Consumer Perceived Risk - Online Export

Exporting online and consumer perceived risk

The element of perceived risk and consumer confidence is an area of online buying behaviour which is widely reported and discussed. The consumer’s perception of the risk associated with purchasing products online is a key factor in the decision of whether or not to buy a product online, or whether to buy from a certain website. Consumers lack the physical reassurances that they get from purchasing a product in person, or even over the phone. “Trust is the currency of commerce” and gaining consumer trust must be of primary importance for any business wishing to sell services and goods online, regardless of the market in which they are selling.

The IAB ‘Estudio anual eCommerce’ carried out by Elogia highlights that consumer confidence in a website is the second highest valued factor (behind price) for Spanish consumers when purchasing goods online. Of the consumers that do not purchase online, 40% of consumers were scared of giving their bank card details and 24% are just not confident of shopping online.

Gaining consumer trust is critical if a business is to build confidence in their products and services, and ultimately, sell them online. This becomes even more important when the business in question is seeking to export products to online consumers abroad.

Different products carry different levels of perceived risk

The perception of risk is not equally distributed across all product groups. Several factors influence the level of risk that consumers place on purchasing certain products online. With regards to product groups, perceived risk can be understood as the consumers’ calculation of ‘the cost of failure’. Taking various factors into consideration, the consumer analyses the personal cost that a failed transaction may have. Subsequently, this valuation of ‘the cost of failure’ will influence whether the consumer will purchase a product or service online, and if so the level at which they will research the product and the selection of sellers that they will consider.

Purchase cost isn’t everything

Whilst the cost of a product is a key component in the calculation of risk, it is not the sole consideration. For example, as demonstrated by Holland and Mandry (2013)[1], consumers in the UK perceive car insurance as a low risk online purchase. Despite the fact that the purchase cost for insurance is high, consumers can switch supplier with relative ease. Additionally, because car insurance is viewed as a commodity product, the outcome and consequences of the purchase are low. Consequently, the overall consumer perceived risk of buying car insurance is low. The story is a similar one with airline and train ticket purchasing. Whilst the purchase cost can be high, consumers are accustomed to purchasing travel tickets online and are confident that the outcome of their transaction will be satisfactory (i.e. they will get what they have paid for). Alternatively, groceries are considered a medium risk purchase. Whilst the purchase cost is not as high, the switch of supplier is perceived as a medium risk due to the effort and time required to understand a new ordering and delivery system. This cost evaluation of purchases highlights that consumers may be less risk averse with certain types of products and services. A supplier’s product category can have an influence on whether the consumer is likely to move from existing suppliers.

In Spain, the top three selling product categories online in 2012 were clothing and fashion, air and train tickets and technology products (i.e. PC/mobile/consoles)[2]. Companies exporting from Spain need to consider the risk association and buying habits of their products in the target market and make a judgment on the customer persona and perceived risk. For example, UK consumers have a culture of buying mobile contracts which come with a handset offline. What risk would a British consumer associate with buying a mobile handset from a Spanish retailer online?

Consumer Drivers of Trust

Understanding the consumer’s perceived risks of shopping online for your product is important. Gaining insight into the drivers of trust is critical. Chaffey and Ellis-Chadwick (2012) expand on the Bart et al. (2005) model detailing the ‘link between websites and consumer characteristics’, identifying the elements which are important in building trust:

  1. Brand Strength – This can be created through advertising and offline contracts
  2. Privacy – Disclosure, repetition, guarantees
  3. Security – Disclosure, repetition, guarantees
  4. Navigation and presentation – Usability, accessibility and persuasion
  5. Advice – Detailed information and buyers guides
  6. Community – reviews, ratings and forums
  7. Order fulfilment – customer promise and experience
  8. Absence of errors – experience and independent ratings

The strength of each driver can vary depending on the consumer and product in question. However, in general, each driver plays some role in developing trust in an online purchase.

Gaining trust from an export market

From an export perspective, trust is arguably one of the biggest barriers to entry and success for a company wishing to sell their products abroad via the web. A business must take every step to ensure that their target consumers trust their brand and feel at complete ease that the entire sales process will go as expected. If the business operations are not located in the same country as the buyer, extra steps need to be taken to build trust and entice the browser to become a buyer. In reference to the previous model on the drivers of trust, here is how I would advise online export business to deliver trust:

  • Brand Strength – This is critical. As a new business in your export market, your brand will be unknown. The extent of your brand building efforts will rest very much on your marketing budget. Before you invest in marketing, consider your brand as it stands. Will it work in the new market? The famous example of General Motors’ failed attempt to launch their car, the Nova, into the South American market demonstrates the importance of checking the meaning of your name and slogan in the target market. Whilst this is an unusual example, it’s worth paying consideration to your brand name. Should you translate it for the new market? How does it sound to the native ear? Once that decision has been made, you need to get your brand out there. Research your target market. Find out what magazines and blogs your target customers read, what sites they visit, what associations they are members of. If you’re selling wine, who are the online influencers? Advertise through them. Local domain names can help to building brand strength in a new market. Consumers have greater trust of sites that they believe are local. How successful do you think a domain would be with a Spanish audience? A .com may not be detrimental, but it won’t help build trust.
  • Privacy and Security – The privacy and security badges (i.e SSL) are fairly standard internationally, particularly within the EU. Make sure that you get this information translated professionally. It could be costly if you don’t, and if this information is written poorly, it looks incredibly unprofessional and does nothing to build trust.
  • Navigation, Presentation and Advice – This is heavily linked to the functionality of your original website. You’ve researched functionality and have used web analytics to gauge the success of each page. With regards to localisation, the language used clearly plays a part in building trust. If it is unprofessional or out of sync with the language used by the target audience, it won’t build trust. Similarly, if the language doesn’t serve its purpose (i.e. clearly give instructions, aid navigation, upsell a product), it will be detrimental to gaining consumer confidence.
  • Community – This is an area which is commonly overlooked by companies exporting online. Many companies monitor customer online reviews. There are several software options available on the market which allow you to track the use of your brand name. This allows you to promote any positive feedback that you find, and more importantly, respond to negative feedback. Review sites can have a strong impact on the success of your company (think Expedia and hotel reviews). However, by responding to these negative reviews and giving your side of the story or offering solutions, you can turn negative publicity into positive. This activity is just as important in the export market as it is in the domestic. You need to have systems and resources in place to monitor feedback. This goes for social media as well.
  • Order fulfilment and absence of errors – This is crucial. Returns policies are a major concern for buyers in the domestic market. Customers want to be confident that if there is a problem with the product, the seller will deal with it. Companies that export products online need to take even greater steps to reassure customers that products will be delivered as expected and returns will be dealt with appropriately. Make sure you have a returns and delivery policy which is specifically targeted at each export country. The company needs to know that you’ll handle any after sales problems efficiently and effectively.

All prices need to be in the currency of the local market. If you’re selling clothes or shoes, make sure you use local size labels. Additionally, if you are going to use a contact phone number for customers, make sure it is a local one. The presence of a contact phone number online can be extremely beneficial in building customer confidence. However, a foreign number will do nothing to gain such confidence, and may even dent it. It costs very little to purchase local numbers which divert to your offices. Regardless of the contact method, customers need to be able to communicate with you. You need to make sure you have the resources to do this. Again, if you want to build trust, broken English via phone or email will do little to help. Outsource these duties if you’re not confident.

If you’ve got any stories about building customer confidence in your site, or challenges of a loss in confidence that you’ve overcome, we’d love to hear them!

[1] Holland, P. and Mandry, D. (2013) Online Search and Buying Behaviour in Consumer Markets. 46th Hawaii International Conference on System Sciences, p.2918-2927. IEEE Computer Society

[2] I Estudio annual eCommerce IAB Spain

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