Factors Influencing Consumers' Trust on E-commerce Adoption in

Sri Lanka
Ilmudeen, A.

Lecturer (Prob.) Management & Information Technology

MIS Unit, Department of Accountancy & Finance

Faculty of Management and Commerce

South Eastern University of Sri Lanka, Oluvil

ilmudeen16@gmail.com, Mobile : 0094 71 603 9226

Abstract
The purpose of the research is to find the factors which persuade the consumers’ trust on e-
commerce adoption in Sri Lanka. The creation of the Internet has reduced physical borders and
made the world a smaller place where people can able to keep in touch with one another at any
time from every nook and corner. This research arise the following research questions. How the
security and privacy concerns in online transaction relate with e-commerce adoption? How do
the trustworthiness and reliability of the web vendors relate to the consumer’s adoption of e-
commerce? and How the performance, physical, security, privacy and delivery risk affect
consumers to adopt in e-commerce. Questionnaire was used as a research instrument and
basically the questionnaire cover two parts; such as 1st part covers questions related to online
purchase and adoption of electronic commerce. The 2nd part covers factors affecting e-
commerce security, privacy, and trust as well as risk perceptions. The extensive literature survey
helped to form the research variables and hypothesis. To measure the questions likert scale
measurement was used. The likert scale measurement were ranging from 1 - very unimportant to
5 - very important. This research shows that, consumer’s perceived privacy, security and
trustworthiness of Web vendor in e-commerce transaction positively contributes to his/her trust
in e-commerce adoption. On the other hand the influence of a consumer’s perceived security in
e-commerce transaction is mediated by consumer’s perceived privacy and consumer's adoption
in e-commerce transaction not negatively associated with e-commerce perceived risks.

Key words: Internet, e-commerce, security, risk, consumer

Introduction
Electronic commerce is defined as “any form of business transaction in which the parties
interact electronically rather than by physical exchanges or direct physical contact" Euro Info
Correspondence Centre (2002). The creation of the Internet has reduced physical borders and
made the world a smaller place where people can be able to keep in touch with each other at any
time from any nook and corner. It is changing the entire world by putting it under one umbrella
called the World Wide Web (WWW). As more and more people are getting connected up to the
Internet each and every day, the value for electronic market places increases. This research
focuses to identify the Factors which influences consumers' trust on e-commerce adoption in Sri
Lanka. In Sri Lankan context though E-Commerce is accelerating at a high pace, most of the
SMEs are still at the lower level compared to their competitors in business (Kennedy D
Gunawardana 2006). Millions of consumers browse thousands of Web vendor web sites
everyday with the purpose of purchasing products and services. E-commerce is defined a subset
of ebusiness in purchasing, selling, and exchanging of goods and services over computer
networks through which transactions or terms of sale are performed electronically. Basically on-
line shopping has certain characteristics than traditional shopping such as the massive use of
technology to complete the transaction, the distant and impersonal nature of the market stores,
the insecurity of using open network infrastructures for transactions, involvement of third parties
in the transaction process, online payment system, and hacker's threaten for the buyers privacy
and monetary information. In general the temporal separation between consumers and marketers
increases fears of web retailer which creates identity uncertainty, and there is a concern about the
third parties or hackers involvement that may threaten consumer’s privacy and monetary
information. Consumers in online may fear providing credit card details to any commercial Web
provider thus consumers simply do not trust most Web providers enough to engage in exchange
relationships connecting money. Previous researchers identified various factors which pressure
the buyer’s online decision making. Such research confirmed that “Customer Trust” plays a key
role towards buyer’s decision making process. Web shopping involves a number of concerns of
consumers, including trade fraud, product quality, monetary losses, privacy, information quality
and so on (YE Naiyi (2004). Srinivasan (2004) mentioned that acquiring customer trust depends
on many things such as appeal of the Web site, product or service offerings, branding, quality of
service and trusted seals.
Research Objective (RO) & Research Question (RQ)

Objective of the research

The key objective of this research is to find the factors which influence the consumers’ adoption
in e-commerce transaction. This research has the following secondary objectives to explore the
relationship between those factors.
• Discover whether the consumers’ perceived privacy and security in online transaction
significantly affect their willingness to adopt with e-commerce.
• Identify the factors of trust on web vendors and intermediaries in e-commerce
transaction.

Research Question (RQ)

This research has the following research questions.
• How the security and privacy concerns in online transaction relate with e-commerce
adoption?
• How do the trustworthiness and reliability of the web vendors relate to the consumer’s
adoption of e-commerce?
• How the performance, physical, security, privacy and delivery risk affect consumers to
adopt in e-commerce?

The factors which are influencing consumers’ willingness to adopt with e-commerce transaction
can be grouped into the following categories : consumers’ perception towards secure online
transaction, consumers’ privacy of personal data, trustworthiness and reliability about online
vendors and intermediaries, consumers’ perceived risk in e-commerce transaction. The model for
the research can be constructed as follows.
 Figure 1: Research Model

H1: Consumer’s perceived privacy in e-commerce transaction positively contributes to his/her

trust in e-commerce adoption.

H2: Consumer’s perceived security in e-commerce transaction positively contributes to his/her

trust in e-commerce adoption.

H3: Consumer’s trust in e-commerce adoption is positively related with the trustworthiness of
Web vendor and intermediaries.

H4: The influence of a consumer’s perceived security in e-commerce transaction on trust is

mediated by consumer’s perceived privacy
H5: Consumer's adoption in e-commerce transaction negatively associated with e-commerce
perceived risks

Literature Review

Keen et al (2000) stated that a working definition of “trust” as when a customer purchases a
product or service from a particular “merchant”, the client has a “confidence”, the seller will
supply goods with adequate quality and fitness for purpose. Basically in online shopping
activities, risk and security have forever been an area of concern among online consumers. The
extensive literature review shows that factors which influence consumers’ buying decisions can
be classified in to several aspects such as the individual level, personality attributes often play an
important role in the process of purchase decision making. Srinivasan (2004) declared that “Two
factors which significantly contribute to the success of e-business thus the trust people place in
the online businesses and how secure they feel in transacting business on the Internet”. Godwin
J. Udo (2001) mentioned that privacy and security concerns are the number one reason Web
users are not purchasing over the Web. Yi Yi Thaw et al (2009) mentioned that consumers’ lack
of acceptance in electronic commerce adoption today is not merely due to the concern on
security and privacy of their personal data, but also lack of trust and reliability of Web vendors.
Ramin Azadavar et al (2011) mentioned that, e-commerce and online shopping will rely on
buyers’ how people interact with computers. Suresh and Shashikala (2011) mentioned that,
Internet being relatively new channel of purchase, consumers perceives risk and electronic
commerce is perceived to be more risky than traditional commerce. Yi Yi Thaw et al (2009)
indicated that although e-commerce is spreading worldwide, customers are still reluctant to deal
with it because of the security and privacy issues. Further Suresh and Shashikala (2011)
mentioned that the major concerns of online shopping are ‘security of online payments’ and
‘privacy of personal information’.

Research Design & Methodology (RDM)

Methodology

Structured questionnaire was used to collect the data. The questionnaire was developed in a
electronic format and usual printed format. The questionnaire's same content included in both
electronic format and printed format questionnaire. The electronic format of the questionnaire
included check boxes to be checked by the respondents by consider their answering easiness and
user friendliness. The questionnaire was developed by the researcher and its content were
checked by a senior academic. Questionnaire included many questions in the aspect of consumer
perceived risk in various dimensions. The questionnaire includes two sections to gather the
details from the respondents such as the respondent's demographic profile age, gender, and
education background, experience of online shopping. The second section gather the details of
the different perceived risk dimensions in terms of their importance and the risk occurrence.
These dimensions were measured under two columns such as "importance of the risk" and
"chance that the risk occur" Questionnaire included 6 point likert scale. The column " importance
of the risk" measured from 1- not important at all and 6 - very important. The column "chance
that the risk occur" measured from 1 - completely impossible and 6 - very possible. This research
includes analyses such as descriptive analysis, correlation analysis and t-test.

Data Collection

The electronic and usual printed format of the questionnaire issued to professionals, MBA
students, academics and friends who purchase in online. From the issued questionnaire, 95
printed format questionnaires and 33 electronic format questionnaires were received from the
respondents.

Data Presentation and Analysis

The collected questionnaire were entered into the SPSS 16.0 version for the data analysis.
Tabular format of results were generated to show the results. Descriptive statistics, correlation
analysis, t-test, average score with standard deviation and its respective charts were generated to
present the findings.

Results and Discussion of Findings

The below table 1 shows the demographic profile of the respondents with their frequency and the
percentage.

Table 1 : Demographic statistics of the respondents

Gender
Male 89 69.5%
Female 39 30.5%
Age Category
15-17 1 .8%
18-20 11 8.6%
21-23 26 20.3%
24-26 25 19.5%
27-29 20 15.6%
30-32 8 6.2%
33-35 13 10.2%
36-38 9 7.0%
39-41 6 4.7%
>42 9 7.0%
Education
 A/L 30 23.4%
Technical College 2 1.6%
High School Diploma 17 13.3%
Under-graduate 31 24.2%
Post graduate degree 42 32.8%
Doctoral Degree 6 4.7%
How frequently purchase online
more frequently 14 10.9%
once a month 16 12.5%
more than once a month 17 13.3%
at least once in 6 month 18 14.1%
at least once a year 63 49.3%

Descriptive Analysis
Out of 128 respondent 98 respondent replied the question the reason why they purchase via
online. The respondent answers are as follows. 32 respondent replied that more product
selection option in online, that is (25%), 23 respondent replied that do not need to go outside &
save time, that is (18%), 15 respondent replied that product price is low (11.7%), price
transparency, 12 respondent replied that price & quality comparison easy between company that
is (9.4%) and 9 respondent replied that 24 / 7 hrs working & buy any time any place that is (7%).
Out of 128 respondent 95 respondent replied for the question reason why they do not purchase
via online. 36 respondent replied that Lack of payment security and lack of trust; that is (28.1%),
26 respondent replied that Cannot see real product and its quality in online; that is (20.3%) and
14 respondent replied that Users privacy and security of issues; that is (10.9%). 116 respondents
replied the question whether they aware or seen the following technologies in e-commerce. 29
respondents replied that, they aware about Firewall; that is (22.7%), 28 respondents replied that,
they aware Cookies; that is (21.9%), 20 respondents replied that they aware about SSL; that is
(15.6 %) and 19 respondents replied that they aware the Site certification; that is (14.8%). There
is a question asking about technically which could be possible to record during the e-commerce
transaction. 125 respondents replied for this question such as 49 respondents replied that e-mail
address; that is (38.3%), 12 respondents replied that the time of the request; that is (9.4%), 12
respondents replied that requested page; that is (9.4%) and 9 respondents replied that machine
address that is (7%).
Reliability Analysis
Reliability analysis was conducted to evaluate the reliability of the scale used to measure the
variables in this research. Reliability assessment of the entire scale was first calculated followed
by the assessments of individual items supposed to compute the research constructs.

Table 2 : Reliability Analysis

Item in the hypothesis α value

Consumer’s perceived privacy 0.762
Consumer’s perceived security 0.720
trustworthiness of Web vendor 0.773
adoption in e-commerce transaction. 0.686
e-commerce perceived risk 0.749

Factor Analysis
Factor analysis (Extraction Method: Principal Component Analysis, Rotation Method: Varimax
with Kaiser Normalization.) were conducted to discover the essential factors affecting
consumers’ trust in e-commerce adoption. Considering all the 17 items such as consumer’s
perceived privacy, consumer’s perceived security, trustworthiness of web vendor, adoption in e-
commerce transaction and e-commerce perceived risk were analyzed by using principal
component analysis. “Total Variance Explained” shows the extent to which total variance of the
observed variables is explained by each of the principal components. The below table shows the
Factor loadings.

Table 3 : Factor Loadings

Items Factor Loading
Consumer’s perceived privacy
PSP .937
CFT .952
PBI .780
Consumer’s perceived security
SSP 1.037
RCT .827
LPB .823
 Trustworthiness of Web vendor
GW .916
TV .664
LWB .911
Adoption in e-commerce transaction.
FAQ .967
PVD .477
NLE .986
e-commerce perceived risk
PR .805
PHR .739
SR .385
DR .971
PRR .720

Correlation Analysis
H1: Consumer’s perceived privacy in e-commerce transaction positively contributes to his/her
trust in e-commerce adoption.

From this research study it is proved that in 1% of significant level there is a positive correlation
(r = 0.576) between consumers perceived privacy and consumers adoption in e-commerce
transaction. Therefore it can be concluded that, the hypothesis H1 thus consumer’s perceived
privacy in e-commerce transaction positively contributes to his/her trust in e-commerce adoption.

H2: Consumer’s perceived security in e-commerce transaction positively contributes to his/her

trust in e-commerce adoption.

From this research study it shows that in 1% of significant level there is a positive correlation (r
= 0.600) between consumers perceived security and consumers adoption in e-commerce
transaction. Therefore it can be concluded that, the hypothesis H2 thus Consumer’s perceived
security in e-commerce transaction positively contributes to his/her trust in e-commerce
adoption.
H3: Consumer’s trust in e-commerce adoption is positively related with the trustworthiness of
Web vendor and intermediaries.

From this research study it is proved that in 1% of significant level there is a positive correlation
(r = 0.584) between the trustworthiness of Web vendor and consumers adoption in e-commerce
transaction. Therefore it can be concluded that, the hypothesis H3; thus Consumer’s
trustworthiness of Web vendor positively contributes to his/her trust in e-commerce transaction
adoption.

H4: The influence of a consumer’s perceived security in e-commerce transaction on trust is

mediated by consumer’s perceived privacy

From this research study it shows that in 1% of significant level there is a positive correlation (r
= 0.676) between consumers perceived privacy and consumers perceived security. Therefore it
can be concluded that, The influence of a consumer’s perceived security in e-commerce
transaction t is mediated by consumer’s perceived privacy

H5: Consumer's adoption in e-commerce transaction negatively associated with e-commerce

perceived risks

From this research study it is proved that there is a positive correlation (r = 0.031) between the
consumers adoption in e-commerce transaction and e-commerce perceived risk. In this case
0.729 > p = 0.05 and it is higher than the P value. Therefore it can be concluded that, the
hypothesis H5 not accepted; thus consumer's adoption in e-commerce transaction not negatively
associated with e-commerce perceived risks.

Limitations & future research avenues

This research just addresses about the perceived risk in online shopping using the risk dimension.
Other than this perceived risk dimension other aspect of purchasing can be considered to
determine the consumer's security risk in online shopping. The selected respondents (sample
size) only 128 by using convenient sampling method. Therefore a self-selection bias might have
influences the findings of this research and it may also limit the generalizability of the findings.
There are more rooms to improve the generalizability of the research findings since it covered
small limited sample size. This research study did not cover factors like, cultural biases, social,
income and buying behaviour with the formed research hypotheses.

Conclusions
The rapid development of IT and the extensive accessibility of the Internet have facilitated for
the popularity of online shopping. Understanding people’s perceptions of attitudes towards
online risks is vital for ecommerce. This research is focusing consumer perceived security risk
in online shopping over the Internet specifically targeting on the perceived risk dimensions. In
general a consumer perceives a certain degree of risk in terms of brand of a particular product
when buying online. This research shows that, consumer’s perceived privacy, security and
trustworthiness of Web vendor in e-commerce transaction positively contributes to his/her trust
in e-commerce adoption. On the other hand the influence of a consumer’s perceived security in
e-commerce transaction is mediated by consumer’s perceived privacy and consumer's adoption
in e-commerce transaction not negatively associated with e-commerce perceived risks.
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