Online Trust: An International Study Of Subjects’ Willingness to Shop at Online Merchants, Including The Effects of Promises and of Third Party Guarantees
Online Trust: An International Study Of
Subjects’ Willingness to Shop at Online Merchants, Including The Effects
of Promises and of Third Party Guarantees
Our expectation was that promises alone would have little impact on
customers’ WTP. Our thinking was that if customers trusted a website,
then promises would not be necessary, and that if customers did not
trust a website they would not trust its promises either; either way
promises would have no effect. This turned out to be incorrect. Our
expectation was that third party guarantees would be most effective.
This turned out to be only partly supported. Our expectation was that
China would be a significant outlier in one direc-tion, and Singapore
would be a significant outlier in the opposite direction. Again, this
turned out not to be entirely true. All of this is described more fully
in our hypotheses (section 4) and our analyses (sections 7 through 11). Code Shoppy
The US online market is the most mature online market in the world, and
the behavior of online shop-pers in the US is remarkably similar to the
behavior of shoppers in traditional physical venues. Shoppers at a
range of physical stores, from Wal-Mart and Rite-Aid to Tiffany’s and
Brooks Brothers, make their purchas-es without requesting promises that
the goods they buy are authentic, and without requiring third party
guaran-tees. The online behavior of US shoppers seems simi-lar to their
offline behavior. In contrast, promises and third party guarantees are
significant in other markets, with vendor type and nature of assurances
interacting in different ways in different countries. Promises were not
always without value, and third party guarantees did not always increase
the value of promises.
Hypotheses Our discussions with executives at 360buy, Taobao, and
Yihaodian suggested the following: (1) vendors’ reputational capital may
be the greatest de-terminant of consumers’ WTP; (2) vendors’ promises
of product quality are of little value from low quality vendors because
buyers may not view these promises as binding in the absence of
reputational capital; (3) third-party guarantees would help create
greater trust and faster growth in online markets, (4) Chinese
con-sumers may be less trusting and Chinese vendors may encounter
greater trust penalties; and (5) different risk mitigation mechanisms
may have different effective-ness in China, due to different consumer
experience with online commerce generally, with third party war-ranties
and performance bonds, and with the legal system when trying to follow
up on complaints. These led directly to our six hypotheses.Hypothesis 1:
In every country, with purchases aggregated across all product types,
as vendor quality decreases, consumer’s WTP will decrease. The idea that
trust is directly observable through subjects’ expressed WTP is central
to our experiments. This is critical to establish, because if we cannot
ob-serve this in the laboratory then our experiments can-not test any
of our more important hypotheses. Hy-pothesis 1 attempts to determine
the extent to which reputation matters to subjects’ WTP for items from
different categories of seller. Hypothesis 2: In every country, with
purchases aggregated across all product types, promises alone will not
increase consumers’ WTP compared to these consumers’ WTP for the same
products purchased from the vendors but without promises. (Promises
alone refers to promises offered without 3rd party guarantees.)
Hypothesis 2 suggests that promises from low quality vendors will not be
credible. The value of promises alone is directly observable through
differ-ences in subjects’ WTP for products online, from a range of
merchant types, with and without promises. The extent to which
differences in WTP vary by mer-chant type and merchant reputation will
indicate the role of reputational capital in determining the value of
promises. A promise from Carrefour or Wal-Mart is credible because they
have reputations that they do not want to damage; they are likely to
back up their prom-ises. Alternatively, if the merchant is unreliable
then the promise will probably be seen as unreliable as well. Hypothesis
3: In every country, and across all product types, consumers’ WTP for
products from vendors who offer promises backed by a trusted third party
will be greater than consumers’ WTP for the same products from the same
quality vendors who offer promises not backed up by a trusted third
party. Hypothesis 3 suggests that promises will be effec-tive only if
they are backed up by third party guaran-tees. This hypothesis interacts
in complex ways with hypothesis 2. In particular, this suggests that
promises from low quality vendors will be credible if they are backed up
by third party guarantees, even if these promises alone are not
credible (consistent with hy-pothesis 2). Additionally, hypothesis 3
suggests that promises from high quality vendors are also more effective
if backed up by third party guarantees, even if these promises alone
are not credible (which is not consistent with hypothesis 2). Combining
hypothesis 2 with hypothesis 3 suggests that vendors without established
reputations could benefit early in their online evolution through the
use of third party guaran-tees. The value of third party guarantees is
directly observable through differences in subjects’ WTP for products
online, from a range of merchant types, with and without third party
guarantees. Hypothesis 4: For each vendor quality level, the decreases
in consumers’ WTP associated with ven-dors’ quality level will vary
across countries. Hypothesis 4 suggests that the impact of trust and
reputation on WTP will vary by country. Based on discussions with online
retailers, we expected trust to be less of a problem among consumers in
Singapore, with consumers in Germany and the United States exhibiting
intermediate behavior. We expected online trust to be the greatest
problem in China, given the incidence of problems with counterfeit and
defective merchandise, and with product tampering in China. We test this
using subjects’ stated WTP for merchan-dise from all vendor types under
the baseline condi-tion, with no explicit promises or third party
guaran-tees. Hypothesis 5: Across vendor quality levels, ven-dor
promises without 3rd party backing will increase consumers’ WTP in
different degrees across countries. Hypothesis 6: Across vendor quality
levels, ven-dor promises with 3rd party backing will increase consumers’
WTP in different degrees across countries. Hypotheses 5 and 6 suggest
that mechanisms to increase consumers’ confidence and to increase
con-sumers’ WTP will vary across nations. We expected variation across
nations, based on national differences in experience with online
shopping, the severity of problems with traditional physical shopping,
and the effectiveness of national legal codes in creating a sense of
consumer protection. https://codeshoppy.com/shop/product/e-commerce-project-report-android-app/
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