A principal component analysis of customers' perceived risks for online retailing services: Evidence from Kenya

Various studies have attributed the low amount of goods and services purchased online to the distrust of online shopping by internet users, many of whom perceived it as fraught with risk. However, in spite of its obvious importance, little attention has been paid so far to identify, analyse and interpret the complex nature of customers' perceived risks regarding online retailing in the context of developing countries such as Kenya. This exploratory study therefore sought to fill this gap in extant research by examining the underlying components or dimensions of customers' perceived risks associated with online retailing services. The intention was to reduce the dimensionality by summarising the information using a limited number of perceived risk components that can be subsequently employed in future research. Towards this end, survey data was collected from 240 users of six online retailing firms. The study participants completed a questionnaire asking them to rate their risk perceptions with regard to online retailing. Principal component analysis was then performed on the 240 customer responses which were based on 11 Likert-type scale items. Factors with Eigenvalues greater than 1 and factor loadings greater than 0.50 were retained for further analysis, which resulted in three factors explaining 71.97% of the variance after Varimax rotation. The findings indicated the presence of three underlying components for customers' perceived risks associated with using online retailing services: privacy/personal risks; performance risks; and financial risks. Overall, these results suggest that customers do not perceive online retailing services uni-dimensionally. Rather, such perceptions are best Cont'd... conceptualised as reflecting multiple underlying facets. This study makes an important theoretical contribution to marketing and information systems research by providing empirical evidence regarding the typology of perceived risk by demonstrating three dimensions that are associated with online retailing usage from the perspective of customers.