The Effects of Information Privacy and Online Shopping Experience in E-Commerce

By Bernard, Elena Kiryanova; Makienko, Igor | Academy of Marketing Studies Journal, January 1, 2011 | Go to article overview

The Effects of Information Privacy and Online Shopping Experience in E-Commerce


Bernard, Elena Kiryanova, Makienko, Igor, Academy of Marketing Studies Journal


ABSTRACT

The purpose of this study was two-fold: 1) to investigate the effect of e-tailer information privacy policy on customers' privacy concerns and their perceptions of the e-tailer trustworthiness and 2) to examine the effect of consumers' online shopping experience on their reactions to the e-tailer's privacy policy. The empirical results showed that consumers' privacy concerns partially mediate the effect of information privacy policy on e-tailer trustworthiness. These findings suggest that information privacy may play a dual role in shaping customers' perceptions of e-tailer trustworthiness: 1) indirectly - by informing customers about the intended uses for their personal information and thus reducing their privacy concerns and 2) directly - by serving as a signal of the e-tailer's integrity and general concern for customers' well-being. In addition, we emphasize the importance of considering consumers' experience with online shopping when studying their privacy perceptions online. In our study, more experienced online shoppers demonstrated lower privacy concerns and appeared to have a stronger response to the e-tailer's privacy policy than less experienced online shoppers.

INTRODUCTION

For a decade information privacy has been one of the central issues in e-commerce research across many disciplines. Extensive research has shown that due to a different nature of shopping environment, consumers perceive online transactions as risky, form heightened privacy concerns and such concerns become the main barrier for electronic commerce (Hoffma, Novak & Peralta, 1999). In marketing, information privacy has been linked to online trust (Bart et al., 2005; Eastlick et al., 2006; Hoffman et al, 1999; Pan & Zinkhan, 2006), e-service quality (Zeithaml et al., 2002), and online purchasing (Malhotra et al, 2004). Some researchers have examined the antecedents of e-shoppers' privacy perceptions, advocating various privacy management strategies such as opt-in/opt-out tactics, monetary compensation for customer information, and third-party privacy seals (Culnan, 1995; Goodwin, 1991; Rifon et al., 2005). In this study we will investigate yet another privacy management strategy that focuses on the transparency of the e-tailer' s consumer information practices.

The supporters of the transparency strategy argue that customers would be more willing to trust the e-tailer with their personal information if the e-tailer explained the intended uses of customer information (Hoffman et al., 1999; Pan & Zinkhan, 2006). This view suggests that the mere transparency of the e-tailer' s information practices can reduce customers' privacy concerns and enhance their perceptions of the e-tailer trustworthiness. However, research shows that many consumers either do not read or do not fully comprehend e-tailers' information privacy policies thus raising questions about their effectiveness in reducing customers' information privacy concerns (Cranor et al., 2006; Meinert et al., 2006; Milne & Culnan, 2004; Milne et al., 2006; Vail et al., 2008, Nehf, 2007; Proctor et al., 2008). Furthermore, little if anything is known about the effect of customers' previous online shopping experience on their reactions to the e-tailer' s information privacy policy. Is it effective for all customers regardless of whether they are novice or experienced online shoppers? While Bart et al. (2005) show that both a consumer's Internet shopping experience and the website privacy policy have a positive influence on e-trust, we have not found any research that looked at the interaction between these two variables. This study will attempt to address these issues by specifying a structural equation model where customers' perceptions of e-tailer' s information privacy policy, their online shopping experience, and the interaction of these two variables are explicitly linked to their privacy concerns and their perceptions of e-tailer trustworthiness. …

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