Intangibility and Perceived Risk in Online Environments

Abstract

Product intangibility increases consumers' perception of risk. Previous research has examined the effects of multiple dimensions of intangibility on the various types of risk and found out that of the three intangibility dimensions, physical intangibility was the least correlated to the consumers' perception of risk in most situations, while mental intangibility and generality had great impact on most of the perceived risk dimensions. Little research so far has been conducted as to the differences between online and offline environments in which risk is perceived. The results from this study with generic vs. branded products in offline vs. online situations show that significant variations in the perception of risk were identified across different purchasing environments. In the online environment concerns of consumers have a significantly stronger impact on the different kinds of risk perceived than generality and mental intangibility. Whereas intangibility has a major impact on risk during the traditional method of shopping, an elevated perception of risk in the online environment is merely triggered by consumer's concerns about their privacy, the security of their purchases and the security of the system through which their transactions are completed.