On risk, convenience, and Internet shopping behavior

TLDR: This article attempts to determine why certain consumers are drawn to the Internet and why others are not, and why the perception of the risk associated with shopping on the Internet is low or is overshadowed by its relative convenience.

Abstract: The past century experienced a proliferation of retail formats in the marketplace. However, as a new century begins, these retail formats are being threatened by the emergence of a new kind of store, the online or Internet store. From being almost a novelty in 1995, online retailing sales were expected to reach $7 billion by 2000 [9]. In this increasngly timeconstrained world, Internet stores allow consumers to shop from the convenience of remote locations. Yet most of these Internet stores are losing money [6]. Why is such counterintuitive phenomena prevailing? The explanation may lie in the risks associated with Internet shopping. These risks may arise because consumers are concerned about the security of transmitting credit card information over the Internet. Consumers may also be apprehensive about buying something without touching or feeling it and being unable to return it if it fails to meet their approval. Having said this, however, we must point out that consumers are buying goods on the Internet. This is reflected in the fact that total sales on the Internet are on the increase [8, 11]. Who are the consumers that are patronizing the Internet? Evidently, for them the perception of the risk associated with shopping on the Internet is low or is overshadowed by its relative convenience. This article attempts to determine why certain consumers are drawn to the Internet and why others are not. Since the pioneering research done by Becker [3], it has been accepted that the consumer maximizes his utility subject to not only income constraints but also time constraints. A consumer seeks out his best decision given that he has a limited budget of time and money. While purchasing a product from a store, a consumer has to expend both money and time. Therefore, the consumer patronizes the retail store where his total costs or the money and time spent in the entire process are the least. Since the util-