Does privacy concern influence e-shoppers choices for online retailers? An application of the Integrated Latent Variable Choice Model
The collection, management and sharing of customers’ personal data represents a new set of opportunities for online businesses. The provision of personal data by consumers is a source of benefits and threats at the same time. Online retailers and service providers often seek ways to gain consumers' confidence and minimize privacy concerns in online transactions. This paper aims to establish a better understanding of the role of attitudes in respondents' willingness to provide personal information in online transactions. We employ a stated preference discrete choice experiment to collect respondents' choices across online retailers and a conventional store under different levels of personal-information requirements.An opt-out option is also available in each of the choice exercises. Personal information in the experiment is presented across three dimensions (attributes): amount/type of information collected, duration of storage and the likelihood of this information being shared with third parties. These dimensions are introduced in order to be able to capture specific threats involved in online transactions according to consumer perceptions. The choice data are complemented with a set of attitudinal indicators (psychometric scales) corresponding to latent constructs such as privacy concern, general caution and technical protection. The data comes from 502 participants reflecting a nationally representative sample of the online-user population in the UK. We report on Integrated Latent Variable models which test the influence of these latent constructs in the respondents' decision to engage in an online transaction. Model estimation results show that the higher an individual's concern, general caution and technical protection the less likely this individual is to purchase a product online. In a joint model, the influence of privacy concern is found to outweigh the influence of general caution and technical protection.