchers
in designing their research questions. According to Lewis and Weigert (1985), trust is
Identified as the understanding of a risky course of action on the confident expectation that all
persons involved in the action will act competently and dutifully
On the other hand Bhattacharya, Devinney and Pillutla (1998) and Boon and Holmes (1991)
conceived trust as predictability and reliance upon another person under uncertain and risky
circumstances.
Some researchers have used fairly simple definition of the concept which might have affected
their empirical results. for instance Gefen 2000; Hosmer 1995; Moorman, Zaltman & Deshpande
1992 viewed trust as a general belief that another party can be trusted. Usage of such generic
definition of variables of interest can lead to misleading results because of the difficulty involved
in adequately quantifying all the relevant dimensions of the variable. One of the most popular
studies on electronic commerce trust is the one conducted by Mayer, Davis and Schoorman
(1995) who viewed trust as a trustors intention to take a risk and proposed the trustors
perceptions about a trustees characteristics as the main predictors of trust.
An interesting insight by White and Lloyd (2006) found trust to have positive impact upon
uncertainty and complexity involved in businesses websites. though businesses are and should
be conscious of ambiguity involved in their websites and other social media to prevent its
negative effects on consumers image (about the business/product) and online buying behavior
but even in case such a situation exist then high consumers trust can help businesses avoid its
negative consequences on business sales/ image etc.
According to Roussseau (1998) trust is a psychological condition comprising of the intention to

accept vulnerability based on positive expectations of another partys intention or behavior. As
is evident from the set of these definitions of trust, it is about having a positive expectation about
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another party in cases of risky situations. As consumers trust for online purchases is not only
affected by businesses online activities but instead is based upon all the tangible and intangible
characteristics concerning a business; therefore it is utmost necessary for businesses to ensure
efficient operations and marketing activities. Moreover presence of cyber-crime cases in the past
has made consumers much more conscious of their online activities and therefore they have now
become slightly reluctant to use this mechanism for an important decision (purchase). Hence
consumers are using more of this medium (internet) for information and news sharing and
receiving rather than purchasing purposes.
Jarvenpaa and Tractinsky (1999) while trying to determine antecedents of trust found businesss
size and reputation (among existing consumers) to be significant variables. They verified their
claim by elaborating upon consumers way of reasoning and stated that consumers believe bigger
firms to be more stable and hence more reliable for establishment of long term relationship. The
hypothesis was also verified by many other researhers including Grazioli & Jarvenpaa, 2000;
Pavlou, 2003; Kim, Xu & Koh, 2004; Koufaris & Hampton-Sosa, 2004).
Moreover consumers level of trust is also determined by the quality of businesses service
quality (if consumers happen to interact with businesses before) and therefore by means of
positively affecting customer satisfaction will lead to enhanced customer trust Anderson and
Fornell (1994).
The hypothesis was also verified by Kim & Tadisina, 2007. Some researchers have explicitly
mentioned in their study about the nature of service quality and for that purposes they have made
use of various variables that make up this variable (service quality). For instance they said that
perceived service quality includes warranties (Grazioli & Jarvenpaa, 2000), guarantees
(Pennington, Wilcox & Grover, 2003-2004), and customized services and delivery performance
(Doney & Cannon, 1997), as well as the general concept of companys service quality (Gefen,
2002; Kim, Xu, & Koh, 2004).
Similarly some researchers have also highlighted the importance of businesses website quality
as a determinant of consumers trust. These include McKnight, Choudhury, & Kacmar, 2002;
Araujo, 2003; Kim, Xu, & Koh, 2004. as stated earlier user friendly websites which are
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perceived as easy to use and of good quality are more likely to build high level of customer trust
(Wakefield, Stocks, & Wilder, 2004; Want & Benbasat, 2005).
Risk aversion just like consumers propensity to trust is found to be another relevant moderating
variable in this research topic. the term is formally defined as the extent to which people feel
threatened by an ambiguous situations, and have created beliefs and institutions that try to avoid
these (Hofstede & Bond, 1984).
Risk averse people tend to feel threatened by risky and ambiguous situations (Hofstede, 1991).
Just like consumers propensity to trust being dependent upon cultures and peoples personality,
risk aversion is also found to be determined by these variables Bao, Zhou and Su (2003). As Tse,
1996 findings showed that Chinese people are generally more risk averse as compared to
Americans. This finding therefore proves the hypothesis that risk aversion is dependent upon
concerned peoples cultures etc.
Our research hypothesis can be supported by Boulding, Kalra, Staelin, & Zeithaml, 1993)
findings according to which consumers purchase intention is the function of consumers trust in
internet shopping.
Similarly McKnight and Chervany (2002) findings are also in line with our hypothesis according
to which customers holding higher level of trust are more likely to depend upon internet vendor
for making online purchases whereas on the other more risk averse people might prefer physical
purchases.
Consumers were found to prefer companies that are known for their good reputation when
relying on online purchases because with such companies they perceive lower risk and therefore
are more willing to enter into a transactional contract due to their higher trust Mao (2011).
Perceived service quality that was found to be a significant variable in explaining consumers
trust was explained as gaining consumer trust and building long-term customer relationship
Grefen, 2002; Kim, Xu, & Koh, 2004.
Other researchers have gone beyond this simple definition by adding elements of guaranties
(Grefen, Karahanna, & Straub, 2003), warranties (Grazioli & Jarvenpaa, 2000; Pennington,
Wilcox, & Grover, 2003-2004), and customized services (Doney & Cannon, 1997).
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As stated earlier that user friendly websites were found to be major factor boosting online
consumers trust was because it makes it easy for them to find information and make transactions
on a particular website (Mao 2011).
Trust is defined as the consumers willingness to be vulnerable to the actions of an internet
vendor in an online shopping transaction (Lee & Turban, 2001). Reduced customers perceived
complexity and uncertainty in online context due to their higher trust encourages their online
businesses related activities (for instance purchasing etc.).
An interesting insight found by Mao (2011) was that customers feel threatened from ambiguous
online environments and therefore might be reluctant to even try for an online shopping
experience. Moreover he found that, at times, people with high level of trust but high risk
aversion might not engage in an online trade whereas people with low trust but low risk aversion
might be more likely to engage in an online trade. Though risk aversion being a moderating
variable but can at times directly influence the dependent variable namely online business sales.
However the exact nature of relationship of the variable with other related variables is what
needs to be defined more clearly defined for more reliable and valid future researchers.
The results prove the proposed positive direct effect of perceived service quality and perceived
website quality on consumer trust. However Perceived website size was found to be reversely
related to consumers trust toward online shopping which is opposite to expectation (Mao 2011).
This is perhaps due to increases consumers ambiguity which was found to negatively affect their
trust. Moreover he (Mao 2011) also found consumers inter-activeness as another moderating
variable affecting the relationship between consumers trust and online business sales. This is
perhaps that increased consumers activeness on online media shows their willingness to engage
in online trade because otherwise no rational person would have been willing to spend so much
time online and therefore it influences the magnitude of relationship between the research study
dependent and independent variables. Online retailing offers consumers a shopping experience
different from physical retailing in terms of convenience, search cost, delivery, and price
(Palmer, 2000).
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Therefore the variables affecting businesses online and physical sales might not be similar and
even they might be related. Chen & He 2003 claimed that online sales are rapidly growing which
shows growing potential of this medium as businesses profitable lower chain aspect. However
consumers anxiousness from online activities privacy and security requirements therefore
discourage them to extensive engage in online transactions. Moreover these security and privacy
requirements also make some consumers to perceive online service quality as low and therefore
negatively affects their purchasing behavior Zeithaml et al. (2002). However in fact most of
these security requirements are actually in favor of consumers to help them protect them against
cyber-crimes etc. hence in the presence of given scenario some researchers are of the opinion
that it is high time for businesses to shift the focus of e-business from ecommerce to e-service.
This will help them enhance their customers trust and therefore will not only help them gain
competitive advantage but will also help them improve their online sales performance Zeithaml
et al. (2002).
Reviewing the literature (e.g Cronin et al., 2000; Hellier et al., 2003; Lai, 2004; Varki and
Colgate, 2001; Wang et al., 2004) reveals that there has been extensive investigation of the
interrelationships among the four constructs (service quality, perceived value, customer
satisfaction, and purchase intentions).
There are many empirical researchers concerning the topic and therefore help develop concrete
hypothesis based upon them whereas on the other hand similar literature is greatly missing for
online business activities (Lien 2010).
As mentioned by Wolfinbarger and Gilly, 2003 online and offline environments present different
shopping experiences even when the same products can be purchased and therefore same
literature concerning physical business activities cannot be used for consumers online
purchasing activities.
Zeithaml et al., 2006 defined customer satisfaction as their assessment of a service in terms of
whether that service has met the customers needs and is up to their expectations. Cronin et al.,
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2000; Tam, 2004; Yu et al., 2006; Chang et al., 2009 found consumers satisfaction (or trust) to
be positively correlated with consumers perceived service quality.
Moreover, sales of online retailers were only 2.2% of total goods sold in the U.S. in 2005 (Lien
2010). Analysts have predicted that even by 2011, online e-commerce sales would account for
only 7%. Thus, the internet is far from achieving its potential due to high amount of potential
consumers being reluctant to engage in its use (Lien 2010).
Commitment as defined by Lien (2010) is a customers psychological attachment to a vendor or
an implicit or explicit pledge of relational continuity. Satisfaction and value were found to be
antecedents of commitment which is an antecedent of consumers loyalty (an important
dependent variable in marketing literature) Lien 2010).
Furthermore loyalty was found to be a major factor causing positive word of mouth, consumers
recommending vendors to each other and it has been empirically proved that majority of online
shoppers prefer vendors whose credibility is already established by someone whom they know
(Lien 2010). Organizations should strive for customer loyalty, because it can help them compete
efficiently with fierce competition and to ensure their long term growth (Lien 2010).
Academic research in online and interactive marketing has focused on the factors influencing the
use and adoption of online platforms. Furthermore, each of the factors causing customer trust and
satisfaction are considered more and more important to maintain relationships in the long term
(Casalo et al. 2007).
Another variable influencing trust in online settings is the time of customer business relationship
(Flavian et al. 2005). The greater the time spent between the two parties the greater will be
consumers trust hence encouraging them to not only sustain such relationships but will also
make them experiment with business other new features.
Trust involves three components: honesty (promise fulfillment and sincerity (Doney and Canon
1997); benevolence (the interest of one party that both parties reach a common objective
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(Ganesan 1994); and competence, (the consumers perception of suppliers knowledge and skills
to provide satisfaction through high quality service (Coulter and Coulter, 2002).
Yet, the rational expectation is that trust in online transactions can reduce customer perceived
risk (Pavlou 2003) and influence customer loyalty (Macintosh and Lockshin 1997), resulting
in repeated uses in the near future. Business reputation is also an important factor determining
consumers trust in certain companies as Doney and Cannon 1997 said Reputation is defined as
peoples perceptions of an organizations honesty and concerns for its stakeholders.
Reputation involves the credibility of a company or brand by its consumers (Herbig and
Milewicz 1993; Hyde and Gosschalk 2005). It is a signal of a history of fulfillments by the
supplier recognized and acknowledged by its stakeholders and users (Doney and Canon 1997). A
positive reputation favorably affects consumers trust (Doney and Cannon 1997), by
emphasizing the fact that the company has been able to fulfill its past promises (Kim et al. 2008).
A good reputation affects both the start of a relationship (Einwiller 2003) and the continuation of
an established relationship (Anderson and Weitz 1989). Hence business reputation is not only
important as the starting point but also helps business to hold up to their existing and new
consumers. Hence, high monetary benefits of reputation calls for increased investment in areas
which help businesses to establish and maintain their reputation.
Because in online contexts lack of persona contact increases risk perception of consumers
therefore the need for good business reputation is greatly increased than what would have been
required for physical sale. Not very brand conscious people might try new business/products in
case of physical sale because it is easier to evaluate quality of various vendors before the actual
purchase of the products which is hardly the case in online purchase.
The role of familiarity on trust has been studied in commercial contexts (Jennings et al. 2000).
Familiarity is a requirement in the pursuance of trust (Noteboom 1996). Greater consumer
knowledge of a providers services increases the consumers trust in the provider (Garbarino and
Johnson 1999). Some authors suggest that in online environments familiarity plays a key role in
the evaluation and adoption of web-based services (Maenpaa et al. 2008).
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Chapter 3: Methodology
The study is specifically focusing on the impact of consumers trust on consumers perceived
risk in online shopping environment in Pakistan. The research is based on two categories,
primary and secondary. The primary data was the questionnaire to get the response of the
respondents and in secondary research we selected different articles related to our study topic
including a base article.
Reliability analysis was conducted to check the reliability of the items. Cronbach Alpha was also
calculated and ANOVA was calculated to measure the significance of the variables. Correlation was
also done to measure the relationship between variables and the effect of one variable on another. All
the data collected form respondents through questionnaire was compiled, tested and analyzed through
statistical software SPSS version 21.
3.1: Research Questions

Q.1) Does service quality influence customers online purchases?
Q.2) What are the factors affecting consumers online buying intentions?
Q.3) What is the relationship between consumers trust and consumers online purchase
decision?
In our research we are going to find out the impact of service quality on consumers online
purchase intention to know that whether service quality influence people to purchase online or
not. We are also going to find out that what are the factors that causes and urges consumers to
make online purchases. And is there any direct or indirect relationship between consumers trust
and consumers online purchase intention. And to find out what are the aspects that consumers
think risky while making online purchase.
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3.2: Framework (Adapted from The study of consumer trust in internet shopping
and the moderating effect of risk aversion in mainland china by Ding Mao, 2010)
Reputation
Service Quality
Consumers
Purchase Intention
Perceived Risk
Website
Friendliness
Consumers
Trust
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3.3: Sampling
3.3.1: Participants
This survey is conducted to find the trust of consumers in online shopping and to find out the
perceived risk involved in such type of activities. In order to find out the relationship and effects
related to the consumers trust in online shopping environment, the target population is the
people from Lahore Pakistan basically the university students which has some knowhow of
internet shopping and they are the one who are involved in internet shopping. We assumed the
data taken from population of Lahore would be representing the whole population of Pakistan.
The respondents of the sample consisted of both males and females ranging from ages between
18 to 30 years. The respondents are the students from different universities across Lahore. The
sampling technique used in this research was simple random and convenience sampling to
collect the data. The questionnaires were distributed to collect the data through 6 variables. The
size of our sample is 150 and in order to get away with any kind of biases we targeted students
from all classes range from first year to last year. This gave us the overall picture and interest of
students not only by their difference in classes but also ages. Another important thing which we
mention in our survey was the rural urban difference. This will gave us the interest of students
who are from different regions. And we will see that is there any marked difference in students
interest in online shopping belonging to rural and urban areas? The participants of this survey
were from different cities and have representation of all the provinces. In addition to it this
survey was conducted in different universities in order to make our sample representative and
removed all kind of biases from it. Another important thing in this survey was this that the
question was framed in a way that participant who had not read question and filled the survey
randomly can be identified. After getting all surveys we discarded such responses and get our
final 150 sample in purest form.
3.3.2: Collection of Data
The questionnaire was taken from the research paper The study of consumer trust in internet
shopping and the moderating effect of risk aversion in mainland china by Ding Mao, 2010. The
first part of the questionnaire consists of demographic data collection including respondents
gender, age, education level and monthly income. The other part of the questionnaire consists of
variables i.e. measuring factors regarding consumers trust which is a moderating factor and
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purchase intention which is a dependent variable while Reputation, service quality, risk aversion
and website friendliness are independent variables. Close ended questions were used to get
responses from respondents. A five point Likert scale was used ranging from 1 to 5. (1 =
Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = Strongly Agree).
The design of the questionnaires was to ensure that the questions were not complex, had high
interest value and encouraged participation. To compute valid findings, we had questions related
to all these variables. Participants were approached in person and the researcher was present
during the completion of the questionnaire to answer any questions. Another important thing in
this survey was this that the question was framed in a way that participant who had not read
question and filled the survey randomly can be identified. After getting all surveys we discarded
such responses and get our final 150 sample in purest form.
3.3.3: Techniques
Coding of the respondents was done by using SPSS21. Various techniques were used to find the
relationship between different variables. These techniques include correlation, reliability analysis
and regression analysis.
Reliability analysis was computed to take out the Cronbach alpha value (with 0.789 being the
benchmark), as this value gives us information about the internal consistency. Linear Regression
models were fitted for different variables and then ANOVA table was analyzed to take out
differences between group means and their associated procedures (with p-value of 0.05 being the
benchmark). Amos was also used to check the reliability and validity of the research.
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Chapter 4: Analysis of Data

In the following paragraphs we have done the empirical analysis of the subject on the basis of
our data.
Descriptive statistics are presented before the analysis in order to understand the characteristics
of our studied individuals.
4.1: Descriptive Statistics

Descriptive statistics of the data are shown in the tables below. The descriptive statistics include
mean, standard deviations, maximum, minimum values, and frequency of each variable.
(Appendix B.1)
4.1.1: Gender
28 percent of the individuals studied are females whereas 72 percent are males. (Appendix B.2)
4.1.2Age (in years)
Category 1 people are less than 18 years of age. Category 2 is 18-21 years old and similarly
category 3 and 4 represent people with 21-24 and 24-30 years of age. (Appendix B.3)
4.1.3: Urban
The table (Appendix B.4) shows that 24.7 percent of individuals studied are from rural
background whereas 75.3 percent are from urban background.
4.1.4: Income Level
Category 1 peoples monthly income is less than 10000 rupees per month; similarly category
2,3,4,5 people have monthly income level of 10000-20000, 20001-30000, 30001-40000 and
greater than 40000 respectively. The 41.6 percent of the individuals monthly income is between
Rs. 10000-20000. (Appendix B.5)
4.2: Indexed Variables

The variables like quality of service, risk aversion, website friendliness, and reputation of the
brand, consumers trust and consumers purchase are index variables. Their index is formed by
adding a persons score on three or four different questions. Each of these questions represent
different dimension of that variable. For instance, Service Quality is measured upon four
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different dimensions i.e. availability of products, speed of delivery, delivery reliability and
guarantee provision. Scores on these four dimensions are added linearly in order to get an overall
index score for Quality of Service.
4.3: Regression Analysis

Multiple regressions are employed in order to find out both the direct effects of four variables i.e.
reputation, quality of service, perceived risk and website friendliness on consumers purchase
intention in online shopping and the moderating effect of consumers trust on the relationship
between perceived risk and purchase decision.
For this purpose, we do the regression analysis in two steps. First we see the impact of four
variables i.e. brand reputation, service quality, perceived risk and website friendliness on
Consumers purchase intention. Then we see the impact of independent variables on mediating
variable i.e. consumers trust in order to understand the transmission of risk averseness into
consumers purchase intentions via mediating variable.
Regression (a): Direct Impact of Reputation, Perceived Quality of Service, Perceived Risk and
Perceived Website Friendliness on Purchase Intention
Purchase Intention= 0 + 1*Reputation + 2*(Quality of Service) + 3*(website
friendliness)+
4*Perceived Risk + 5*(Gender) + 6* (income)
The dependent variable is Consumers Purchase intention in Online Shopping. The results show
that it is only impacted by Consumers Perceived Risk and Reputation of Brand because their Pvalues is less than 0.05 (significance level). All other variables like quality of service, website
friendliness and gender etc. do not have any significant impact on Consumers Perceived Risk.
The model is jointly significant because its ANOVA test p-value is 0.02 which is less than 0.05.
Moreover, the Durbin Watson statistic value is 1.84 which is close to 2 and hence there is no
autocorrelation in our model. (Appendix B.6)
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Now we run our second regression in order to see if Consumer Trust (moderating variable) is
impacted by other variables or not.
Regression (b): Impact of Reputation, Quality of Service and Website friendliness on Moderating
Variable
Consumers Trust = 0 + 1*Reputation + 2*(Quality of Service) + 3*(website friendliness)
+ 4*(Gender) + 5* (Urban) + 6* (Perceived Risk)
The independent variables like Quality of Service, Risk Aversion, and Brand Reputation, Gender
etc. have significant impact on the mediating variable. These variables previously did not have
any impact on consumers online purchase intention but now have significant impact on
consumers trust which is moderating variable. (Appendix B.7)
This means that the impact of consumers perceived risk on consumers purchase intention is not
direct. Rather it indirectly affects consumers behavior in online shopping by first impacting the
consumer trust which then impacts the consumers purchase intention.
However, if we compare the coefficients of all these three variables, we find that quality if
service is the most critical determinant of customers trust because it has the largest coefficient.
4.4: ANOVA Tests

ANOVA test is applied to analyze the differences between group means and variances when we
have two or more than two categories. We do the following tests to see if the categorical
variables like years of education, time spent on social media sites, and monthly income define
any difference in consumer trust, service quality etc. or not.
4.4.1: Difference in Consumers Trust w.r.t Years of Education

The homogeneity of variance exists because the Levenes test statistic has p-value greater than
0.05 (Appendix B.8). This implies that we cannot reject the null hypothesis of homogeneity of
variance. So the requirement of homogeneity of variance for ANOVA test is met and hence we
can use the results of ANOVA tests.
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The p-value is 0.13 which is greater than 0.05 (significance level) so we cannot say that there is
difference in the level of trust across people having different levels of education (Appendix B.9).
However if we relax our significance level to 15 percent then we can say that there is significant
difference w.r.t. education level.
4.4.2: Difference in Consumers Trust w.r.t Income Level
The table shows that homogeneity of variance exists because the Levenes test statistic has pvalue greater than 0.05 (Appendix B.10). This implies that we cannot reject the null hypothesis
of homogeneity of variance and hence we can interpret the results of ANOVA tests.
Since, the value of ANOVA statistic is less than 0.1 (10 percent significance level) so we can
reject the null hypothesis of no difference in consumer trust w.r.t. income status of the person.
(Appendix B.11). Hence we can say with 90 percent confidence that consumers trust in online
shopping is impacted by a persons income level. This can be due to the fact that low income
people are more risk averse and thus they do not display as much trust in online shopping as is
displayed by the high income online buyers.
4.4.3: Difference in Quality of Service Perception w.r.t Income Level
The results of ANOVA are shown in the tables (Appendix B.12 & B.13)
Since the p-value of the test of homogeneity is greater than 0.05, we cannot reject the null
hypothesis of homogeneity of variance (Appendix B.12). So the requirement of homogeneity of
variance for ANOVA test is met and hence we can use the results of ANOVA tests.
Since the P-value is less than 0.1, we can say with 95 percent confidence that there is significant
difference in the perception of quality of service according to the income level of individuals.
(Appendix B.13). This result is in accordance with the expectations. Affluent people are usually
more quality sensitive than non-affluent people. Hence, our results highlight this fact and in our
case, high income people perceive quality of service in online shopping differently than low
income people.
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4.5: Correlation
We try to find the correlation between the indexed variables to see if they are significant or not
and also to test if the correlation between variables is significant or not.
4.5.1: Correlation between Perceived Risk and Consumers Trust
The correlation table shows the correlation between Perceived Risk of consumers and
Consumers Trust in online shopping. (Appendix B.14).
The results show that the correlation between the perceived risk and the variable of interest i.e.
consumers trust is negative as per expectations. Consumers are reluctant to purchase online
because they do not trust online shopping on attributes like warranty provision, quality of
product, delivery etc. Therefore these perceptions of consumer add to the perceived risk of
customers. Because of this perceived risk, their online shopping tends to be low and therefore we
can expect negative relationship between consumer trust and risk aversion i.e. the higher the
trust, the lower the risk aversion and vice versa. Moreover, this correlation is highly significant
because its p-value is 0.011 which is less than 0.05 (significance level) and thus it leads us to
reject the null hypothesis of no correlation between risk aversion and trust. The magnitude of the
correlation is -0.308 which is considerably large.
4.5.2: Correlation between Consumers Trust and Consumer Online Purchase Intention
The correlation table shows the correlation between consumers trust and Consumers online
Purchase intention. (Appendix B.15).
The results show that the correlation between consumers trust and consumers online purchase
intention is positive as per expectations. Moreover, this correlation is highly significant because
its P-value is 0.000 which is less than 0.05 (significance level) and thus it leads us to reject the
null hypothesis of no correlation. The magnitude of the correlation is 0.46 which is also
considerably large. The correlation shows the relationship between the mediating variable i.e.
consumers trust and consumers purchase intention in online shopping.
Theory endorses this relationship in a way that consumers trust has significant impact on
consumers perceived risk which in turn is expected to affect the online purchase intention. If
trust is low, high risk is perceived by the customer in online shopping and hence they are less
willing to purchase online.
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4.5.3: Correlation between Reputation of the Online Shopping Websites and Consumers
Purchase Intention
The correlation table shows the correlation between consumers purchase intention and
Reputation. (Appendix B.16)
The results show that the correlation between consumers purchase intention and reputation of
the online shopping website is positive as per expectations. Moreover, this correlation is highly
significant because its P-value is 0.000 which is less than 0.05 (significance level) and thus it
leads us to reject the null hypothesis of no correlation. The magnitude of the correlation is 0.605
which is also considerably large.
This correlation is justified and expected because reputation of online shopping website has a
bearing on the consumers trust and hence consumers perceived risk. A website which has low
reputation and which is new in the field will be unattractive for the customer. An established and
well reputed websites will on the other hand impact consumers trust positively and hence
consumer behavior. Therefore, this positive relationship is in accordance with the theory.
4.6: Reliability Analysis

In order to test the consistency of all the variables in the data sheet, we perform the reliability
test. This reliability test checks for internal consistency among the variables. These results show
that all the variables are valid. (Appendix B.17)
The table (Appendix B.18) shows the estimate of Cronbachs Alpha coefficient.
Cronbach's
(alpha) is a coefficient of internal consistency. Normally a value between 0.7 to
1of this Cronbach's alpha coefficient means that the requirement of internal consistency is
fulfilled by the data. Since in our results we get the value of 0.774 for this coefficient, we can
infer that our data in internally consistent.
Cronbach's alpha is a measure of internal consistency, that is, how closely related a set of items
are as a group. A "high" value of alpha is often used as evidence that the items truly measure an
underlying construct. It is most commonly used when we have multiple Likert scale questions in
a survey/questionnaire that form a scale and we want to determine if the scale is reliable or not.
Normally a value between 0.7 to 1of this Cronbach's alpha coefficient means that the
requirement of internal consistency is fulfilled by the data. Since in our results we get the value
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of 0.774 for this coefficient, this indicates a high level of internal consistency for our scale with
this specific sample.
4.7: Confirmatory Factor Analysis

At first, the variable Consumers Purchase Intention was checked for factor loadings through
AMOS. For three items, CPI1, CPI2 and CPI3, the factor loadings were found to be 1.0, 0.92 and
0.97 respectively. As no item had factor loading less than 0.5 so none was deleted.
The factor loadings of Website friendliness were found out through AMOS. For all the four
items, WF1, WF2, WF3 and WF4 were found out to be 1.08, 1.64, 1.65 and 0.91. All the items
were found to have factor loadings higher than the designated criteria, which showed that the all
the factors were significant.
The variable Service Quality was then analyzed through AMOS, and all the factor loadings for
all the items were than compared with the benchmark of 0.5, for the four items, SQ1, SQ2,
SQ3,and SQ4 the factor loadings were 1.0, 1.59, 1.76 and 1.24 respectively. The factor loadings
of all the items were thus greater than 0.5, which shows that all the items were significant.
The variable Perceived Risk showed that the factor loadings for three items, PR1, PR2 and PR3,
were 1.31, 1.95 and 1.0 respectively. The questionnaire data was re-run again through the
AMOS, and all the factor loadings were again listed.
The data for variable Consumer Trust was first analyzed through AMOS for factor loadings that
showed the four items, CT1, CT2, CT3, CT4 and CT5 had factor loadings of 2.15, 1.91, 1.12,
1.09 and 1.0 respectively. The factor loadings of all the items were thus greater than 0.5, which
shows that all the items were significant.
The variable Reputation showed that the factor loadings for three items, R1, R2 and R3, were
0.85, 0.99 and 1.0 respectively The factor loadings of all the items were thus greater than 0.5,
which shows that all the items were significant.
4.8: Model Fit

The factor loading analysis was succeeded by the test of model fit measures, to check either the
items of the scale belong to the underlying construct. The model fit was done in the domains of
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certain dimensions, which have been thoroughly used in many researches i.e. GFI, CFI and NFI.
The CFI came out to be 0.755; GFI came out to be 0.764; NFI came out to be 0.745; (see
Appendix B.19, B.29), which shows that the model is a good fit.
In the last the validity and reliability table was made. All the dependent and independent
variables values were above 0.5 which means that the reliability of results is a good fit.
(Appendix B.21)
CR
AVE
DV
CT
0.654
0.285
0.534
Repu
0.754
0.507
0.712
SQ
0.665
0.343
0.586
RA
0.718
0.470
0.685
WF
0.632
0.315
0.561
CPI
0.712
0.452
0.672
Chapter 5: Discussion
Despite the high use of Internet in our society, the penetration of online shopping is still low.
However, businesses are keen to explore the impediments to online shopping in order to utilize
the untapped potential of online shopping. People are not willing make purchases on the internet
mainly because of the lack of trust toward businesses in the new electronic environment. Hence
one of the key impediments to entry in the online shopping is the perceived risk of the customers.
Building consumers trust is believed to be a remedy for the perceived risk. The purpose of this
research is to identify the relationship between consumers purchase intentions and perceived
risk in online shopping. The main objective of the paper is to discover the factors that affect
consumers trust in online shopping and how it influences their purchasing decision making.
Moreover, we try to access whether risk aversion as an important consumer psychological
attribute plays a moderating role in the relationship between trust and purchase decision of
customers.
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The importance of this research for marketers is based upon the fact that many decision makers
and executives look to empirical research and studies before taking a decision. Moreover this
research will enable business executives to develop appropriate strategies while marketing their
products online. Cheung (2010) pointed that lack of empirical research concerning the area of
online shoppers trust prevents marketers to develop appropriate strategies for targeting their
market.
Consumers purchase intention in online shopping is an index variable of three different
attributes. In our study it is represented by willingness to buy products online in the future,
willingness to use credit card for online purchases and willingness to shop again from already
used websites. A higher score on this index means the customer positively perceives online
shopping and is more likely to do shopping on internet. On the other hand, Consumers trust is
measured by indicators like willingness to share private information on websites, willingness to
share credit card number etc. Moreover, attributes like website friendliness, perceived quality of
service etc. also have a bearing on consumers trust. As far as the consumers perceived risk is
concerned, it is indicated by attributes like willingness to trying new/different products,
perceived costs of making a mistake and trying new brands in online shopping.
5.1: Discussion on Results

Keeping in view our research objectives, the results of our study proposes strong support for the
direct impact of quality of service, reputation of the brand and website friendliness in promoting
consumers trust in online buying. Moreover, consumer trust is found to be having a moderating
effect on perceived risk and it positively impacts purchase decision.
5.1.1: Moderating Role of Trust in Online Shopping
Consumers inherent trust can be viewed as a personality trait that leads to expectations about the
trustworthiness of others (Hofstede, 1980). There can be several factors that directly impact
consumers trust in online shopping. According to the findings of this study, consumers trust is
significantly positively influenced by quality of service, brand reputation and website
friendliness. This is because people put high value on the quality of service they receive in
making online shopping as well as the quality of the brand and the technical design and safety of
the shopping website. Once, consumers confidence is built, his/her perceived risk is reduced in a
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sense that the persons perceived risk is reduced. This decreased risk leads to positive attitude in
the online shopping.
As Doney and Cannon, (1997) discovered that consumers perceived risk about the business is
inversely related with their trust. Consumers who tend to have higher confidence in an online
business will obviously perceive it to be less risky to buy from them and vice versa. This
hypothesis is also verified by Selnes in 1998. Hence there will be less negative relationship
between perceived risk and purchase intention for people having more trust as compared to
people who have low trust. Our results support this theory.
5.1.2: Perceived Risk in Online Shopping
Online shopping is up to some extent a risky and ambiguous situation as compared to daily life
shopping. Since risk reduces utility for risk-averse people that they get from shopping new items,
it is reasonable to expect negative relationship between perceived risk and online purchase
intention. Our results generate the similar results. Consumers perceived risk reduces the
probability to purchase online. In fact, apart from brands reputation, perceived risk is the only
variable which is significantly related to purchase intention. Other variables like website userfriendliness and quality of service do not have any direct impact on online shopping behavior.
Rather they impact purchase intention through consumers trust which is moderating variable in
our analysis.
5.2: Limitations of the Study

Our research findings have certain limitations. Firstly, our results suffer from the problem of
generalizability which is caused by the sampling methods undertaken for data collection. Almost
all the correspondents to our survey questionnaires were college level students and hence the
results of our study are confined to this population. Generalizing our results about the whole
population would be inappropriate and hence care should be taken in applying these results to
other groups.
Secondly, because of time and cost constraints, the sample size was limited to 129. Although the
data generated significant results and also as per expectations, a larger sample would be able to
reduce biases in our results if there are any. Probably this small sample is the reason that at some
instances, we relax the significance level from five percent to ten percent which is inappropriate.
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Thirdly, others antecedent factors that may impact trust could be added to the analysis. Future
research should try to include them in order to obtain a deeper insight into the problem. Some
example of these other antecedents can be previous experience in Internet shopping and the
influence of word-of-mouth from peers.
Finally, the inclusion and selection of the moderating variable i.e. customers trust should be
further analyzed. Although the study offers some theoretical and empirical justifications for the
inclusion of this variable as moderator variable, more insight of this variable is needed.
5.3: Conclusion
The main objective of this study is to investigate factors affecting customers risk perception in
online shopping and how this perceived risk influences their purchase intention. The study also
examines the moderating effect of consumers trust on the relationship between perceived risk
and purchase intention of consumers. Understanding the nature of various factors that influence
customers perceived risk can help online sellers to utilize the untapped potential of online
market.
As electronic commerce continues to grow, e-service is going to play a bigger role in customer
satisfaction. The secret of the long term competitive capability of the online selling firms lies in
the way they manage their e-service technology. Firms are required to design user-friendly
websites and to sell the type of services customers demand. Moreover, since the technology is
ever changing, so are online shopping processes.
5.4: Implications
The findings of this study generate several implications for businessmen and researchers. In this
paper we have argued that reducing customers perceived risk is critical for the success of online
shopping companies. Moreover, we have highlighted various dimensions of this perceived risk
and hence it would be easy to address each of them separately.
5.4.1: Theoretical Implications
Firstly, in line with prior researches the determinants of trust i.e. brand reputation, service quality
and website user-quality have been identified and analyzed in our study. All these determinants
were found to be significantly and positively affecting customers trust. However, we found that
among these three variables quality of service plays the most important role in building
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customers confidence. Quality of service is a mixture of other variables. It constitutes delivery
speed, warranty provision, diversity of products and delivery reliability. Future researchers
should try to evaluate the impact of each of these determinants. Once that is known, online
companies would be able to focus more on improving the determinant which is proved to be
most critical.
Another implication of this study originates from the study of relationship between perceived
risk and purchase decision. Perceived Risk is an important determinant of the purchasing
decision. In our study, other than brand reputation, it is the only variable that impacts purchasing
decision directly. All other variables do not have direct impact on customers purchasing
decision; rather they impact it through the moderating variable.
5.4.2: Managerial Implications
This study generates several practical implications for businessmen involved in online selling.
Firstly, the importance of perceived risk in future purchase intention shows that online shopping
risk is the standard consumers use to differentiate between sellers on the Internet. Hence those
sellers who are able to reduce the perceived risk in the minds of its customers can guarantee their
success in the online selling market. This can be achieved by building confidence by providing
high quality of service, generating brand reputation in the hearts of the customers and by making
their online website more user-friendly. More specifically, secure and fast delivery, reliable
payment methods, certificate of quality assurance, and after-sale service etc. can help reduce risk
in the customers mind. Website friendliness depends on indicators like easiness to use, clear
contact information of the company as well as beautiful interface design. In other words, a userfriendly website is the one that is reliable and professional in the eyes of customers. Reputation
can be built up by spending on advertisement. Our study suggests that advertisement will bring
high returns to online sellers because it improves reputation of a brand or website.
In this particular area for the firm and the company there is a need to increase peoples
confidence in online shopping. This can only be done by providing the item in its exact form as
portrayed in online websites of companies. If this is not done so then there will be huge decrease
in peoples interest and so in the revenue of company. There is a great lesson for the companies
after this research that people change their purchase intention after getting something not
matching to the specification given on online website.
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Also there is need for government regulation to stop companies which are fraudulent. This
should be done because presence of one bad company affects the business of all others. These
steps are necessary to win the confidence of people.
Furthermore companies need to hire efficient employees in order to convey companies image
effectively and attract people toward online product.
5.5: Further Recommendations

Future research should use wider range of questionnaire in order to explore broad range of
questions under this research topic. It should be done at a larger scale all over Pakistan to grasp
more knowledge about the consumers purchase intentions in online shopping environment. In
depth interviews should be carried out to develop a better understanding of how people perceive
online shopping community and its environment. Further research in this area is needed to more
fully understand the consumers perceptions regarding online shopping. Knowledge from this
research should be applied to the companies who sell their products online. Future research
should be carried out to study the impact of these factors in different parts of Pakistan and
similar conservative developing countries to have more focus on this topic.
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Pavlou, P.A. (2003). Consumer Acceptance of Electronic Commerce: Integrating Trust and
Risk with the Technology Acceptance Model. International Journal of Electronic Commerce. Vol.7,
No.3, pp. 101-134.
Pavlou, P. A. & Gefen, D. (2004). Building Effective Online Marketplaces with Institutionbased Trust. Information Systems Research. Vol.15, No.1, pp. 37-59.
Pennington, R., Wilcox, H. D. & Grover, V. (2003-2004). The Role of System Trust in
Business-to-Consumer Transactions. Journal of Management Information Systems. Vol.20, No.3, pp.
197-226.
Ranaweera, C. Bansal, H. & McDougall G. (2008). Web site satisfaction and purchase
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Quality. Vol.18, No. 4, pp. 329-348.
Ribbink, D., Riel, A. C. R. V, Liljander, V. & Streukens. S. (2004). Comfort your online
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Schlosser, A. E., White, T. B. & Lloyd, S. M. (2006). Converting Web Site Visitors into
Buyers: How Web Site Investment Increases Consumer Trusting Beliefs and Online Purchase
Intentions. Journal of Marketing. Vol.70, pp. 133-148.
Shimp, T. A. & Bearden, W. O. (1982). Warranty and other extrinsic cue effects on
consumers risk perceptions. Journal of consumer research. Vol.9, pp.38-46.
Sonja, G. (2002). The Role of Consumers Trust in Online-Shopping. Journal of Business
Ethics. Vol.39, No.1/2, pp. 43-51.
Wakefield, R. L., Stocks, M. H. & Wilder, W. M. (2004). The Role of Web Site
Characteristics in Initial Trust Formation. Journal of Computer Information Systems. Vol.45, No.1,
pp. 94-103.
38

Environment
Appendix A: Questionnaire
This survey is being conducted for a research project. Please fill in ALL questions as accurately
as possible. All responses will be anonymous and the survey poses no threat to anyone's
confidentiality.
a) Gender:
Male
Female
b) Age (in years):
Less than 18
18-21
21-24
24-30
More than 30
c) Years of Education:
Less than 12
13 years
14 years
15 years
16 years
More than 16
d) Your Background:
Rural
Urban
e) Time spent daily on social media websites like Facebook, twitter, YouTube etc.
Less than one hour
1-2 hours
2-3 hours
3-5 hours
More than 5 hours
f) Have you joined any brand community on social media (Facebook, twitter, YouTube
etc.)?
Yes
No
39

Environment
Reputation
1. I use famous websites for online shopping
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
2. I use online websites that have high quality reputation

1
Strongly Disagree
Disagree
Neutral
4
Agree
5
Strongly Agree
3. I use online websites that are well known

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
Service Quality
4. The products on online websites are always available
1
Strongly Disagree
Disagree
Neutral
Agree
Strongly Agree
5. Online websites have fast delivery speed

1
Strongly Disagree
Disagree
Neutral
Agree
Strongly Agree
6. Online websites have high delivery reliability

1
Strongly Disagree
Disagree
Neutral
4
Agree
5
Strongly Agree
7. Online websites provide guarantees

1
Strongly Disagree
Disagree
Neutral
Risk Aversion
8. I am cautious in trying new/different products
40
4
Agree
5
Strongly Agree

Environment
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
9. I never buy something I dont know about at the risk of making a mistake
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
10. I would rather stick with a brand I usually buy than try something I am not very
sure of
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
Website Friendliness
11. Online websites usually work very well technically
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
12. Online websites are simple to navigate

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
13. On online websites, it is easy for me to find the information I want

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
14. Online websites clearly show how I can contact or communicate with the company
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
Consumers Trust
15. I believe that online websites would act in my best interest
1
Strongly Disagree
Disagree
Neutral
Agree
16. I believe that online websites are trustful in their dealings with me
41
5
Strongly Agree

Environment
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
17. I believe online websites would keep their commitments

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
18. I am prepared to give my private information to online websites

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
19. I am willing to give my credit card number to online websites

1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
Consumers purchase intention

20. I am willing to use my credit card to purchase products on online websites
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
21. It is very likely that I buy products from online websites in the future
1
Strongly Disagree
Disagree
Neutral
Agree
5
Strongly Agree
22. I am willing to buy online products again from websites I have used once
1
Strongly Disagree
Disagree
Neutral
Agree
42
5
Strongly Agree

Environment
Appendix B: Diagrams and Figures

Appendix B.1
Descriptive Statistics
Statistics
N Valid
Missing
Mean
Median
Std.
Deviation
Minimum
Maximum
Gender
89
0
.72
1.00
.452
0
1
Age
Income
(in
Years Of
(per
years) Education Urban month)
89
89
89
89
0
0
0
0
2.48
3.97
.75
2.78
2.00
4.00
1.00
2.00
.586
1.071
.434
1.194
1
4
2
6
0
1
1
5
Time
Spent
Daily
on
Social
Brand
Media Community
89
89
0
0
2.72
.72
3.00
1.00
1.033
.452
1
5
Appendix B.2
Gender
Percent
0
Valid 1
Total
Frequenc
y
25
64
89
1
2
Valid 3
4
Total
Age (in years)

Frequenc Percent
Valid
Cumulative
y
Percent
Percent
1
1.1
1.1
1.1
47
52.8
52.8
53.9
38
42.7
42.7
96.6
3
3.4
3.4
100.0
89
100.0
100.0
28.1
71.9
100.0
Valid
Cumulative
Percent
Percent
28.1
28.1
71.9
100.0
100.0
Appendix B.3
43
0
1

Environment
Appendix B.4
Urban
Percent
0
Valid 1
Total
Frequenc
y
22
67
89
1
2
3
Valid
4
5
Income (per month)

Frequenc Percent
Valid
Cumulative
y
Percent
Percent
9
10.1
10.1
10.1
37
41.6
41.6
51.7
19
21.3
21.3
73.0
13
14.6
14.6
87.6
11
12.4
12.4
100.0
24.7
75.3
100.0
Valid
Cumulative
Percent
Percent
24.7
24.7
75.3
100.0
100.0
Appendix B.5
Total
89
100.0
100.0
Appendix B.6
Coefficientsa
Model
1 (Constant)
Reputation
of Brand
Quality of
Service
Website
Friendliness
Unstandardized Standardized
Coefficients
Coefficients
Std.
B
Error
Beta
6.828
2.107
.473
.098
.572
t
3.240
4.842
Sig.
.002
.000
95.0%
Confidence
Interval for B
Lower Upper
Bound Bound
2.612 11.043
.277
.668
-.004
.100
-.005
-.045
.965
-.204
.195
.019
.104
.020
.181
.857
-.189
.226
44

Environment
Income (per
.060
.214
.032
.278
month)
Gender
-.237
.526
-.050
-.451
Risk
-.153
.096
-.179 -1.592
Aversion
a. Dependent Variable: Consumer's Behavioural Attitude
.782
-.369
.489
.654
.011
-1.289
-.344
.814
.039
Appendix B.7
Coefficientsa
95.0%
Confidence
Interval for B
Lower Upper
Bound Bound
2.617 12.254
-.040
.407
Unstandardized Standardized
Coefficients
Coefficients
Std.
B
Error
Beta
7.435
2.409
.184
.112
.194
t
3.087
1.646
Sig.
.003
.051
.387
3.359
.001
.155
.611
.098
.867
.035
-.134
.340
-.151
-1.317
.193
-.813
.167
.017
-.277
.159
-2.476
.874
.016
-1.107
-.491
1.297
-.052
Model
1 (Constant)
Reputation
of Brand
Quality of
.383
.114
Service
Website
.103
.119
Friendliness
Income (per
-.323
.245
month)
Gender
.095
.601
Perceived
-.271
.110
Risk
a. Dependent Variable: Consumer's Trust
Appendix B.8
Test of Homogeneity of Variances
Consumer's Trust
Levene
df1
df2
Sig.
Statistic
.298
4
84
.879
45

Environment
Appendix B.9
ANOVA
Consumer's Trust
Sum of
Squares
Between
Groups
Within Groups
Total
df
Mean
Square
49.390
12.348
578.565
627.955
84
88
6.888
1.793
Sig.
.138
Appendix B.10
Consumer's Trust
Levene
df1
df2
Sig.
Statistic
1.944
4
84
.111
Appendix B.11
ANOVA
Consumer's Trust
Sum of
Squares
Between
Groups
Within Groups
Total
df
Mean
Square
58.834
14.708
569.121
627.955
84
88
6.775
2.171
Appendix B.12
Quality of Service
Levene
df1
df2
Sig.
Statistic
.826
4
62
.514
46
Sig.
.079

Environment
Appendix B.13
ANOVA
Quality of Service
Sum of
Squares
Between
Groups
Within Groups
Total
df
Mean
Square
59.614
19
14.904
408.833
468.448
70
89
6.594
Sig.
2.260
.073
Appendix B.14
Correlations
Risk
Aversion
Perceived Risk
Pearson
Correlation
Consumer's
Trust
-.308*
Sig. (2-tailed)
N
89
Pearson
-.308*
Correlation
Consumer's
Trust
Sig. (2-tailed)
.011
N
89
*. Correlation is significant at the 0.05 level (2-tailed).
.011
89
1
89
Appendix B.15
Correlations
Consumer's
Trust
Consumer's Trust
Pearson
Correlation
Sig. (2-tailed)
N
47
Consumer's
Behavioural
Attitude
.460**
89
.000
89

Environment
Pearson
.460**
Correlation
Consumer's
Behavioural Attitude
Sig. (2-tailed)
.000
N
89
**. Correlation is significant at the 0.01 level (2-tailed).
89
Appendix B.16
Correlations
Consumer's Reputation of
Behavioural
Brand
Attitude
Consumer's
Behavioural Attitude
Reputation of Brand
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
.605**
89
.000
89
.605**
.000
89
89
**. Correlation is significant at the 0.01 level (2-tailed).
Appendix B.17:
Case Processing Summary
N
%
Valid
89
100.0
a
Cases Excluded
0
.0
Total
89
100.0
a. Listwise deletion based on all
variables in the procedure.
Appendix B.18
Reliability Statistics
Cronbach's
N of
Alpha
Items
.774
29
48

Environment
Appendix B.19
Baseline Comparisons
NFI RFI
IFI
Delta1 rho1 Delta2
Model
Default model
Saturated model
.772
.490
1.000
Independence model
CFI
.709
.755
1.000
.000
Appendix B.20
.772
TLI
rho2
.000
.000
1.000
.000
.000
GFI
Model
RMR
GFI
AGFI
PGFI
Default model
.094
.764
.692
.586
Saturated model
.000
1.000
Independence model
.243
.468
.418
.428
Appendix B.21
CR
CT
Repu
SQ
RA
WF
CPI
0.654
0.754
0.665
0.718
0.632
0.712
AVE
DV
0.285
0.534
0.507
0.712
0.343
0.586
0.470
0.685
0.315
0.561
0.452
0.672
49

Environment
Appendix C: Measurement Model
50

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Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

|Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online

Lahore School of Economics

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Ahmed Raza Zafar

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

1.2: Managerial Concerns

1.3: Study Objectives

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

1.4: Scope of the Study in Pakistan

1.6: Research in Pakistan

1.7: Related Definitions

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Chapter 2: Literature Review

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Furthermore propensity to trust can be viewed as a

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

According to Roussseau (1998) trust is a psychological condition comprising of the intention to

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

3.1: Research Questions

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Chapter 4: Analysis of Data

4.1: Descriptive Statistics

4.2: Indexed Variables

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

4.3: Regression Analysis

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

4.4: ANOVA Tests

4.4.1: Difference in Consumers Trust w.r.t Years of Education

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

4.6: Reliability Analysis

(alpha) is a coefficient of internal consistency. Normally a value between 0.7 to

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

4.7: Confirmatory Factor Analysis

4.8: Model Fit

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

5.1: Discussion on Results

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

5.2: Limitations of the Study

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

5.5: Further Recommendations

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping

Jarvenpaa, S. L. & Tractinsky, N. (1999). Consumer Trust in an Internet Store: A

Impact of Consumers Perceived Risk on Consumers Purchase Intention in Online Shopping