Financial risk and its impact on new purchasing behavior in the online retail setting

Abstract

This paper examines the effect of financial risk on perceptions of service quality and relationship-marketing quality in the online retail environment. Perceptions of financial risk were found to be negatively associated with service quality. In particular, a well-designed and attractive Web site was found to mitigate perceptions of financial risk during early trial-buy purchasing. Relationship-marketing quality was not affected by financial risk. This study adds to an enhanced understanding of how risk perceptions influence assessment of service quality and relationship-marketing quality. While the drivers of service quality and relationship-marketing quality have been examined extensively in the online setting, a surprising lack of research investigates the role of risk perceptions in the early stage, buy-trial purchasing behavior. This emerging area of research interest is deserving of more attention. Our findings provide valuable normative guidance to researchers interested in the affects of perceived risk (particularly financial risk) on new online shoppers, emphasizing the interdependency between Web site design and risk perceptions.