Like a Glittering Prize: The impact of Perceived Risk and Trust as Determinants of Online Purchasing Behaviour in the Gemstone Industry

Findings on the impact of perceived risk and trust in online purchasing are usually based on evidence obtained from the purchase of inexpensive, uncomplicated, and hence low risk products such as books, compact disks (CD’s, DVD’s), or clothing. Antecedents of perceived risk and trust are also not usually addressed in these studies. This study shows that the type of Internet marketing strategy (the place strategy), the buyer’s privacy and security concerns influence a buyer’s perceived risk to purchase gemstones online. Findings also show that perceived risk reduces trust and trust was positively associated with the amount purchased online. Introduction Pierre Omidayr, the founder of eBay back in 1995 identified some of the main obstacles to the development of online retailing. "The whole idea was just to help people do business with one another on the Internet. And people thought this is impossible, because how could people on the Internetremember this was 1995how could they trust each other? How could they get to know each other"? (cited in Goldsmith and Wu 2006, p. 129). Even today, some 12 years later, with estimated sales of online purchased expected to reach US$316 billion by 2010 (Shop.org, 2006a), the main drivers of e-commerce remain, including the notion of building trust (Belanger, Hiller, and Smith, 2002; Dillon and Reif, 2004; Fung and Lee, 1999; Gefen, 2000; Shim, Slyke, Jiang, and Johnson, 2004; Vijayasarathy and Jones, 2000) and reducing the risk of purchase (Kim and Montalto, 2002; Heijden et al., 2003 Chellappa and Pavlou, 2002). To compensate for concerns about risk and to find sources of trust, online consumers rely on the information provided to them by sellers or the trader’s policies which secure their personal information and protect their privacy (Heijden et al., 2003). While protection from fraud may be difficult, guarantees provided by online retailers are seen as an important means of gaining the trust of consumers (Chellappa, 2003 and Wind and Mahajan, 2001). This paper examines these set of factors as shown in the conceptual/results model in figure 1, for a particularly risky, and more expensive product, gemstones. Discussion is centred on each of the parts of the model. The model contains both managerial actionable antecedents as well as consumer evaluations. Actual amounts purchased online were used to evaluate the model.