Risky Business: How Online Business Can Lower Critical Perceived Risk Factors Among Consumers and Achieve Accelerating Word-of-Mouth

Abstract

Society is becoming more and more digitalized, where people to a large extent have moved away from brick-and-mortar stores and adopted online shopping. In this digitalized world, paid media are getting less effective for businesses and more and more annoying for consumers. Because word-of-mouth (WOM) is shown to be more effective online than paid media and because perceived risk is a determent factor in consumer decision-making in online shopping, I have found it interesting to examine the relationship between these two important constructs, in relation to Danish women’s online clothes shopping. The investigation is especially relevant for online shop startups, where I examine whether the lowering of perceived risk may leadtoH1) new customers, H2) WOM and H3) an accelerating WOM. The hypotheses have been measured through quantitative analysis as a cross-sectional design, where I have surveyed 50 Danish women in the street of Copenhagen. Correlations between the two constructs have been tested through a Pearson Correlation analysis, with addition measures of relationship and significance to ensure high internal consistency of my results.
My findings show a strong relationship between perceived risk and new customer acquisition and WOM, where the findings for the relationship between lowering of perceived risk and accelerating WOM has an especially high significance and high internal consistency. The findings have massive and very favorable implication for online clothes shop startups and online business in general, and because there are no prior studies that deals with this particular relationship, this thesis contributes with valuable preliminary research that can move this area of study further, which would benefit online shop businesses and consumers alike.
Because of surprising results for the measure of perceived risk and because of a lack of measurement consistency in the literature, I have search for validity errors in my measure of perceived risk, where importance findings include how people moderate perceived risk through the level of involvement they engage in through information search, where they are able to alter the probability of ending up with the wrong product, according to how important a risk factor are to them.