Reducing consumer risk in electronic marketplaces: The signaling role of product and seller information

Abstract

Existing studies offer very limited insight into how sellers may reduce consumers' perceived risk in order to make consumer-to-consumer electronic marketplaces more successful. Contrary to these studies, the empirical investigation reported in this article acknowledges the role of sellers in enabling these computer-mediated transaction platforms. The study focuses on how information provided by sellers about themselves (i.e., seller information) and about their products (i.e., product information) can function as risk reduction signals and how these affect a buyer's inclination to purchase. Combining signaling theory with perceived risk theory, the authors present a research model that they test using structural equation modeling with data collected in two different electronic marketplaces, including eBay.nl. The results indicate that while product and seller information are indeed important risk reduction signals, and as such can play an important role in stimulating purchasing, the risk reduction potential of these forms of information differs across the studied risk types. This article discusses these findings and explains how they contribute to signaling theory and perceived risk theory. Based on the findings, several practical implications for sellers active in electronic marketplaces and for the intermediaries operating these transaction systems are described.