Perceived risk of online shopping behaviour in China

October 2013

Abstract
The fast development of Information and Communication Technology (ICT) has
opened many new markets and industries for business. e-Business is one of the
most flourishing areas of growth in the twenty-first century. Consumers have
followed new fashions and adapted a modern lifestyle. Considering the
importance of the Chinese market and the large population of China, this
dissertation tries to give an evaluation of what factors could have an influence
on the perception of risk in the case of Chinese online shopping. Consumer
behaviour has been studied for decades by both academics and industry. There
are many successful consumer behaviour models such as the Theory of
Research Action (TRA). In the classic models studying perceived risk, the six
dimension model is found to be successful for the interpretation of overall
perceived risk. These six dimensions are financial, functional, hazard, social,
time and psychological (Stone and Cronhaug, 1993). This research combines
the social and psychological risks together and incorporates a new factor,
privacy risk in order to build a new six-dimension model. For each risk the sum
of the product of possibility and importance of the six factors is actually the
overall perceived risk. This research employs a typical quantitative method: a
survey to study the risk perception of Chinese consumers. Over 500 valid
questionnaires were collected. Three linear regression models were built: one
overall risk model and two decomposed risk models. In the overall risk model,
financial risk, performance risk, physical risk, social and psychological risk and
privacy risk were found to be significantly negatively associated with online
shopping behaviour, however the time risk was not. In the decomposed risk
models, similarly, independent variables were reduced to six factors and it was
found that financial risk, social and psychological risk and privacy risk all have a
negative impact on shopping frequency; while performance risk, physical risk,
social and psychological risk and time risk have a negative impact on shopping
expenses. In terms of the four control variables, age, gender, experience and
income, significant differences were observed in the measurement of perceived
risk. This means different people of different characteristics perceive risks in the
own way.
2

Acknowledgement

Table of Contents
1.

2.

Introduction....................................................................................................1
1.1

Background of e-Business and online shopping....................................1

1.2

Research on online shopping..................................................................2

1.3

Research aims and objectives................................................................4

1.4

Structure of dissertation..........................................................................5

Literature Review...........................................................................................6
2.1

Online Shopping Behaviour.....................................................................6

2.2

Consumer Behaviour Models..................................................................9

2.3

Perceived Risk.......................................................................................11

2.3.1

Definition of perceived risk..............................................................11

2.3.2

Measurement of perceived risk.......................................................11

2.3.3

Dimension of perceived risk...........................................................13

2.4

2.4.1

Perceived risk in online environment..............................................14

2.4.2

Origin of online perceived risk........................................................17

2.5
3.

4.

Perceived risk of online shopping.........................................................14

Summary...............................................................................................18

Methodology................................................................................................20
3.1

Research Strategy.................................................................................20

3.2

Research framework.............................................................................20

3.3

Research questions...............................................................................21

3.4

Research method..................................................................................25

3.5

Data.......................................................................................................28

Analysis.......................................................................................................31
4.1

Descriptive analysis...............................................................................31
4

4.2

Reliability analysis.................................................................................36

4.3

Validity analysis.....................................................................................37

4.4

Factor analysis......................................................................................39

4.5

Regression analysis..............................................................................40

4.5.1

Overall risk model...........................................................................40

4.5.2

Decomposed risk model.................................................................42

4.6
5.

Demographic variables..........................................................................45

Discussion and conclusion..........................................................................47

5.1

Review of dissertation...........................................................................47

5.2

Conclusion and recommendation..........................................................49

5.3

Limitations.............................................................................................51

Reference...........................................................................................................53
Appendix.............................................................................................................60

Table 2 Data description for demographic variables..........................................31

Table 3 Online shopping behaviour for all respondents.....................................34
Table 4 Descriptive statistics for statement scores.............................................35
Table 5 Reliability analysis results......................................................................37
Table 6 Validity analysis results..........................................................................39
Table 7 Validity test resutls for each facet..........................................................39
Table 8 Factor analysis results...........................................................................40
Table 9 Regression summary for the overall risk model....................................41
Table 10 Factors for decomposed models.........................................................42
Table 11 Regression summary for the frequency model....................................43
Table 12 Regression summary for the expense model......................................44
Table 13 ANOVA results for demographic variables...........................................45
Figure 1 A model for online perceived risk.........................................................15
Figure 2 Research framework............................................................................21
Figure 3 Age and gender for all respondents.....................................................32
Figure 5 Monthly income for all respondents.....................................................33
5

Figure 6 Distributions of online shopping frequency and expenses...................34

1.

Introduction

1.1

Background of e-Business and online shopping

The Internet plays a significant role in many industries and is integrated into
nearly every aspect of management such as communication by email. Our
social life style, communication behaviour and even consumer behaviour have
all been changed by the Internet. In fact, e-Business as a new business model
has emerged in most industries. This short period in the history of market has
seen a total change to our daily life in many different areas. People nowadays
may purchase goods much more easily by using online shopping (Bonn et al.,
1999). Online shopping could be seen as a new fashion for consumers
especially for the younger generation (Thomson and Laing, 2003).
A report from Forrester (2011) examined the rapid growth of the Internet retailer
in Europe from 2010 to 2011. The size of the online business market had
increased by 18 per cent (2009) and 13 per cent (2010). With the improvement
of this global online shopping environment, the Chinese online shopping market
has also dramatically increased. According to the Bains report (Hoffmann et al.,
2012), Chinas e-Business market was 460 billion CNY in 2010 and
approaching 1.5 trillion CNY, which has the potential to be the worlds largest eBusiness market. It is going to be tripled in three years. The consumer-toconsumer (C2C) and business-to-consumer (B2C) platforms are widely adopted
by enterprise in different industries and therefore the number of participants has
rapidly increased. The fast growth of C2C and B2C platforms has brought with it
a rapid development of two online applications, namely online payment and
online banking. The C2C online shopping pattern requires online payment. And
the online payment is also increasingly used in B2C online shopping. Xues
(2010) report demonstrates the rapid development of online payment and online
banking. Netizens utilisation rate of the two applications has reached
respectively 22.5 per cent and 24.3 per cent. In particular, with regard to online
payment, the number of users, within half a year, reached 23.79 million, with a
semi-annual growth rate of 71.7 per cent in China. Not only the rapid
development of the Internet but also the development of telecommunication
technology, has brought with it a rapid growth of online shoppers. Recently,
1

smart mobile phones have taken up the majority of the cell phone market
around the world, and these smart phones usually use the 3G/4G network for
accessing the mobile Internet. Overall, the speedy development of the
Information and Communication Technology (ICT) has strongly boosted the
growth of online shopping users worldwide.
The fast expansion of online market has called the importance of research on
online shopping. And because China is second largest economy and the largest
emerging market in the world and probably going to be the largest e-Business
market (Hoffmann et al., 2012), the research on Chinese online shopping
market seems rather necessary.
1.2 Research on online shopping
1.2.1 Online shopping experience
Convenience is one of the advantages to attract Internet shoppers (Sin and Tse,
2002). Customers do not need to waste lots of time on searching, comparing,
and purchasing (Raijas and Tuunainen, 2001). They do not have to go to a
physical store which obviously generates expenses in either traffic or parking.
And even for after-sales customer service, if they do not like what they have
got, customers can go to their online account, click on refund or return button
and print out the labels and send the parcel back. Besides its convenience,
online shopping provides abundant information for both merchants and
customers. For merchants, they can collect a large amount of consumer
shopping data. By the use of appropriate analysing techniques such as data
mining, they can get patterns of consumption and then develop a marketing
strategy to a specific target, which can be more efficient and effectively
implemented. For consumers, handy information makes comparison and
decision making easy. They can also share this information with their friends
through social networking sites such as Facebook and Twitter. It is a
communication channel (Li et al., 1999). The other form of e-Business,
represented for example by eBay, can also act as a trading platform between
users who want to sell or buy their personal items. eBay only charges the seller
for a successful deal made.
2

Different online shoppers may focus on various aspects of the shopping

experience (Li et al., 1999). For example, some online shopping consumers
may give more attention to the prices while others may focus on the after-sale
services. Successful merchants are those who make their customers feel
satisfied and increase the volume of repeat purchases. Therefore, online
marketing nowadays attracts increasing attention from practitioners and
scholars. Studies of the online consumer experience are increasing.
1.2.2 Online shopping behaviour and perception
Gabriel (2007) and Flick (2009) tried to identify the factors affecting consumers
purchasing behaviour or preference. Clearly, a negative experience will reduce
trust and a positive experience will positively influence the perception of a
vendors trustworthiness. An Oxford Internet Survey carried out by Dutton and
Shepherd (2006) shows that the major factor effecting trust in online shopping is
previous experience. Previous experience of online shopping determinates the
effect of using the Internet to purchase. Similarly, Connolly and Bannister (2007)
have provided evidence that experience strongly moderates online consumer
perceptions of online vendors competence, security, and integrity. Their findings
showed that not only is experience a strong predictor of online consumer trust
beliefs, but it is more influential than perceived vendor competence and
evidence of vendor security controls (Connolly and Bannister, 2007, p.243). In
fact, rapid development of online shopping, at the same time, gives birth to
potential risks of online shopping. Risk is frequently encountered in the online
shopping environment. Even a small negative Internet transaction experience
will consistently affect subsequent beliefs related to that environment.
Online shopping brings disadvantage and sometimes it will become a barrier to
the further development of online shopping. Although the description could be
as clear and precise as possible, the perception of buyers may still be unclear
or inaccurate. Without trying the goods and without previous experience, online
products are unlikely to meet the expectation of buyers one hundred per cent of
the time. This could be regarded as a kind of perceived risk. Also personal
3

information stored on the website and payment security could be a problem for
online business. A report shows that fraudulent card-not-present transactions,
where personal data is stolen on the internet, account for about sixty per cent of
the losses from credit card fraud (BBC News, 2013a). This brings losses to both
merchants and customers.
These two kinds of perceived risk can be called performance risk and privacy
risk according to studies of online shopping behaviour (Forsythe and Shi, 2003;
Martin and Camarero, 2009). In fact, scholars have found more risks in
consumers perception. Cox (1967) finds that perceived risk is associated with
financial and social psychological issues. Peter and Tarpey (1975) find time loss
or time risk is what consumers are concerned. Stone and Cronhaug (1993) then
define a six dimension model to study perceived risk which are financial risk,
function risk, physical risk, time risk, social risk, psychological risk. However,
most research in the past focuses on general shopping behaviour but does not
adapt to the changes in the internet environment. In the fast changing
environment, many additional issues such as online privacy have not been well
addressed. Studies on Chinese consumers are even fewer. Considering the
large population and potential online customers in China, it is especially
important to study the Chinese behaviour in online shopping and their
perception on risks they may face to. Then it brings the aims and objective of
this dissertation.
1.3

Research aims and objectives

The emergence of the Internet has brought great changes to our shopping
behaviour. It is widely accepted that online shopping is completely different from
traditional shopping. This dissertation aims to investigate the online consumer
behaviour in China. Many previous studies about the consumers behaviour
could be found in the database. However, few if any studies have focussed on
one specific factor that affects consumers purchasing decision. The perceived
risk has been found to have a great impact on online shopping behaviour in
literatures, which will be further discussed in following sections. In addition,
studies of online shopping in emerging markets are absent. Therefore, this
4

dissertation will focus on the Chinese online shopping market, which has
increased rapidly over recent years (Hoffmann et al., 2012). Details of the
research objectives could be described as follows:

Understand the factors that influence online shopping behaviour and the

perceived risk;

Examine perceived risk more fully and understand its components;

Based on theories, test hypotheses about perceived risk on Chinese

online shopping consumers;

Give suggestions to merchants on how to minimise the risks and benefit

their

business.

The research method is conducted using an online survey to collect data on

consumer behaviour and measures of perceived risk and other factors. The
sample size of valid return questionnaires is 515. Finally, the findings on how
perceived risk influences online behaviour is summarised and conclusions are
given.
1.4

Structure of dissertation

This introductory chapter gives a background overview of e-Business and online

shopping. It identifies whether perceived risk is a major issue of online
shopping. Chapter 2 mainly discusses previous literature and examines both
theories and empirical studies regarding online shopping behaviour. It provides
a comprehensive review of the factors which may possibly affect online
shopping behaviour, paying particular attention to the perceived risk which is the
focus of this dissertation. This chapter also introduces some theoretical models
and frameworks to study perceived risk. In Chapter 3, the methodology of this
research is going is introduced. This includes the research approach, the
research framework, hypotheses, data collection methods and an outline of the
sample group. The fourth chapter is the main chapter and presents the results
from the questionnaire and the results of statistical tests, which are then
discussed and interpreted. Finally, Chapter 5 summarises the findings and gives
some conclusions on what will affect the perceived risk of online shopping
5

among Chinese consumers and maybe some suggestions for companies of

how to minimise the perceived risk in order to benefit their e-Business.

2.

Literature Review

The online shopping market continues to undergo rapid development in 2013.

A new report shows that there are 242 million web consumers in China and the
total number of online transactions has already reached 1.26 trillion CNY in
2012, which is a 66.5% growth since 2011 (CNNIC, 2013). Online retailing
accounts for about 6.1% of total retail sales and will continue to shows an
uptrend in the future. Reports indicate that average online expenditure in China
reached 5,203 CNY (equal to 580 GBP) per year. Online consumers on average
purchased 18 times per year in 2012, which is 3.5 times more than that was in
2011. The most popular online goods were apparels where 81.8% of web
consumers bought them in last year. Grocery and digital products were the
second and third most popular respectively after clothing; 31.6% of consumers
reported wishing to purchase grocery products while 29.6% of people bought
digital products. As mentioned, the development of ICT and the use of 3G/4G
have boosted online shopping. Most recently, 55 million people have shopped
online using their mobile phones in China. More than 50% of Internet users will
browse online stores when they are free at home or even in the office.
CNNICs report sheds light on the outcome of the quick development of online
shopping in China and also demonstrates the statistics of the promising
situation of Chinese online consumer market. This section will review some
relevant literature about online shopping behaviour especially the perceived
risks of online shopping users and outline the theoretical framework of this
dissertation.
2.1

Online Shopping Behaviour

Fjermestad and Romano (2006) analysed fourteen empirical studies and

identify the factors that strongly affect customers web purchasing behaviour.
They indicate that some important factors such as the external environment,
demographics, personal characteristics, the features of e-store, online shopping
attitudes and behavioural intention may influence consumers decision on
7

whether they purchase products or services online or not. Netizens who are the
internet users, especially the young generation, are much more open to online
shopping because they have previous experience of the Internet and
purchasing online (Bellman et al. 1999; Bhatnagar et al. 2000). In addition,
users who accept the new technologies and who consider the Internet as an
effective tool may be more likely to purchase online (Bellman et al. 1999). Using
the online brokerage industry as a case study, Chen and Hitt (2002) found a
positive relationship between product variety and attrition behaviours. Khalifa
and Limayem (2003) also reveal that more convenient and effective online
applications, such as transaction systems, could attract more customers to shop
online. Perceptions about the Internet and customer service have been
considered to be effective predictors of shopping behaviours.
Another strong predictor of online shopping behaviour is the intention. Park and
Kim (2003) indicate that factors like information quality, user interface quality
and security issues are the most significant to motivate users to purchase online
according to a large-scale survey study. Moreover, Hong et al. (2004)
investigated the relationship between purchasing behaviour and the information
display format.

They found that a user-friendly information display and an

effective shopping search tool are significant to online shopping. Online

shopping sometimes may be hedonic or utilitarian according to Childers et al.s
(2002) study. They found that the attitudes of online shopping may be
influenced by enjoyment, immersive perception, interactive experience and
substitutability.
Moreover, external environmental factor, namely the competitors performance,
is a significant predictor of online shopping users behaviour. According to
Ramaswami et al.s study (2001), the quality and performance of an offline
financial service agent is important to maintain the relationship between online
consumers and the financial agent, which in turn could drive the customer to
purchase financial produces online.
Limayem et al. (2000) conducted a large-scale survey and concluded that the
variables of subjective norms, attitudes and beliefs positively influence the
8

decision to shop online based on the Theory of Planned Behaviour (TPB). Their
findings gained support from the later study. Hsu et al. (2006) investigated the
online shopping behaviour by employing the Theory of Planned Behaviour
(TPB) and the Expectation Disconfirmation Theory (EDT). This study seeks to
integrate these two theories and identify the factors influencing online shopping.
They find that factors like attitude, subjective norms and perceived behavioural
control determinate the acceptance of web purchasing while factors like
disconfirmation and satisfaction determine the repeat online purchasing.
Besides the Theory of Planned Behaviour, consumer behaviour is frequently
investigated based on the Transaction Cost Economics (TCE) theory, which
was initially presented for the organizational studies from an economic
perspective. The transaction cost here implies six variables namely product
uncertainty,

behavioural

uncertainty,

convenience,

economic

utility,

dependability and asset specificity rather than the real transaction cost in the
payment of transaction. Teo et al. (2004) indicated that the transaction cost in
both China and U.S is positively related to the willingness of web consuming
although slight differences may exist between two countries. They notice that
American customers perceive more convenience and economic utility while
Chinese consumers find more product and behavioural uncertainty.
Mummalaneni and Meng (2009) focussed on the shopping behaviour of
Chinese consumers. They carried out a survey of 237 university students in
Beijing and the outcome showed that Internet skills and perceptions challenge
young college students and determine their shopping behaviour to some extent.
The research findings suggest that the usability of webpages is important to
attract more customers especially for the younger generation. Bai et al. (2008)
explored Chinese consumer behaviour from a different perspective to that of
Mummalaneni and Meng (2009). In their study, two major qualities (functionality
and usability) of the shopping website are identified. Functionality implies that a
website should include various functions such as transaction, contact and
destination that fulfil customers requirements. Usability emphasizes the
technological issues of a website including language, friendly layout and
graphic, user interface and navigation. This indicates that the quality of a
9

website could directly influence customers satisfaction and ultimately motivate

customers to purchase. Nonetheless, some limitations of the case selection and
methodology exist in their study and may limit the implementation of it to other
online shopping industries.
Zhou et al.s (2007) study provides evidence about the characteristics of a
website.

This study identifies many factors, by group, which have been

previously indicated as significant factors affecting shopping behaviour. For

instance, male consumers purchase more and spend more time on online
shopping (Alreck and Settle, 2002; Rodgers and Harris, 2003). Bagich and
Mahmood (2004), interestingly, claim that rich web users tend to buy more
online. The principle and initial reason for online shopping should be its
convenience, but nowadays online customers focus more on the recreational
element and on competitive lower prices (Donthu and Garcia, 1999). Mauldin
and Arunachalam (2002) found that previous perception is an important
element in repeat online shopping; also, a comfortable feeling towards the
Internet supports web purchasing. Same studies demonstrate that repeat
purchasing behaviour may last for a while. People who shop online frequently
are more likely to purchase online in the future (Cho, 2004; Yang and Lester,
2004) and previous satisfaction is positively related to the tendency of web
purchasing (Pires et al., 2004). Nevertheless, there is still a lack of consensus
on several factors namely the age group, education level and Internet usage,
and how these affect online shopping behaviour.
Negative factors may also have an impact on both customers and merchants in
the process of online shopping. The principle negative factors of shopping
online should be the risk of privacy and security. BBC News (2013a) reported
instances of customers personal information being divulged and credit card
fraud. BBC News (2007) launched a report which indicated that the majority of
citizens are worried about those web portals which sell their information (such
as home and email address, contact number and so on) to the third party
without permission. In fact, this report is covering old ground. Miyazaki and
Fernandez (2001) already noticed this as being an issue and found that both

10

fresh and experienced citizens have placed emphasis on the perceived risk to
privacy and security with web purchasing.
Chang et al. (2005) carried out a comprehensive literature review on the theme
of online shopping behaviour. Finally, they identified all possible factors that
have an impact on online purchasing and categorized them into several groups:
perceived

characteristics

of

the

web

channel,

website

and

product

characteristics and consumer characteristics. All of those factors may effectively

influence the customers behaviour through web purchasing.
2.2

Consumer Behaviour Models

The relationship between attitudes, intentions and behaviours has been

discussed in depth in many literatures that focus on consumer behaviour, and it
is recognised that all three notions interact with each other in relevant studies.
There are several well-known theoretical models widely used by researchers.
They are the Theory of Research Action (TRA), the Theory of Planned Behavior
(TPB), the Technology Acceptance Model (TAM) and the extend TAM model
namely the Unified Theory of Acceptance and Use of Technology (UTAUT).
The aim of the Theory of Reasoned Action (TRA) is to explain volitional
behaviours. Its explanatory scope excludes a wide range of behaviours such as
those that are spontaneous, impulsive, habitual, the outcome of craving, or
simply scripted or mindless (Dillard and Pfau, 2002). Such behaviours are
excluded because their performance might not be voluntary or because
engaging in the behaviour might not involve a conscious decision on the part of
the actor. The TRA model also excludes from its scope those behaviours that
may require special skills, unique opportunities or resources, or the cooperation
of others to be performed. One may be prevented from performing a behaviour
because of a skill deficit, lack of opportunity, or lack of cooperation from others
and not because of a voluntary decision not to engage in the behaviour. Later,
the TRA model developed into the Theory of Planned Behavior (TPB) by Ajzen
(1991).

11

The Technology Acceptance Model (TAM), as its name implies, explains the
customers perspective to the acceptance and usage of a new technology
(Davis, 1989). Numerous external factors influence the perceived usefulness
and perceived ease of adaptation in a new technological context. This model
successfully copes with the problem that beliefs in both TRA and TPB are
difficult to appraise, but the value of perceived usefulness and perceived ease
could be easily assessable in this model, that stems from the expectancy theory
and self-efficacy theory. Later, Venkatesh and Davis (2000) further developed
the TAM model to TAM2 by considering the social influences, which included
some subjective norms, images, experiences, voluntaries and other set
variables. The TAM2 model was developed further, into the TAM3 model, which
contains anchor and adjustment variables.
The most comprehensive model that combines the TRA, TPB, TAM, TAM2, the
motivational model, the model of personal computer use, the diffusion of
innovations theory and the social cognitive theory together has attracted the
attention of scholars. Venkatesh et al. (2003) conducted an empirical research
based on the UTAUT model and found that this model is much more useful than
other individual theories employed separately.
2.3

Perceived Risk

2.3.1 Definition of perceived risk

The concept of perceived risk was introduced by Prof. Raymond Bauer at
Harvard University in 1960. He believes that all purchases could bring about an
unhappy outcome which are not expected before the purchase. Therefore in his
definition, he regards the perceived risk as the uncertainty born with products
and services of purchases. After that, many scholars have developed and
extended the concept of perceived risk. Cox (1964) emphasises the perceived
risk which happens before the actual purchase. It is the perceived losses which
the unfavourable uncertainties and bad outcomes bring. Cunningham (1967)
basically agrees with Coxs (1964) definition and thinks the key elements of
perceived risk are uncertainties which are based on the consumers subjective
judgments about what may happen and the possible consequence when the
12

unfavourable uncertainties have happened. Baird and Thomas (1985) later

defined perceived risk as the personal evaluation of risks or scenarios about the
probability of uncertainty and degree of control. Dowling and Stalin (1994)
believe the perceived risk arises during the process of purchases when
consumers feel uncertainty and the possibility of bad consequences. Put more
simply, from another point of view, Mitchell (1999) regards the perceived risk as
the subjectively expected losses. This means consumers have sensed a kind of
probable or possible loss which they cannot manage and control. In the
subsequent empirical studies, many papers follow the definition of Cox (1964)
and Cunningham (1967).
2.3.2 Measurement of perceived risk
Many scholars have proposed various methods for the measurement of
perceived risk. The two dimensional model from Cunningham (1967) is one of
the earliest models. The two dimensions are uncertainty and danger and so
the perceived risk is the product of them: perceived risk = uncertainty of losses
severity of consequences. A ten point rating scale is used to describe the
degree of uncertainty and danger. Since the introduction of this model, it has
become a classic but academics have wide discussions on whether the
relationship of uncertainty and danger is addition or multiplication. Sjoberg
(1980) criticises that the multiplication comes from economic theories but it may
be correct in consumer behaviour. Stone and Grounhang (1993) argue it from a
practical way that in the process of purchase decision making, consumers
would not actually use numerical measurement to calculate the perceived risk.
Bettman (1973) distinguishes between two kinds of perceived risk inherent
risk and handled risk. Inherent risk is the latent risk a product class holds for a
consumer, the innate degree of conflict the product class arouses in the
consumer. Handled risk is the amount of conflict a product class engenders
when the buyer chooses a brand from that product class in his usual buying
situation. Thus handled risk includes the effects of information and risk
reduction processes as they have acted on inherent risk. But Cunningham's
(1967) measure only deals with inherent risk. So he uses an additive model
13

rather than productive model to measure perceived risk. Even the coefficients
and R-square value are very close, the addictive model suits better.
Peter and Ryan (1976) measures both possibility and importance of losses and
n

link them to brand preference. PR j ( PLij ILij ) where PR j is the perceived

i 1

risk for brand j ; PLij is the possibility of losses when purchasing brand j in
facet i ; ILij the importance of losses when purchasing brand j in facet i ; n is
the facets of risks. This model has been tested in some studies and its reliability
and validity are verified (Mitchell, 1999).
Dowing and Stalin (1994) split the overall perceived risk (OPR) into product
class risk (PCR) and product specific risk (SR) and their model resolves as
OPR PCR SR . Based on that, they proposed an important concept

acceptable risk (AR). Then during purchase, when the product specific risk is
larger than his acceptable risk, the consumer will keep searching for other
information or products until the perceived risk is under the limit of acceptable
risk. During this process, the perceived risk is dynamically changing.
Academia has not yet reached agreement on which measurement is the most
effective one. From applications, the two dimensional model has been used
widely and accepted by many scholars but it is still not clear whether the
relationship should be addition (+) or multiplication ().
2.3.3 Dimension of perceived risk
Dimensions of perceived risk are usually regarded as facets or aspects in some
literature. They include what kinds of risks are inherent in perceived risks or
simply the types of risks. What perceived risk consists of is a major task of
studies of perceived risk research.

In the early days, Cox (1967) and

Cunningham (1967) started the exploration in the late 1960s. Following that,
the studies became deeper and wider and expanded from just conventional

14

shopping, to telephone shopping, mail shopping and online shopping, with the
addition of many new dimensions. They are all found to contribute to perceived
risk in purchases. Some examples include Cox (1967) findings that perceived
risk is associated with financial and social psychological issues. Cunningham
(1967) finds that perceived risk originates from the gap between what
consumers actually get and what they expect. These gaps are losses from time,
health, finance, social consequence and functions of products.
Then in 1968, Woodside clarified the issue reporting that perceived risk can be
divided into three dimensions: economic risk, functional risk and social risk.
Roselius (1971) argues that when consumers are making decisions they
hesitate because they are considering their potential losses. There are four
types of losses in purchases. Time loss: if consumers are not satisfied with the
products, they have to spend time on choosing another one, repairing or
refunding it. Hazard loss: certain products may be harmful for consumers
safety, such as food and toys. Money loss: the money spent on resolving
problems or buying a new satisfactory product. Ego loss: when consumers have
got a faulty product, they will feel embarrassed because of the failure in
purchase. The time loss is also mentioned in the research of Peter and Tarpey
(1975). It shall include the losses of time, effort and energy contributed to the
purchase.
However, Bettman (1973) proposed a different way of risk classification. He
believes risks come from two sources: one induced by the type of products and
the other brought by the brand. Here is a simple example. Consumers may feel
risks in choosing laptops. They are worried about whether the laptop will work
reliably all the time as it carries large data. But some consumers may feel more
comfortable when they like a brand such as Apple because the service and
quality are assured. The former type of risk is inherent risk but the latter one is
handled risk. In this case, the inherent risk is higher than the handled risks but
in cases where consumers have no information at all, these two risks are equal.
In 1993, Stone and Cronhaug proved that six types of risks existed in purchases
and built a framework of the six dimension model. These six dimensions are
15

financial, functional, hazard, social, time and psychological. In their study, they
also found these six components do not act independently but the former five
have an impact on psychological risk and then finally affect the overall
perceived risk. Therefore until now, this six dimension framework has been
applied in many consumer behaviour studies. And this is the model which has
been chosen as the framework for this research.
2.4

Perceived risk of online shopping

2.4.1

Perceived risk in online environment

The online environment is very important to online customers. The security

problems, the lack of trust in Internet retailers, and the lack of Internet
knowledge may form the use of Internet shopping. Jones and Vijayasarathy
(2001) suggest that individuals have unfavourable perceptions of Internet
shopping security as they are wary of giving credit card details over the Internet
and Aldridge and Rowley (1998) argues that businesses should provide
alternative arrangements. For example, consumers should be able to make
arrangements to pay by phone, fax, or post and they should apply encryption for
their credit card numbers and should use electronic cash by withdrawing digital
money from an Internet bank and storing it on the hard disk.

Aiming to

synthesise the relevant literature, Forsythe and Shi (2003) developed a

conceptual model for the types of perceived risk and demographics on online
shopping behaviour, which contains six types of perceived risk (see bellowed
Figure 1).
Figure 1 A model for online perceived risk

16

Source: Forsythe and Shi (2003)

These are: the financial risk, the product performance risk, the social risk, the
psychological risk, the physical risk and time/convenience risk (ibid).
As one of the crucial barriers that confront e-commerce behaviour, perceived
risk has a significant influence on consumer decision-making. Andrew and
Boyle (2008) asserted that as a result of perceived risk, consumers in many
cases, would be reluctant to make a purchase to maximise utility. That means
even consumers who believe that shopping online is cost-effective, may still
refuse to use it, if they are affected by such a stereotype that Internet is an
unsafe medium for shopping purposes.
Inevitably, online purchasing can be viewed as risky in the uncertain context of
online retailers. The complexity of the network environment and the uncertainty
about Internet transactions run on open platforms has increased the risk of ebusiness (Pavlou, 2003). Online transactions, compared to online shopping, are
much more impersonal and anonymous, therefore building trust as much as
possible, to reduce risk, plays a crucial role in online vendor business
performance and customer retention. When consumers are making purchase
decisions they have to rely on what they see based on the information they get
on the website before confirming purchase. Thus, building higher trust with
costumers will lead to quicker and easier purchase decision making by
consumers (Chen and Barnes, 2007).
17

Privacy in online service, as mentioned above, is an issue of considerable

concern because spilling out personal information and losing control of their
own data is the last thing consumers want to see. Operated under safety
agreement and security policy, Internet transactions may lead to the problem of
losing control. Moreover, privacy policies vary from one online retailer to
another. Some will apply to collect consumer date for internal use only, while
others may operate a scheme to sell customer information for profit (Grewal et
al., 2004). Consumers demand to know clearly for what purpose user data is
collected, how long it will be kept and if there are any consequences
(Pikkarainen et al., 2004). Unfortunately, it is extremely difficult to obtain this
reassurance due to the non-transparent website policies that are widely
adopted.
Although perceived risk exists in both online and traditional shopping
behaviours, the details are quite different. When shopping online, customers
are usually unable to properly assess the true value of products by touching or
feeling the quality, the materials and other relevant elements. Moreover, the
absence of social contact and interaction with other people may lead to feelings
of discomfort. Perceived risks in the online context could easily arise from
security issues of Internet using, online transaction and privacy information
(Martin and Camarero, 2009).
Nevertheless, different customers have different perceptions of risk. When
academics discuss the risks of online shopping, actually it is not the objective
risk but the perceived risk which is discussed. Rather than reasoning,
customers perceive whether something is risky by their intuition. Previous
experience influences peoples judgment; therefore, the judgment varies
because of the different opinions about the price of products, the level of
involvement and so on.

Martin and Camarero (2009) indicate that some

customers may notice the potential risks of web purchasing but they also
appreciate the advantages of buying online because online stores provide a
convenient way for comparing prices and the quality of products and obtaining
sufficient information to make the most reasonable purchasing decision.
18

Either traditional storeowners or online retailers should notice the importance of

gaining satisfaction and trust in the business context. Online retailers should
improve their commerce and the loyalty of consumers by creating trust.
However, the construction of trust in an online context is much more difficult
than in an offline context. Firstly, it is a fact that many online shores are offering
the same products or services; customers can easily switch from one online
store to another, based on lower prices or other factors. Therefore, severe
competition should be worth more attention. Furthermore, customers nowadays
can purchase worldwide. Hence, the online retailers face not only domestic
competition but also global.
Many factors such as the quality of a website, customer service and previous
experiences of online purchasing contribute to reduce the perceived risks of
online shopping. This dissertation will find out the approaches that can be used
to ease the perceived risk based on empirical evidences.
2.4.2

Origin of online perceived risk

Online shopping takes advantage of the openness of the internet and makes
online transaction cheap and information easily available. The internet gives
equal opportunities to all participants including sellers and buyers. Consumers
can use search-engines to gather valuable information, at a low cost to
themselves but with high efficiency. Therefore the asymmetry of information
between consumers and merchants may be reduced. However it does require
the online shopper to have good searching techniques and it takes a
considerable time to develop this skill. The rational and optimal choice therefore
depends on the ability and skill of consumers.
Furthermore, there is some other asymmetric information born in online
shopping. First, the identities of parties are not clear. In conventional shopping,
normally the two parties involved, the sellers and buyers, make a deal face to
face. But when online, the two parties can only rely on the provided information
and they are actually just two nodes on the internet. Online fraud is easy
19

because consumers do not know who the seller is, what characteristics the
seller has or how long the site will stay there. Secondly, the authenticity of
information may be a problem. In conventional shopping, consumers can see,
touch, hear, smell and sense the quality of products. However online products
only exist as digital codes before they are received, and a 2-dimensional picture
display can induce visual bias compared to a real display in space. Third, online
privacy is a critical issue. In conventional shopping, money and products are the
only things to be exchanged. It is not necessary for consumers to provide other
personal information. But online shopping usually requires at least payment
information and delivery information which is sensitive and can be used by
criminals.
According to the source of risk, Cases (2002) summarises perceived risk of
online shopping as being product related, website related, internet related and
remote transaction related. Lim (2003) divides perceived risk in four categories:
technology, product, seller and buyer. In Einwillers study (2003), there are only
three sources: from electronic transaction systems, from online merchants, and
from buyers themselves. But Liang and Huang (1998) argue that the uncertainty
actually comes from two sides. One is the product when it does not match the
expectation of consumers. The other is the transaction process where
consumers have no control or no faith in it. Obviously, these two sides will
increase the risks of online shopping.
2.5

Summary

This chapter has included an extensive review of existing literature about online
shopping and consumer behaviour, paying particular attention to perceived risk.
With regards to online shopping, the external environment, demographics,
personal characteristics and features of an online store will all affect a
consumers attitude and behavioural intention and so have a final impact on
consumer behaviour on online shopping. Researchers started to investigate
perceived risk of purchases in the 1960s and since then some classical models
(such as the two dimensional model) have been proposed to explain consumer
perceived risk when making purchases. But these studies have been for
20

general purchases. In the environment of online shopping, some factors are not
valid and some factors, such as payment issues, are added. Finally the
conceptual model from Forsythe and Shi (2003) which covers product
performance risk, financial risk, physical risk, social risk, psychological risk and
time risk is suitable to study the perceived risk of online shopping. Online
shopping in China started later than in Western countries but it has been
growing very quickly in the recent decade. Academics so far have not drawn
enough attention to this change. Some papers only focus on general online
shopping behaviour. This dissertation will investigate the perceived risk of online
shopping from these those six dimensions and address some of the problems
facing Chinese people and their online shopping behaviour.

21

3.

Methodology

3.1

Research Strategy

Basically there are two widely used approaches in research: qualitative and
quantitative analysis. They each have their own advantages and disadvantages.
Qualitative methods are more suitable for examining possible relationships,
causes, effects and dynamic processes (Hughes, 2012). Interviews are
frequently used in qualitative research, and by using in-depth questions and
answers from interviewees, researchers can investigate the how and
particularly they why of decision making. In understanding human behaviour
and psychology, it is very useful. However the data it uses is difficult to collect
and time consuming and case specific sometimes. So the validity and reliability
is hard to control (Hughes, 2012). Quantitative methods, in contrast, usually
employ statistical, mathematical and computational tools on a large scale of
data. It can be used to obverse the general trends and allow repeated
experiments. Hypothesis testing is frequently used. There has been a lot of time
spent and a wide debate conducted on these two methods, but a suggestion
from Bryman (1988) that combining the two is preferred to eliminate their
disadvantages. In this research aims to investigate the relationship between
perceived risks and online behaviour in a general sense, and for this subject
there are already some hypotheses, therefore it is believed that a quantitative
approach is better for this research.
3.2

Research framework

This dissertation will investigate the relationship between consumers online

shopping behaviour and perceived risk. Jacoby and Kaplan (1972) define
perceived risk from five aspects: financial, performance, physical, psychological,
and social risks. Peter and Tarpey (1975) then added a new dimension time
risk. It is believed that these six dimensions can cover all factors in perceived
risk. Stone and Gronhaug (1993) define perceived risk by the subjective
expectation of losses. The more expected losses there are, the larger risk one
perceives. From their empirical results, they conclude that the six dimensions
22

financial, performance, physical, psychological, social and time risk can explain
88.8 per cent of total perceived risks. To date most of the research has applied
this six dimension structure in studying perceived risk, and therefore this
research follows the same six dimension structure.
Besides, there are demographic factors which may have an impact on the
measurement of perceived risks, such as gender, age, experience and income.
It is understandable that men and young people are more likely to take risks
and when they get more experience in life, they become risk averse. Then
these four factors are also added to the model. Finally, the framework of this
research could be illustrated in the figure below. Details of hypotheses are given
in next section.
Figure 2 Research framework

Financial risk
Performance risk
Physical risk
Psychological and social risk

Perceived

Online shopping

risk

behaviour

Time risk
Privacy risk

Gender

3.3

Age

Experience

Income

Research questions

To study consumer behaviour, this study uses a direct measurement, recording

the average time spent online shopping in a month which could adequately
describe the frequency of online shopping. For the four control variables, the
23

basic information of consumers is collected. The five external factors and their
sub factors, which are the dimensions of perceived risk, are examined through
several questions in the questionnaire. Then the scores are calculated and the
internet use for shopping and associated behaviour can be estimated.
Finally, in line with previous literature, several hypotheses are formed and
tested in the analysis.
Financial risk is the perception that a certain amount of money may be lost or
economic losses caused by some reasons (Garner, 1986). In the online
environment, unlike conventional shopping where transactions are made face to
face and hand by hand, it normally requires payment in advance and delivery
after, which causes some risk of default and intentional fraud due to sellers lack
of credit. The website of e-stores may not be secure which may cause losses to
buyers and sellers alike. Financial risk may be the biggest concern of online
shopping. Therefore we have Hypothesis 1.
Hypothesis 1: Financial risk is negatively associated with online shopping
behaviour.
Performance risk is the risk that a product purchased may fail to function as
originally expected (Kim and Lennon, 2000). Customers expectation of a
product is unlikely to be the same as what they actually get one hundred per
cent of the time. In traditional shopping, functionality could be tested by full
examination, however in the long term no one can guarantee that it will last in
future. For online shopping, and especially auction style C2C e-Business, there
are normally gaps between what you actually get and what you expected and
between what you get and how it was originally described. In the new type of ebusiness, known as group buying, represented by Groupon, volumes of
transactions sometimes increase beyond the capability of merchants so there
are some complaints about the quality of their services for customers is reduced
(Beijing News, 2010).

24

Hypothesis 2: Performance risk is negatively associated with online shopping

behaviour.
Physical risk refers to the danger to health or safety associated with the product
(Roselius, 1971). But in this research, it is believed that health and safety issues
are also associated with the shopping activities. Nowadays, many office men
and women have health problems because they spend so much time sitting and
facing a computer. Obesity and eye sight problems are common diseases. In
contrast with traditional shopping which involves walking and travelling which
could be regarded as excise, online shopping sometimes involves a lot of time
spent searching and communicating online with suppliers. Though ergonomic
equipment could reduce the risk, it is still a concern.
Hypothesis 3: Physical risk is negatively associated with online shopping
behaviour.
Social risk is the perception that a product purchased may result in disapproval
by family or friends (Dowling and Staelin, 1994). And psychological risk refers to
a negative effect on a consumer's peace of mind which may be caused by a
defective product (Jacoby and Kaplan, 1972). Previous theories treat these two
separately. Social risk comes from people nearby but results in mental stress for
consumers. It could be seen as a negative effect from others. Therefore in this
research the social risk and psychological risk are combined. Furthermore,
stress and worries may not only be focussed on the purchased products but
also on the behaviour of online shoppers themselves, because in the eyes of
conventional people, online shopping is disliked. Their negative opinions
towards online shopping could result in stress for online shoppers.
Hypothesis 4: Psychological and social risk is negatively associated with online
shopping behaviour.
Time risk is not only about time, but also convenience and the effort made in
purchases. But they could all result in time wasting in the end (Bauer, 1967).
Information is one of the biggest advantages of online shopping, which provides
25

customers with many options to choose and compare with. However, one may
find there is too much information sometimes, particularly in searching for a
good retailer using a search engine. Therefore, there is some time risk that is
associated with information searching, payment clearing, delivery, product
exchanging and refunds. Every point in the process of online shopping could
consume much time which means there is a great potential of risk associated
with it.
Hypothesis 5: Time risk is negatively associated with online shopping behaviour.
Besides the above six dimensions of perceived risk, in online shopping, there
are some new types of risk attached. Privacy risk is one of important additional
concerns. Traditional shopping takes little personal information to complete a
transaction. However online shopping requires at least a name, address, online
account and payment method in online shopping. If this information is leaked it
may cause irretrievable losses to both buyers and the service provider. Online
privacy is a large topic for discussion. But clearly the growth in online retail
business will shrink or even stop if people stop trusting the websites for
shopping or banking (BBC News, 2004). Therefore this factor is added to the
hypothesis that privacy risk in the online environment as a kind of perceived risk
is negatively associated with online shopping behaviour.
Hypothesis 6
Privacy risk is negatively associated with online shopping behaviour.
Consumers are one of the major parties involved in online shopping. Their
demographics and history of using the internet, experience of online shopping,
personal knowledge may all have an impact on the perceived risk. Different
consumers perceive risks differently although the same things may happen.
Therefore, in online shopping, consumers use their knowledge to process all the
collected information and make a judgement on the risk. Characteristics and
personalities will definitely affect perception of risks. In studies of consumer
behaviour, gender is always a factor that affects the decision making of
consumers. For example, Meyers-Levy (1988) comment that gender has a
26

significant impact on purchase decision. Forsythe and Shi (2003) find that
males perceive more time risk while females perceive more economic,
performance and psychological risk, and as people age, individual perception
and judgement change too. In the research of Philips and Sternthal (1977), age
is seen as an important factor in information processing. Li et al (1999) argue
that young people have more time and better techniques for using computers
and the internet so they like online shopping. For people who have some online
shopping experience, they may be familiar with its procedures and operations.
And if they have had a bad experience in the past, they may have learnt
lessons from them and be more skilled to prevent potential losses. Sometimes,
online shopping experience can be correlated to history of using the internet.
Lohse et al (2000) found that the longer people spend on the internet, the more
likely they are to purchase something. The more they rely on the internet, the
less risks they perceive. Online shoppers tend to be well educated and have
high levels of income (Donthu and Garcia, 1999). Richer people have more
funds and are therefore better able to recover from losses so it is not that
sensitive to take risks in normal shopping. It is still worth investigating whether
gender, age, experience and income will significantly affect the perceived risk.
3.4

Research method

Surveys are one of the most frequently used research methods in business
research (Bryman and Bell, 2011). However, Bryman and Bell (2011) also
outlined some problems with using social surveys to investigate behaviour.
There might be problems of misunderstanding the meaning of questions,
omissions, mistakes of memory and the respondent may also have concerns
about social desirability and possible threat. And the survey may be affected by
the interviewers characteristics. However, for the purposes of this research, it
has been decided that a survey is the main method to collect data. There are
many advantages such as surveys are easier to conduct, and efficient for the
collection of a large sample. A carefully designed survey, with a well-structured
questionnaire, will support this research. Besides, in the study of internet related
topics, an online survey becomes a particularly powerful tool, as there are fewer
limitations which may be associated with online surveys. For other businesses
27

the sample is arguably biased because the respondents have to be internet

users first in order to respond. However, for investigating online shopping
behaviour, the use of an online survey is very appropriate. Besides, as
compared with an email survey, a web survey outperforms because it can reach
a wider variety of people in terms of its appearance. Additionally, a professional
survey website can provide a functional service to create a multi-layered
questionnaire and the results are automatically coded and stored, ready for
analysis.
The questionnaire contains two parts. In the first part, there is only basic
information such as the respondents age, gender, income and experience, and
also an indication of their online shopping behaviour, the average times of
online shopping in a month and the average spend in a single purchase. These
were both measured by numerical true figures, which were then used to
calculate the average expenses on online shopping in a month. Respondents
were asked in two questions:
How many times did you shopping online in the last month?
How much did you spend in last purchase online?
Actually the first question measures the frequency of online shopping and the
second measures the cost of it.
The second section contains a group of questions to describe the factors listed
in the research framework. There are three types of scale settings for the
answers to the questions: Thurston Scale, Likert Scale and Guttman Scale. The
Likert scale is based on the statement. Normally the respondents will express
their agreement or disagreement by the degree measured as strongly
disagree, disagree, neutral, agree and strongly agree, with marks as 1, 2,
3, 4 and 5 respectively. The Likert scale is good at maintaining the reliability of
answers to questions and the ease to measure the perceived risk, and for this
reason the Likert scale was applied for the questionnaire.
However the measurement is slightly different from common Likert scale
because of the dependent variable, shopping behaviour has two dimensions:
28

frequency and cost, and based on the measurement of perceived risk in the
study of Peter and Tarpey (1975), the overall perceived risk is:
n

OPR ( PLi ILi )

i 1

where OPR j is the overall perceived risk;

PLi is the possibility of losses in facet i ;
ILi the importance of losses in facet i ;

n is the facets of risks.

Here we call the possibility of losses uncertainty and the importance of losses
severity. It is better to examine the perceived risk from both ways at the same
time. Then there are two sets of Likert scales for one statement, one to
measure the uncertainty and one to measure the severity. The lower score
indicates a lower level of response and a higher score indicates a higher level of
response. In fact, in this way, both independent and dependent variables are
decomposed. The uncertainty of perceived risks is reflected by the frequency of
the purchase behaviour and by the severity of any perceived risks and these
are then reflected by the cost of a single purchase. The measurement of each
statement was interpreted as follows (Table 1):

Statement 1

Uncertainty
Severity

1
Least
Least

5
Most
Most

As introduced previously, there are six factors in the framework of perceived

risk: financial risk, performance risk, physical risk, psychological and social risk,
time risk and privacy risk. For each of the risks the questionnaires had three
statements to describe them and the statements were designed to best gather
information of these aspects. Details of them are as follows:
Financial risk:
Statement 1: payment in advance may incur losses due to many reasons such
as loss of parcel or no delivery.
29

Statement 2: information of online payment methods are stolen by someone

may incur losses.
Statement 3: if return postages is not refundable or prepaid, it incurs extra costs
in return and exchange.
Performance risk:
Statement 4: There are fake products and counterfeit online.
Statement 5: There are gaps between the real situation and the expectation.
Statement 6: There are differences between the real situation and what it is
stated on the website.
Physical risk
Statement 7: Online shopping involves long time searching for information
through computers and mobile devices which causes eye sight problems, back
sore and other physical discomfort.
Statement 8: Without pre examination, touch or other senses, the products
could turn out to be sharp, smelly and other situations that cause discomfort.
Statement 9: Products from unreliable sources do not pass relevant tests may
cause health issues.
Psychological and social risk
Statement 10: there are anxieties in the waiting for delivery.
Statement 11: if losses happens, there is mental stress from yourself and
others.
Statement 12: Traditional people may have negative opinions on online
shopping.
Time risk
Statement 13: it takes too long to search for products and sellers.
Statement 14: it takes too long to receive the order.
Statement 15: it takes too long to return the order.
Privacy risk
Statement 13: Personal information may be leaked to the 3rd party.
30

Statement 14: Purchasing history and interest may be tracked and studied.
Statement 15: After registration, you may be contacted though emails, calls and
messages without permission.
The full questionnaire detail is attached in the appendix.
3.5

Data

3.5.1 Data collection

In any business research or statistical analysis, sampling is a key part to ensure
the quality of research. As the research objective is the Chinese online
shoppers and their behaviour, all internet users who have online shopping
experience are the population of this research. The ideal survey would mean we
can have the data of the whole population, however that is clearly impossible,
and so sampling is required. Sampling is the procedure which draws on a
portion of a population and the sample is simply a subset of the population
(Zikmund, et al, 2012). There are several sampling methods such as random
sampling, systematic sampling, cluster sampling and accidental sampling.
When the questionnaire is well structured and designed, the link to it is
distributed online through social network sites, forums and communities, email
and instant messaging to internet users and my friends and their relations and
contacts. So the sample for this study is representative of the Chinese
population of online shoppers, through the use of the quota method. However
the results may have some bias as it is impossible to distribute the survey link
everywhere on the internet. The links were generated from my social networks,
and concentrated largely on young people. This could be a limitation with data
collection but in order to improve the result would cost more and take longer.
As the following analysis involves statistical testing, in order to ensure the
results are reliable, a large sample size is preferable. But as time and cost were
both restricted, the target number of valid questionnaires returned was 500
copies.
3.5.2 Data analysis
31

When the target number of questionnaires were collected, answers to questions

were coded and processed in Excel. Firstly the distribution of results was
observed. Then the results were tested using a series of analysis including
validity analysis, reliability analysis, factor analysis in SPSS.
Then there three models were used to test the hypotheses. The integrated
model was the main model used. It aims to build the relationship between
perceived risk and shopping behaviour. Shopping behaviour measured by the
number of times of online shopping in a month and the average expenses in a
single purchase is the dependent variable. The measurement of perceived risk
follows the definition in the study of Peter and Tarpey (1975), but without brand
specification. And for this study the two measures were called uncertainty and
severity rather than probability and danger as in the original study. They are the
independent variables. Then the model is:
y b f be 1u1s1 2u2 s2 L 6u6 s6

Where b f , be are the number of times of online shopping in a month and the
average expenses in a single purchase;
u1 , u2 ,L , ui are the uncertainty of losses in facet i ;
s1 , s2 ,L , si are the severity of losses in facet i ;

1 , 2 ,L , i are coefficients;

is the constant, is the error term.

More simply, if replacing b f be and ui si by y and x, the equation becomes:
y 1 x1 2 x2 L 6 x6

The decomposed models investigated one dimension at a time, i.e. the

frequency in shopping behaviour is affected by the uncertainty, and the
expenses in shopping behaviour is affected by the severity. Then the other two
models are:
b f 1u1 2u2 L 6u6
be 1 s1 2 s2 L 6 s6

32

By these three linear regressions, the significance and coefficients of facets

were compared and analysed.
After that, the four control variables, gender, age, experience and income were
examined and the differences in the mean of measures of perceived risks
caused by these four variables were tested in ANOVA analysis.

33

4.

Analysis

The original questionnaire was designed in English and was translated into
Chinese because this study focuses on Chinese consumers. The questionnaire
was published on sojump.com which is one of the leading online survey service
providers in China. The link to the questionnaire was distributed and had been
open for responses for one week. Finally there were 515 returned
questionnaires which are valid for analysis. The results are presented and
analysed and the findings and conclusions are given in the end of this
dissertation.
4.1

Descriptive analysis

First of all, it is necessary to have an overview on the general description of the

data. The questionnaire was divided into two parts: personal information and
risk perception. In the personal information section, to keep it simple, only six
questions were asked. The first four questions are actually control variables and
Q5 and Q6 are online shopping behaviour measures. Some basic statistics are
presented in Table 2 as follows.
Table 1 Data description for demographic variables
Frequenc
y
under 18
76
18-25
239
age
26-35
155
above 35
45
male
280
gender
female
235
less than 1 year 97
2-3 years
246
experience
4-6 years
147
More than 7
25
Less than 200
192
200-499
171
income
500-999
119
1000-2000
28
More than 2000 5
Variable

Value

Percentage Mode
14.8%
46.4%
30.1%
8.7%
54.4%
45.6%
18.8%
47.8%
28.5%
4.9%
37.3%
33.2%
23.1%
5.4%
1.0%

18-25

male

2-3 years

Less than 200

34

Figure 3 Age and gender for all respondents

Looking at the age groups, the largest proportions were aged 18-25 and aged
26-35, which together accounted for over three quarters of the whole sample. It
is true that young people like online shopping. They are more open to new
technologies. When smart phones become popular in China, they adapted to
the new lifestyles easily in line with the current trends happening in the world.
Though the survey did not ask questions about their education, it is
nevertheless believed that the group of 18-25 year olds consists mainly of
university students and the group of 26-35 is mainly young people with some
income. The third group, less than 18 years of age, only makes up 15 per cent
of the sample, because they are too young to have many funds for shopping.
The group of people above 35 was the smallest group, making up less than 10
per cent. They may be conventional people who do not like online shopping.
The results for male and female are expected to be equal but in fact they were
not in the sample. There were 8 per cent more males than females in the
sample.

However, this is not seen as a problem because the sex of the

Chinese population is imbalanced due to birth control, and Chinese people

prefer boys rather than girls. Currently there are 118 boys for every 100 girls
(BBC News, 2013b). So the sample result actually reflects the fact.
35

Figure 4 Online shopping experience for all respondents

Figure 4 Monthly income for all respondents

36

Looking at the online shopping experience (Figure 4), the largest group comes
from people of two or three years online shopping experience, and this makes
up nearly half of the total respondents (47.6 per cent). Combined with the new
online shoppers (started shopping within one year), two thirds of respondents
are relatively new to online shopping. Only one third have four years or more
experience and only five per cent of them have been shopping online for over
seven years. Considering that the trends of online shopping and online stores
happened much later than in the US and UK, this is a reasonable finding. But
this market is fast growing. Generally, the income of Chinese people cannot be
compared with the British people because the minimum salary standard in
China is only like one tenth that of the UK. Chinese people earn much less
(Figure 5). Besides, most respondents are young people in the sample, so there
is no wonder that the largest group of income is less than 200.
Table 2 Online shopping behaviour for all respondents
N
Online
shopping
frequency
Online
shopping
expenses

Minimum Maximum Mean

515

20

515

35

2000

4.59

Std. D
3.56

313.91 266.21

Skewness Kurtosis
1.42

2.18

2.06

7.41

Figure 5 Distributions of online shopping frequency and expenses

37

Questions 5 and 6 ask for the frequency and expenses of online shopping. In
Table 3, it is reported that the respondents did 4.59 times of online shopping
and averagely spend 313.9 CNY (about 30 GBP) online. The range of shopping
frequency spreads from 0 to 20, which means someone did no online
transaction at all in the last month. The largest expense online is 2000 CNY.
Compared to its average 313.9 CNY, we can see its distribution is positively
skewed (2.06) and most expenses are concentrated around the average (7.41).
Compared to expenses, the distribution of frequency is less positively skewed
and less peaked but still it cannot be regarded as normal distribution. The
standard deviations for both of them are within the range of one mean.
Table 3 Descriptive statistics for statement scores
Statemen
t
S1a
S2a
S3a
S4a
S5a
S6a
S7a
S8a
S9a
S10a
S11a
S12a
S13a
S14a
S15a
S16a
S17a
S18a

Statemen
Mean Std. Dev t
2.93 1.107
S1b
3.31 1.195
S2b
3.50 1.101
S3b
3.70 1.169
S4b
3.51 1.085
S5b
3.54 1.093
S6b
3.30 1.185
S7b
3.42 1.127
S8b
3.53 1.091
S9b
3.03 1.250
S10b
2.99 1.156
S11b
2.95 1.220
S12b
3.30 1.165
S13b
3.16 1.099
S14b
3.27 1.159
S15b
3.46 1.168
S16b
3.38 1.124
S17b
3.53 1.164
S18b

Mean
3.54
3.83
3.48
3.67
3.70
3.53
3.26
3.55
3.70
2.93
3.05
2.96
3.20
3.20
3.40
3.78
3.51
3.65

Std. Dev
1.143
1.135
1.113
1.159
1.067
1.084
1.234
1.107
1.102
1.187
1.228
1.239
1.098
1.122
1.113
1.154
1.146
1.199

In the section of the questionnaire looking at risk perception, six facets of

perceived risk were described in 18 statements, 3 for each facet. For each
statement, answers in A (Table 4) describe the degree of uncertainty and
answers in B describe the degree of severity. As all these statements are about

38

risks which are supposed to be disliked, the average scores are expected to be
positive (above 3) where a score of 3 is regarded as neutral.
However, we can still observe some statements get average scores slightly
below 3, which are S1a (2.93), S11a (2.99), S12a (2.95) and S12b (2.96). When
going back to the statement, S1 says payment in advance may incur losses due
to many reasons such as loss of parcel or no delivery. The reason behind the
score may indicate that at this time, most merchants or intermediate platforms
such as eBay and Taobao in China have provided full protection on their
purchases. In cases of loss, they are covered by services so consumers are no
longer worried about this kind of risk. Only in private transactions (such as on
Gumtree in the UK), this could happen but still it is rare. S11 says if losses
happen there is mental stress from the consumer and others. The score shows
this to be neutral (2.99). As online purchases become common, they are no
longer seen to be important decisions which bear too much pressure. Similarly,
with questions S11 and S12, traditional people are not likely to have negative
opinions on online shopping. People have accepted this change in their lives
(2.95). Even where negative opinions exit, people tend to be relaxed and solve
the problem (2.96).
4.2

Reliability analysis

Reliability refers to the level of consistency of the results and the stability of the
results as measured. The behaviour of the respondents cannot be represented
accurately if there is an unreliable measurement, and the result of the analysis
will also be affected. As a result, it is necessary to conduct a reliability test
before the analysis. In this paper, the test will focus on the collected data from
questionnaires, to see if the data is reliable. In general, there are mainly three
ways to test for reliability: the inter-rater reliability, the test-retest reliability and
internal consistency reliability. The first two methods will test the consistency of
stability and equivalence across different structures. The third method focuses
on the relationships between different content in the subject, and the test will
check if they have the same content or quality in the subject. Usually the Splithalf reliability, Kude Richardson reliability and the Cronbach's Alpha reliability
39

are used to measure the internal consistency reliability. But the Cronbach's
Alpha (Cronbach, 1951) is more commonly applied because this method gives
the consistency of the scale for each question score in the questionnaire data.
And the reliability of the Likert scale can also be measured by this method. So,
in this study, Cronbach's Alpha will be applied. To be specific, if the Cronbach's
Alpha is higher than 0.7, the data will be reliable for analysis. When it is larger
than 0.9, the result consistency is excellent and when it is below 0.5, it is poor
and unacceptable.
Based on the theories and measurement to perceived risk, we do not consider
uncertainty and severity separately any more but compute the product of them
to interpret the perceived risk of the facet. So from this section, the analysis was
carried out based on a new result dataset, which directly measurd the perceived
risk. For example, in the new dataset, S1 = S1a S1b, S2 = S2a S2b and so
on. The results of the reliability analysis are given in Table 5 below.
Table 4 Reliability analysis results
Cronbach's
Alpha
N of Items
.945
18
Corrected
Item-Total
Correlation
S1
S2
S3
S4
S5
S6
S7
S8
S9
S10
S11
S12
S13
S14
S15

.666
.708
.736
.691
.726
.729
.595
.770
.717
.622
.628
.552
.656
.714
.693

Cronbach's
Alpha
if
Item
Deleted
.942
.941
.941
.942
.941
.941
.944
.940
.941
.943
.943
.944
.942
.941
.942

Cronbach's N
of
Alpha
Items
.832

.859

.821

.869

.808

40

S16
S17
S18

.701
.663
.657

.941
.942
.942

.819

The two left-hand columns show the reliability across the 18 statements. The
overall Cronbachs alpha is 0.945, which indicates the questionnaire is well
designed and the answers are highly reliable. The correlated items to the total
correlation are all larger than 0.55 which means all statements are useful. The
two right-hand columns consider each facet of perceived risk separately. All
aspects show good reliability for the three statements in each facet (all above
0.8) with very small differences in levels of reliability.
4.3

Validity analysis

Validity usually refers to the accuracy of the measured results and the proximity
of the measured results to the target concepts. In a survey, the validity of the
questionnaire refers to the extent to which it reflects the theoretical concepts of
measurement. The higher the validity of scales, the better the measured results
reflect the true characteristics. It is necessary to test whether the classification
of statements is valid and whether the influence of scales on consumer
evaluation is valid.
There are several different kinds of validity such as construct validity, content
validity, convergent validity, representation validity, face validity, criterion validity,
concurrent validity and predictive validity. Among them, content validity and
construct validity are the most important ones. Content validity is also known as
logical validity. It refers the systematic examination of the test content to
determine whether it covers a representative sample of the behaviour domain to
be measured (Anastasi and Urbina, 1997). When the tested contents of the
questionnaire do not cover the full contents of the study, the questionnaire does
not have good content validity. However when the items measured in the
questionnaire do covers all the research content, then it has good content
validity. Generally speaking this will depend on expert judgment, which is to say
that the professionals and experts have experience and can assess the
accuracy of the questions. Construct validity is also known as structure validity.
41

It refers to the extent to which operationalization of a construct (i.e., practical

tests developed from a theory) do actually measure what the theory says they
do. Construct validity includes discriminant validity and convergent validity.
Between them, discriminant validity is used to measure the distinction between
the various dimensions of the adequacy of validity, usually by judging if the
corresponding correlation coefficients of each indicator and a factor if higher
than that between other factors. At the same time, it determines the indicators
within the same dimension by checking if the Cronbacha coefficient is higher
than that with other different structural variables correlation coefficient. If a
factor has a high correlation coefficient that other factors and between, and
Cronbacha coefficient the same structural variables is also higher than with
others, then the questionnaire has high discriminant validity. Convergent validity
refers to in the questions on the same aspect, statements are highly correlated.
When all indicators load factor is higher than 0.5, it indicates that the
questionnaire a high degree of convergence.

Table 5 Validity analysis results

KMO and Bartlett's Test
Kaiser-Meyer-Olkin .945
Measure
of
Sampling
Adequacy.
Bartlett's Approx. 6223.153
Test
of ChiSphericity Square
df
153
Sig.
0.000
In the Principle Component Analysis across all ten statements, the KMO (>0.9)
and Bartletts test (0.000) indicates the questionnaire is of good validity. If
checking the validity by factors, Table 7 also shows the statements are valid
within each facet of perceived risk.
Table 6 Validity test resutls for each facet
Financial risk
Performance risk
Physical risk

KMO
.717
.732
.699

Approx. Chi-Square
595.6
718.9
577.1

df
3
3
3

Sig.
.000
.000
.000
42

Social and psychological risk .737

Time risk
.708
Privacy risk
.709

760.6
511.5
551.7

3
3
3

.000
.000
.000

The significance are very strong so the validity of statements in each facet of
perceived risk is also ensured.
4.4

Factor analysis

Factor analysis can be used to describe the variability of observed and

correlated variables and build a series of unobserved variables. It can reduce
the number of variables by their best combination and make further analysis
possible and interpretable. In this study, for each aspect of perceived risk, three
statements were used to describe them. When putting them all in regression, it
is hard to decide whether the risk facet is important or not if the significance of
statements are mixed. Therefore only one factor from each risk facet is
extracted to represent that financial risk, performance risk and so on. In fact, in
the factor analysis, it shows only one factor of the eigenvalue larger than 1. So
one factor is enough to be picked out to represent the risk facet. Details of the
factor analysis is shown in Table 8.
Table 7 Factor analysis results

Facet
Financial risk
Performance risk
Physical risk
Social
psychological risk
Time risk
Privacy risk

Component
1
Item Extraction loading
S1
0.760
0.872
S2
0.779
0.883
S3
0.708
0.842
S4
0.752
0.867
S5
0.804
0.897
S6
0.792
0.890
S7
0.676
0.822
S8
0.797
0.893
S9
0.743
0.862
S10 0.815
0.903
and
S11 0.790
0.889
S12 0.776
0.881
S13 0.690
0.831
S14 0.760
0.872
S15 0.720
0.849
S16 0.780
0.883
S17 0.722
0.850

Componen
t
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2

Eigenvalues
2.247
.428
.325
2.348
.366
.286
2.216
.478
.306
2.380
.340
.280
2.170
.464
.366
2.206
.455
43

%
Varia
74.89
14.28
10.82
78.27
12.20
9.53
73.86
15.95
10.19
79.34
11.34
9.32
72.34
15.47
12.19
73.52
15.17

S18

0.703

0.839

.339

For all facets of perceived risk, the first component, Component 1 contributed to
over 70% of the total variance of the three. So this was selected to be the
specific risk taken forward to the next step of regression. Their loadings are
listed in Table 7 as well. They are all larger than 0.5, which also means there is
a high degree of convergence. The values of new factors are recorded as new
variables for regression analysis.
4.5

Regression analysis

The main model of this dissertation is the overall risk model stated in Equation
1. The decomposed risk models cover uncertainty and severity separately. Their
results are presented in this section.
4.5.1 Overall risk model
As described above, six new variables are computed to represent six
dimensions of perceived risk. They are the independent variables in the linear
regression and they all enter the model at the same time. The dependent
variable is the product of Q5 and Q6 which is literally the average expense of
online shopping in a month.
Table 8 Regression summary for the overall risk model

Model Summary
Model
1
ANOVA
Model
1 Regressio
n
Residual
Total

R
.698

R Square
.487

Adjusted
R
Square
.481

Std. Error
of the
Estimate
1511.415

Sum of Squares df
1103215041.000 6

Mean Square
F
183869173.500 80.490

1160463267.768 508
2263678308.76 514

2284376.511

Sig.
.000

9
44

11.31

Coefficients
Unstandardized

Standardized

Coefficients

Coefficients
Std.

Model
1 (Constant)
Financial risk
Performance risk
Physical risk
Social
and

B
1616.608
-246.018
-380.847
-379.396
-287.869

Error
66.601
110.284
115.006
108.774
96.536

Beta
-.117
-.181
-.181
-.137

t
24.273
-2.231
-3.312
-3.488
-2.982

Sig.
.000
.026
.001
.001
.003

psychological risk
Time risk
-171.865
Privacy risk
-295.083

116.095
107.727

-.082
-.141

-1.480
-2.739

.139
.006

In the model summary, the linear correlation coefficient R is close to 0.7 (0.698)
and the F ratio of model fitting is significant, which means that the linear model
is generally a good fit for the independent and dependent data.
In a summary of the variable coefficients, except time risk, all other risks,
financial risk, performance risk, physical risk, social and psychological risk and
privacy risk are significant at 95% level of confidence in the model. And their
signs of coefficients are all negative, as expected, which means they are
negatively associated with online shopping behaviour. The more risks consumer
perceive, the less purchases they will make online.
4.5.2 Decomposed risk model
In the decomposed risk models, uncertainty is reflected in shopping frequency.
The more likely it is for risk to occur, the less time people spend shopping
online. Severity is reflected in shopping expenses. The more important a risk
factor is, and the more severe its impact, the less money people will spend
online.
Similarly, in line with the overall risk model, every three statements in the risk
dimension are extracted to be one component by factor analysis. The details of
the factors are described below.

45

Table 9 Factors for decomposed models

Facet

Item Extraction
.735
S1a
Financial risk
S2a
.759
.606
S3a
.778
S4a
.819
Performance risk
S5a
.764
S6a
.714
S7a
Physical risk
.766
S8a
.777
S9a
.780
S10a
Social
and
.761
S11a
psychological risk
.796
S12a
.642
S13a
Time risk
.741
S14a
S15a
.781
.769
S16a
.768
Privacy risk
S17a
.737
S18a

Component
1
loading
.857
.871
.778
.882
.905
.874
.845
.875
.881
.883
.872
.892
.802
.861
.884
.877
.876
.859

Componen
Item Extraction t 1 loading
.713
.845
S1b
Financial risk
S2b
.661
.813
.548
.740
S3b
.683
.827
S4b
.728
.853
Performance risk
S5b
.738
.859
S6b
.544
.738
S7b
Physical risk
.712
.844
S8b
.642
.802
S9b
.752
.867
S10b
Social
and
.742
.862
S11b
psychological risk
.741
.861
S12b
Time risk
.637
.798
S13b
S14b
.721
.849
Facet

Componen
t
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3

Componen
t
1
2
3
1
2
3
1
2
3
1
2
3
1
2

%
Eigenvalues Varianc
2.100
69.99
.556
18.52
.344
11.47
2.361
78.70
.363
12.10
.276
9.18
2.257
75.22
.419
13.97
.324
10.80
2.337
77.90
.358
11.93
.305
10.16
2.164
72.12
.514
17.14
.322
10.73
2.274
75.80
.389
12.96
.337
11.23

%
of
Eigenvalues Variance
1.923
64.100
.640
21.325
.437
14.575
2.150
71.663
.465
15.495
.385
12.841
1.899
63.306
.653
21.765
.448
14.929
2.235
74.512
.391
13.046
.373
12.441
1.921
64.019
.640
21.341
46

Privacy risk

S15b
S16b
S17b
S18b

.562
.672
.627
.656

.750
.820
.792
.810

3
1
2
3

.439
1.955
.551
.494

The scores for the six dimensions of perceived risk were input into linear
regressions. In the first model, online shopping frequency was the dependent
variable and scores of uncertainty are independent variables. The result of
regression is displayed below.
Table 10 Regression summary for the frequency model
Model Summary
Model R
R Square Adjusted R Square Std. Error of the Estimate
1
.553 .306
.298
2.985

Model
1 Regressio
n
Residual
Total

Sum
Squares
1995.771
4526.411
6522.183

ANOVA
of
Mean
df
Square
6
332.629

F
Sig.
37.331 .000

508 8.910
514

Coefficients
Unstandardized
Standardized
Coefficients
Coefficients
Std.
Model
B
Error
Beta
1 (Constant)
4.594
.132
Financial risk
-.504
.210
-.141
Performance risk
-.058
.220
-.016
Physical risk
-.307
.229
-.086
Social
and -.644
.188
-.181
psychological risk
Time risk
.297
.224
.084
Privacy risk
-1.052
.224
-.295

t
34.927
-2.402
-.263
-1.340
-3.422

Sig.
.000
.017
.793
.181
.001

1.327
-4.704

.185
.000

In the second model, online shopping expense is the dependent variable and
scores of severity are independent variables. The result of regression is
displayed below.
47

14.641
65.160
18.377
16.463

Table 11 Regression summary for the expense model

Model Summary
Model R
R Square Adjusted R Square Std. Error of the Estimate
1
.577 .333
.325
218.659

Model
1 Regressio
n
Residual
Total

ANOVA
Sum
of
Mean
Squares
df
Square
12138397.199
6
2023066.200
24288435.512
36426832.711

F
Sig.
42.313 .000

508 47811.881
514

Coefficients
Unstandardized
Standardized
Coefficients
Coefficients
Std.
Model
B
Error
Beta
1 (Constant)
313.909 9.635
Financial risk
-20.705
15.079
-.078
Performance risk
-57.929
16.152
-.218
Physical risk
-38.096
15.504
-.143
Social
and -41.409
13.878
-.156
psychological risk
Time risk
-31.167
15.907
-.117
Privacy risk
-1.504
14.788
-.006

t
32.579
-1.373
-3.587
-2.457
-2.984

Sig.
.000
.170
.000
.014
.003

-1.959
-.102

.051
.919

Although compared with the overall model, the correlation coefficient R of the
decomposed models are reduced a lot (0.553 and 0.577), by the ANOVA test,
the linear fit is still valid at 99% of significance. In the frequency model, only
financial risk, social and psychological risk, and privacy risk are significantly and
negatively correlated with online shopping frequency. In the expense model,
there are performance risk, physical risk, social and psychological risk and time
risk which are significantly negatively correlated with online expenses. Then
only the social and psychological risk has a negative impact on both shopping
frequency and expense.
4.6

Demographic variables

48

Age, gender, experience and income are four demographic variables of

modelling. They are supposed to have significant impact on the measurement
of perceived risk. Their mean differences were calculated and tested by F test.,
and the results are given in Table 13.
Table 12 ANOVA results for demographic variables

<18
18-25
age
26-35
>35
F sig.
male
gender
female
F sig.
<1 year
2-3 years
experience 4-6 years
>7
F sig.
<200
200-499
500-999
income
10002000
>2000
F sig.

Social and
Physical
psychological
risk
risk
.232
.313
.101
.226
-.172
-.335
-.337
-.573
.001
.000
.162
.167
-.193
-.200
.000
.000
.109
.251
.124
.163
-.183
-.342
-.568
-.572
.000
.000
.145
.217
.037
-.009
-.205
-.138

Financial
risk

Performanc
e risk

192
171
119

.593
.022
-.215
-.378
.000
.180
-.215
.000
.222
.101
-.292
-.142
.000
.218
.048
-.286

.559
.069
-.250
-.449
.000
.160
-.191
.000
.253
.089
-.246
-.412
.000
.233
-.012
-.262

28

-.430

-.311

-.178

-.657 -.649

-.800
.000

-.562
.000

-.935
.006

-1.055 -.804
.000 .000

n
76
239
155
45
280
235
97
246
147
25

Please note that in Table 13 (above) the mean scores are given in standardised
figures: positive larger scores indicate higher perceived risk and negative
smaller scores indicate lower perceived risk. All the F tests (between different
dimensions of perceived risk and groups of each of the variables) show that the
differences between groups are significant. That means people of various ages,
gender, experience and income perceive risks in various ways.

Generally,

younger people perceive more risks than older people. Males perceive more
risks than females. People with limited online shopping behaviour perceive
more risks than experienced consumers. And people with lower incomes
perceive more risks than high income consumers.

49

Time Priv
risk
ri
.372
.167
-.283
-.537
.000
.116
-.138
.004
.250
.096
-.267
-.344
.000
.182
.113
-.270

50

5.

Discussion and conclusion

The previous section has completed the analysis of the data, collected from the
online survey. It is now time to draw some conclusions and recommendations of
this research. But before them, a review of the content of this dissertation is
given first.
5.1

Review of dissertation

The fast development of Information and Communication Technology (ICT) has

opened many new markets and industries for business. e-Business is one of the
most flourishing areas of the twenty-first century. Many enterprises, no matter
what their size or their product, have considered e-Business to assist the
operations or extend the scope of their businesses. Consumers, on the other
side of businesses, have also followed this new trend in life and adapted to a
modern lifestyle. In various areas of e-Business, this dissertation focuses on the
activity of online shopping in China, and from the perspective of consumers
investigated their shopping behaviour online. The number of online shoppers is
growing very fast and the figure could be doubled in just a couple of years.
Obviously consumers are attracted by the many advantages of online shopping.
Convenience, access to information and other extra benefits such as sharing
and communication are the main reasons why consumers prefer online stores
rather than traditional physical stores. However, there are a lot of risks
associated with online shopping as well. But literature has not given enough
attention to risks perceived by consumers, especially the Chinese consumers.
China now is the largest developing country and the second largest economy in
the world. Considering the importance of the Chinese market and the large
population of China, this dissertation tries to give an evaluation of what factors
could have influence on the perception of risk in the case of China.
Consumer behaviour has been studied for decades by both academics and
industry. There are many successful consumer behaviour models such as the
Theory of Research Action (TRA), the Theory of Planned Behaviour (TPB), the
Technology Acceptance Model (TAM) and the extended TAM model namely the
51

Unified Theory of Acceptance and Use of Technology (UTAUT). All of them try to
understand the decision making process of purchasing from the important
factors affecting behavioural intention. In the new environment of the internet,
many literatures have explained and studied online shopping behaviour by the
TPB and the Expectation Disconfirmation Theory (EDT). Examples are
Limayem et al. (2000) and Hsu et al. (2006). As the internet and computers or
mobile devices are all kinds of new technology, the Technology Acceptance
Model works fine as well. Perceived risk usually is only one element of all the
factors that affect online shopping behaviour. In the classic models used to
study perceived risk, the six dimension model is found to be the most
successful for the interpretation of the overall perceived risk. These six
dimensions are financial, functional, hazard, social, time and psychological
(Stone and Cronhaug, 1993).
In the online environment, obviously there are some new concerns which
should be added to the six dimension model. Online privacy is one of the
biggest worries. This research then combines the social and psychological risks
together and incorporates a new factor, privacy risk, in order to build a new six
dimensional model. For each of the factors, the risk perception is measured for
both its possibility and importance, Peter and Tarpey (1975). The sum of the
product of possibility and importance of the six factors is actually the overall
perceived risk. This research employs a typical quantitative method, a survey to
study the risk perception of Chinese consumers. An online questionnaire is
designed and distributed to collect first-hand data for analysis. For each factor,
three statements are used to describe it and respondents are asked to give a
score indicating how possible and how serious the statement is when they
consider online shopping.
Finally over 500 valid questionnaires were collected which is an acceptable
sample size for this quantitative study. In the descriptive analysis, age, gender,
experience and income are the four control variables are observed. The results
show that young people from 18 to 25 years of age are the main consumers of
online shopping. In China, there are 8 per cent more male consumers than
female consumers. Almost half of the respondents had experience of online
52

purchasing over a period of two to three years. Because Chinese people earn
much less on average, than British people, the results show that one third of
them have monthly income less than 200 and two thirds of them have a
monthly income less than 500.
The results obtained through the questionnaires have passed both reliability
and validity tests which means the questionnaire is well designed and both the
structure and results are suitable for further analysis. The factor analysis was
then employed to reduce the three variables to one variable in each risk factor,
in order to better understand and interpret the results. Three linear regression
models were constructed: one overall risk model and two decomposed risk
models. In the overall risk model, financial risk, performance risk, physical risk,
social and psychological risk and privacy risk were found to be significantly
negatively associated with online shopping behaviour. However, the time risk
was not.
In the decomposed risk models, similarly, independent variables are reduced to
six factors and it was found that financial risk, social and psychological risk and
privacy risk each have a negative impact on shopping frequency. Performance
risk, physical risk, social and psychological risk and time risk showed a negative
impact on shopping expenses.
In terms of the four control variables, age, gender, experience and income,
significant differences are observed in the measurement of perceived risk. This
means different people of different characteristics perceive risks in the own way.
5.2

Conclusion and recommendation

Based on the analysis, in all six hypotheses to be tested in this research, five of
them were found to be supported by the statistical results. Financial risk,
performance risk, physical risk, social and psychological risk, privacy risk are all
negatively associated with online shopping behaviour.

53

However, the time risk was not verified in the overall risk model. This may be
because convenience is one of the major advantages of online shopping.
People use online shopping to save time compared to traditional street
shopping. Although searching for products, waiting for deliveries or exchanging
goods takes some time, it is not too excessive and it is still acceptable for most
customers. But it is worth noting that the factor of time risk is significant in the
decomposed model where it has a negative effect on the shopping expenses.
This suggests that speeding up the process and simplifying the procedures for
online shopping would be helpful to boost online transactions. Websites should
provide powerful search engines and clearly designed pages based on
category, size, price, colour etc. in order to make communication efficient and
enable consumers to spend more money on their e-stores.
The social and psychological risk was found to be negatively associated with
online shopping behaviour in both the overall risk model and decomposed
models. As it is a relatively new technology, online shopping is not yet full
accepted by the whole population and particularly the older generation, however
in time it is expected that people will get used to it.
Because in the linear regression, all scores of independent variables are
standardised, their coefficients actually are comparable with each other. The
performance risk and physical risk are shown to be equally (coefficients -380)
important factors in all five significant dimensions. Consumers are worried about
whether they will receive what they expect from online stores. This could be
minimised by pre-examinations and certificates to guarantee their performance.
For physical risks the result is similar, and this is particularly important for online
C2C and B2C platforms such as eBay and Taobao in China. No one wants to
bear any physical risk which is harmful to their health. When physical risk
happens, it is very serious. For financial risk and privacy risk, as there are laws
and regulations. Buyer protection against financial and privacy risks are very
comprehensive. Consumers normally have the right to ask for money back or
sue the sellers if they break the laws.

54

In the four control variables, teenagers under 18 perceived more financial risk
than others. And people from 18 to 25 years old perceived more social and
psychological risk, which implies that their behaviour is more likely to be
affected by others. Men evaluated financial risk to be the most important risk in
comparison to others as they do not want to see any financial losses in
purchase. New online shoppers regarded performance risk as being most
significant, as they expected to get what they want from online stores, however
for experienced customers, maybe they already know there is always a gap
between the reality and the expectation.

Another explanation is that when

experience grows, buyers become more skilful in identifying which product is

worth buying online. For consumers with only a small income, performance risk
is the most important factor too.
Finally, all the risks examined, except time risk, should be the focus for website
design. If sellers focus on these risks then consumers are more likely to shop
more often and spend more money, and so businesses will survive and grow.
5.3

Limitations

Although this study has been carefully structured and conducted, and the
survey has been well designed and kept in a simple and straightforward way,
there are still some limitations in this dissertation. First, compared to other
consumer behaviour studies, the sample size in this research is still small. If
considering the whole population of Chinese online users who are hundreds of
millions potential customers for internet businesses, the sample of 515 seems
quite small. But due to limited funds and time, the survey could only be
conducted within such a range. Obviously a larger sample size requires
advanced service from online survey providers (which cost money) and would
take a much longer time waiting for the target number of returned questionnaire.
Without much incentive for respondents and only based on the background of a
master level dissertation, the best effort has been made to achieve the number
of 515. In real practice, it is common that a larger sample can be achieved by
examination of data concerning consumers purchasing history or other
professional survey organisations. More resources are required for future
55

research. Secondly, although one new factor, the privacy risk was added to the
online environment, this is probably inadequate considering many new issues
constantly emerge, such as the quality risk and after sale risk which may take a
longer time to test. On the other hand, traditional risks nowadays are fully
protected by professional insurance services such as eBay Buyer Protection
and payment security techniques. Consumers now have got used to these
protections so they perceive fewer risks than previously. So the risks are
underestimated because of the protection. Thirdly, more statements could be
included in the survey to describe different factors in the survey so that more
information could be collected. A wider scale such as a 7-point scale may be
better than a 5-point scale for use in the questionnaire.
Furthermore, future research could add another countrys consumer cohort, and
build separate models. It would be interesting to see the differences in risk
perceptions especially when adding cultural factors.

It is possible that the

results for social and psychological risks might be different. This would be
particularly useful for international marketing. Nevertheless, this research has
given some insightful results for all businesses which want to explore the
Chinese market. Hopefully it could make a little contribution to academic
research on consumer behaviour and practice in business.

56

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Appendix
Questionnaire design
Introduction
This questionnaire is to investigate consumer online shopping behaviour
regarding perceived risks. There about 25 questions which may take you about
5 minutes. All the collected information and answers are going to be used for
the course assignment and will not be given to any third party. Thank you for
your time and participation!
Part A: Personal information
Q1: Age: under 18
Q2: Gender: M

18-25

26-35

above 35

Q3: How long has you started shopping online?

less than 1 year

2-3 years

4-6 years

More than 7

Q4: How much is your personal monthly income?

Less than 200

200-499

500-999

1000-2000

More than

2000
Q5: How many times did you shopping online in the last month? _____
Q6: How much did you spend in last purchase online? _____
Part B: Risk perception
Please choose the appropriate scale which is marked by 1~5 to denote the
smallest degree to the largest degree on the uncertainty and severity of each
statement.
No
S1

Statement
Payment in advance may incur losses due to

1 2 3 4 5
Uncertainty
65

S2
S3
S4
S5
S6

S7

S8

S9
S10
S11
S12
S13
S14
S15
S16
S17
S18

many reasons such as loss of parcel or no

delivery.
Information of online payment methods are
stolen by someone may incur losses.
If return postages is not refundable or
prepaid, it incurs extra costs in return and
exchange.
There are fake products and counterfeit
online.
There are gaps between the real situation
and the expectation.
There are differences between the real
situation and what it is stated on the website.
Online shopping involves long time searching
for information through computers and
mobile devices which causes eye sight
problems, back sore and other physical
discomfort.
Without pre examination, touch or other
senses, the products could turn out to be
sharp, smelly and other situations that cause
discomfort.
Products from unreliable sources do not pass
relevant tests may cause health issues.

Severity
Uncertainty
Severity
Uncertainty
Severity
Uncertainty
Severity
Uncertainty
Severity
Uncertainty
Severity
Uncertainty
Severity
Uncertainty
Severity

Uncertainty
Severity
Uncertainty
There are anxieties in the waiting for delivery.
Severity
Uncertainty
If losses happens, there is mental stress
from yourself and others.
Severity
Uncertainty
Traditional people may have negative
opinions on online shopping.
Severity
Uncertainty
It takes too long to search for products and
sellers.
Severity
Uncertainty
It takes too long to receive the order.
Severity
Uncertainty
It takes too long to return the order.
Severity
Uncertainty
Personal information may be leaked to the
3rd party.
Severity
Uncertainty
Purchasing history and interest may be
tracked and studied.
Severity
After registration, you may be contacted
Uncertainty
though emails, calls and messages without
Severity
permission.

66