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Market Impact of Online Trust on the Relationship Between Perceived Risks and Purchasing Intention in Saudi Arabia

7 pages
1762 words
Sewanee University of the South
Type of paper: 
Literature review
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The adoption of E-commerce over the last decade has transformed how businesses conduct their operations. This has opened a new shopping channel where both manufacturers and retailers can efficiently reach potential consumers in the market (Chang & Makki, 2015). It has shortened the distance between the producers and consumers, as the online platform has no geographical limitations as it was in traditional business channels. The use of E-commerce has increased the global sale of products and businesses adopting this model have recorded substantial gains.

Despite the gains presented by online shopping, numerous risk factors have negatively influenced the purchasing intention of consumers. This study is a literature review that aims to examine how these risk factors have affected consumers in Saudi Arabia (Almousa (2014). The review explores whether the negative impact of some perceived risk factors on the online purchasing intentions of both Saudi and non-Saudi consumers living in Saudi Arabia is strong or weak. It also seeks to find out whether there are awareness campaigns of e-shopping in Saudi Arabia and their impact in boosting trust of online purchasing among consumers despite the perceived negative risk factors.

Literature Review

Pappas (2016) revealed in a study that several kinds of literature do not provide a straightforward interrelationship between perceived risk factors, the marketing impacts and their effect on product and web-vendor consumer trust. However, a study by Omwansa, Lule, and Waema, (2015) have gone further to examine the relationship between trust and risk of embracing online shopping, particularly among middle-class consumers. In their findings, they prove perceived risks are still a major impediment to acceptance of online shopping among consumers. Therefore, the authors recommend online businesses should demonstrate precise measures to reduce risk to improve online purchasing intentions (Omwansa, Lule & Waema, 2015).

In a study by Chen et al. (2014), the findings demonstrate that the perceived risks in most cases are strong and negatively affect purchasing intentions among consumers. This is often made worse by complex behaviors that subject consumers to perceive online shopping as riskier compared to brick and mortar shopping.

According to a study done by Almousa (2014), the use of the internet since it was first introduced in Saudi Arabia in 1998 has seen the number of users rise to 9.6 million by the beginning of 2009. As revealed in the study, the high number of users translated as well to an increase of online sales, which is attributed to a predominantly high population of young computer-savvy generation. Almousa (2014) expect that going into the future internet penetration will increase and the demand for internet usage will rise.

As noted in a study done by Al-Nasser et al. (2014), the steady rise of annual online sale during the first decade has been negatively affected by several perceived risk factors that have resulted in sharp decline of online shopping among Saudi Arabia consumers since 2009. These risk factors include the perceived privacy concerns, psychological risks, performance risks, and financial risks (Almousa, 2014). Other significant perceived risks include time and social risks. Financial risks involve the potential monetary outlays incurred due to the perceived high purchase price as well as the subsequent maintenance cost of the product and potential financial loss due to fraud (Almousa, 2014). Psychological risk according to Almousa (2014) is the potential loss of self-esteem from the frustration of not achieving a buying goal. The social risk as defined in a study by Sota-Acosta et al. (2014) represents a potential loss of status in one's social group because of purchasing a product or service that is not trendy or that looks foolish. Concerning time risk, the authors explained that this is encountered when there is a potential loss of time by consumers after spending considerable time researching and making a purchase that turns out to be a bad purchasing decision and the only option is to replace the product if it does not perform to the expected level. Privacy risk as defined in a study by Sharma and Kurien, (2017) represents the potential loss of control over personal information when a consumer purchases products online using private and personal information. Their personal information may be easily accessed and used by third parties without the consumers knowledge or permission (Sharma & Kurien, 2017). Before making any given online shopping, consumers are required to provide credit card information to online merchants, a process that may pose a risk of exposing their data to cybercriminals.

Kim and Peterson (2017) identified these risk factors as the greatest impediment negatively affecting the attitudes of Saudi and non-Saudi consumers towards online shopping. The author validated this claim by carrying out online surveys where the results indicated that the perceived risk negatively influenced the consumers attitude, perceived usefulness, perceived ease of use and intention to shop online among several consumers.

The study by Chang and Makki (2015) describes the potential factors that inhibit and promote E-Commerce in Saudi Arabia. Several factors identified in this study include the delivery system, security and privacy, consumer trust, ICT infrastructure, banks and credit cards issuance, business system integration, government regulations and user readiness and awareness. In their discussion, Chang and Makki (2015) pointed that these factors have substantially prevented the growth of E-commerce in Saudi Arabia. To understand the extent of impact these risk factors has caused among the customers in Saudi Arabia, the authors carried out an extensive online survey using social media platforms. The participants sampled identified the most common factors that positively or negatively affect the acceptance and use of online shopping in Saudi Arabia. Sixty-four percent of the respondents preferred the use of credit cards to purchase products and services online (Chang & Makki, 2015). The survey indicated cash on delivery was the second best payment choice as thirty-eight percent of respondents preferred to use the method. Twenty-eight used wire transfer.

Chang and Makki (2015) drawing on these results claim that the problem of inadequate credit cards is no longer an obstacle as pointed in previous studies. As pointed in a study by Kaur and Quareshi (2015) the major problem faced by online business is the apparent lack of trust among consumers in using their credit cards to shop online. Most consumers in this study identified the risk of potential loss of their privacy by disclosing their information online as a significant impediment to their online purchasing intentions.

Costagliola et al. (2014) in a study of Saudi Arabian E-commerce points that the use of social media has served as an important platform to improve awareness of e-shopping among consumers. The surveys carried out during the study indicate regular adverts improve consumer trust to shop online. Unlike SMS and emails, social media was found to have a higher impact in promoting E-commerce.

According to Alafeef (2014), use of social media has promoted E-commerce in companies based in Al Baha City in Saudi Arabia. Most of the sampled companies pointed a positive correlation between the adoption of electronic commerce (the social media) and the improved sales of products online. As revealed in this study, the social media has become an important tool to launch awareness campaigns among consumers in the market (Alafeef, 2014). This, in turn, has positively increased the purchasing intentions of consumers.

Bashir and Aslam (2017) have demonstrated how companies adopting the use of social media increase their brand awareness that ultimately improves their online sales. In an online survey conducted by Alafeef (2014), 89 percent of the respondents confirm the use of social media has resulted in more exposure of their businesses. Most of the respondents as revealed by Alafeef (2014) pointed that regular posting of important content on social sites facilitate the growth of their followers and fans base, with a majority of them turning to be potential customers. It acts as an important platform to reach out many customers mainly because of its viral nature and ability to spread the adverts quickly. As revealed by the author, it is not only enough to post online content advertising and marketing a given product, but it must be accompanied by ongoing interaction with them over and over again (Alafeef, 2014). It is through this regular practice that will ensure there is an enhanced awareness of online shopping as a faster way of making purchases.

A study by Alshehri & Meziane (2017) explains that use of social media help companies overcomes customer reluctance to purchase products online. Though 84 percent of respondents sampled still trust more word of mouth compared to 68 percent who trust the advertisement posted online, the statistics demonstrate trust is an important factor in convincing consumers to buy products online. Moreover, Alshehri & Meziane (2017) explains that social media helps to build relationships that enhance interaction that ultimately helps customers overcome their reluctance.

Another study conducted by Aljarboa (2016) indicates that online shopping in Saudi Arabia has brought both challenges and opportunities. In the study, the author enumerates that the perceived lack of acceptance of online shopping as a way of purchasing by Saudi and non-Saudi Arabian customers has slowed the adoption of this model. Most businesses according to Aljarboa (2016) have not yet identified and establish E-commerce as the future most effective business model. Even though internet usage has gone up, Aljarboa (2016) in this study pointed that online shopping is still low among consumers. Another study by Al-Salamin and Al-Hammad, (2014) claim the perceived lack of trust by customers is the main challenge that has hindered the growth of E-commerce in Saudi Arabia. For instance, Al-Salamin and Al-Hammad, (2014) pointed that most customers do not feel comfortable to carry out a transaction with an online entity because they fear underlying risk factors such as potential loss of privacy and security may be breached. Those surveyed in the study, claim another major risk factor is the purchase of a product or service online only for them to receive poor quality products or services. This represents an area where online retailers focuses on a daily basis to ensure their product or service descriptions merges with what the customers will expect.

The assessment provided by Al-Salamin and Al-Hammad, (2014) is supported in another study by AlGhamdi et al. (2013) that reiterate improvement of products quality is an important area of interest where retailers are expected to put a great deal of effort to increase e-customer satisfaction in a bid to strengthen their credibility as sellers. Apart from the potential risk of the unmet expectation, this study also single out the user interface of online shopping website as the potential perceived risk among the consumers in Saudi Arabia (AlGhamdi et al., 2013). The customers always look forward to finding an easy user interface for them to accept this manner of doing business. Customers have an inherent tendency to judge the credibility of a company by the look of their website design and arrangement of products and services. Therefor...

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