October 29, 2018

Importance of Trust in E-commerce

The notion of trust is complex and thought provoking. Hence, research literature on trust tends to be fragmented and the definitions show a high degree of disparity. No single, universally accepted definition of trust exits, yet there is general agreement that to engender trust one must act in a dependable, ethical, and desirable manner (Hosmer, 1995; Rotter, 1971). Trust implies that the other party can be believed (Gefen, 2000; Gefen, 2002b; Gefen, Karahanna, & Straub, 2003).

Trust in e-commerce

“The Internet has become an essential business marketing paradigm related to the development of platform for trading, distributing and selling products this B2C e-commerce is trust (Corbitta , Thanasankita & Yib, 2003).” Trust is a fundamental between organisations, among organisations and principle of every business relationship Hart and Saunders, 1997). Quelch and Klein noted, ”trust is a critical factor brought e-commerce to an entirely new level in stimulating purchases over the Internet (Quelch, L.R. Klein, 1996).” While Keen argues that the most significant long-term barrier for realising the potential of Internet marketing to consumers was the lack of consumer trust, both in the merchant’s honesty and in the merchant’s competence to fill Internet orders (Keen, 1997). Trust is a crucial factor on the Internet since an e-vendor is considered a business entity with which consumers are economically engaged in online transactions. “Trust is considered as the key factor for maintaining sustained relationships between the transacting parties. Slyke et al. argued that in Web-based shopping, there may be increased uncertainty with respect to e-vendors since consumers have no direct face-to-face interactions with them (Slyke, 2004). Moreover, vulnerability for consumers stem from the fact that they should provide their personal and financial information to e-vendors in order to complete their online transactions. This puts consumers at risk because the online environment exposes them to the threat of possible opportunistic behaviors by e-vendors such as masquerading, misuse of personal information, and even credit card fraud (Slyke, 2004). Pavlou and Jarvenppa et. al state that for this, perceived risk negatively influences consumer’s intention to transact online and decreases the likelihood of such transactions. Therefore, in this arena, trust helps consumers overcome perceptions of uncertainty and perceived risk, and engage in trust relationships with e-vendors (Jones and Leonard, 2008).”

Importance of Trust in E-commerce

Doubt, lack of trust is a fundamental reason why many users won’t purchase goods or services from e-commerce Web sites. Evidence suggests that the principal reasons why people do not purchase via the internet are related to online security and policy, reliabilities of companies (Gefen, 2000), and web site technology. Online trust is an important determinant for web sites to succeed in marketplace (McKnight and Chervany, 2001; Balasubramanian et al., 2003; Grabner-Krauter and Kaluscha, 2003; Koufaris and Hampton-Sosa, 2004), and for retaining long-term relationships with consumers (Reichheld and Schefter, 2000; Gefen et al., 2003).

The importance of trust is elevated in e-commerce because of the high degree of uncertainty and risk present in most on-line transactions. Jarvenpaa et al. empirically showed the favorable effect of trust on consumer purchase intentions . Thus, the role of trust is of fundamental importance for adequately capturing consumer behavior in e-commerce. Perceived risk is also an important element of B2C e-commerce that is likely to affect consumer

behavior.

Consumers and businesses must feel confident that their transactions will not be intercepted or modified, that both sellers and buyers own the identity they claim, and that the transaction mechanisms that are available are secure and legal. “There is a growing body of research literature dealing with online trust, in which e-commerce is one prominent application. Several studies contend that e-commerce cannot fulfill its potential without trust (Kuttainen, 2005.)”

“In research on business-to-consumer (B2C) e-commerce, trust is regarded as a mental short-cut to a buying decision, where the buyer is faced with the uncertainties of product quality and vendor reputation (Grabner-Kräuter, 2002). Some suggest that trust can turn a potential online consumer from a curious “window shopper” to an actual buyer (McKnight, Choudhury,

Kacmar, 2002). Empirical evidence indicates that knowing and trusting the web site are the overriding concerns for Internet consumers when doing business with an online vendor (Reichheld and Schefter, 2000). The literature on online trust essentially makes the assumption that risk and dependence, such as giving out personal and payment information to an e-vendor, is higher in e-commerce than in traditional, physically conducted commerce. Therefore

the need for trust also is higher (Kuttainen, 2005)”

Trust is a crucial element in any business discipline and transformation, which involve information technology (Journal of Strategic Information System Editorial, 2002). In relation to this belief, Tang et al (2003:342) state, “Trust is the foundation upon which commerce is built, and in the virtual world it may be the fuel for the locomotion”. Lee and Turban (2001) highlight lack of trust as the most commonly cited reason in market surveys why consumers do not shop online. The authors argue that “the importance of trust in e-commerce cannot be overestimated” (p.77). This claim is motivated by the fact that shopping on the Internet is more uncertain and riskier than traditional shopping. The reason for this is that online shops are not well known to the consumers, the consumer has no opportunity to physically examine the product before buying, and the consumer cannot protect any sensitive private or financial information that the seller receives (ibid). Other factors that contribute to the higher level of uncertainty in e-commerce environment are:

“Lack of physical contact, in terms of location, touching goods and the human factor (face-to-face or verbal communication). This limits the consumer ability for assessing the quality and suitability of a product (Lynch et al, 2001).

Not being able to observe body language and emotional signals which might have a positive effect on building a trustworthy relationship between the customer and the vendor (sales person). In the absence of a live social interaction between a buyer and a seller, the quality assessment of a product or services becomes difficult in the online environment compared with the traditional commerce. For example, when a sales person is asked for more detailed-information of a product or service (just for being sure of the satisfactory level of the quality or the price of that product or service). Hence, in computer mediated environment, many signals of personal interaction are absent (e.g. facial expression, gesture, body language), (Krauter and Kaluscha, 2003). This also results in a consumer being unable to assess the integrity, benevolence, or ability of vendor as easy as in the traditional commerce.

The lack of control and the limitation of tracking of the purchase procedures after sending information from the consumer (Personal Computer) to a web vendor’s server. Despite the fact, that many web vendors claim that they use encryption system. However, there is a possible risk of secondary use of the consumers’ information while it is transmitted and settled on the business side server. The encryption system works through an electronic channel, and not at the server side of company. It means all consumers’ information exists on the server of the vendor without encryption and others at the server side can have access to this information (Khazaei, 2006).”

“Apart from the short-term functions of trust in B2C e-commerce , trust also provides several long-term benefits to e-vendors. These include enhancement of ecommerce acceptance ) and e-commerce adoption, maintenance of long-term relationships between e-vendors and customers , establishment of consumer commitment, improvement of customer satisfaction, increase in customer loyalty, gaining a competitive advantage, price tolerance, a decrease of privacy concerns, and forgiving occasional mistakes made by e-vendors (Pittayachawan, 2007.)”

 

UKEssays. November 2013. Trust And Its Importance In E Commerce Marketing Essay. [online]. Available from: https://www.ukessays.com/essays/marketing/trust-and-its-importance-in-e-commerce-marketing-essay.php?vref=1 [Accessed 30 October 2018].

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