The impact of perceived risk on willingness to buy in online markets

Abstract

The Internet today has become far from obscure as economic agents have come to accept the vast amount of information and possibilities that can be achieved using the internet. The usage of the internet as a shopping medium has raised issues about perceived risks, which has greatly influenced consumer attitudes towards shopping online. The main purpose of this study was to investigate the effect of perceived risks by consumers on willingness to buy products online, using six perceived risk parameters: time, performance, financial, psychological and social, and physical risks. Specifically, the greater the risk perceived by consumers to be associated with a product advertised online, the less the willingness to purchase it online. Comparatively, the psychological risk model performed best among the alternative specifications in terms of statistical significance of the coefficients of the indicators of perceived risk and correctness of their signs. The study concludes by exploring managerial implications arising from the research and recommends among others, that risk reduction strategies will go a long way in increasing consumer confidence in online market.