Does privacy assurance on social commerce sites matter to millennials?

Highlights

• Perceived effectiveness of privacy policy and industry self-regulation may directly influence consumers’ trust.

• Institutional privacy assurance positively influences institutional-based trust.

• Institutional-based trust affects online social interactions, increasing intention to purchase a product on s-commerce.

• Theoretical development of this research contributes to marketing and information systems disciplines in social media era.

Abstract

Social commerce (s-commerce) has become increasingly impactful to e-commerce and has generated potential economic benefits. With the rise of online privacy concerns, we have seen the need to explain how concerns about privacy affect consumers’ social interaction behavior and purchase decision-making on s-commerce sites. Synthesizing the privacy-trust-behavioral intention (PTB) and consumer decision-making models, this study proposes a comprehensive model by specifically refining its privacy and trust from an institutional perspective and investigating the influences of social interaction on purchase intention and actual purchase behaviors. Our results found that institutional privacy assurance positively influences institutional-based trust, which, in turn, affects online social interactions, and consequently increases the likelihood of product purchases on s-commerce sites. Theoretical development of this research contributes to both marketing and information systems disciplines in the social media era.

Introduction

Social commerce (s-commerce) has become increasingly impactful on e-commerce and has generated significant economic benefits. However, consumers’ privacy concerns that arise from online transactions and social interactions on shopping websites are increasingly growing. In fact, the Marketing Science Institute’s Research Priorities (2016–2018) consider privacy concerns such an import issue in online business that they call for further research in the field. This phenomenon is becoming increasingly worse as s-commerce sites integrate tools to enable interaction and socialization between peers (i.e., social networking features, recommendation systems, rating options, discussion boards, etc.) with commercial features (Huang & Benyoucef, 2013). S-commerce sites have been considered a new business model, shifting from a product orientation to a social- and consumer-driven orientation (Huang & Benyoucef, 2013), by utilizing a variety of Web 2.0 technologies to enhance social interactions among consumers in online environments (Liang & Turban, 2011). It is more based on social media and social media has created more opportunities for firms (Confos & Davis, 2016). Although s-commerce has become increasingly impactful to e-commerce and has generated potential economic benefits, it has been plagued by rising consumer privacy concerns.

The new design features, such as referrals, recommendations, crowdsourcing, and subscriptions embedded on s-commerce sites have become a threat to personal privacy as well as an impediment to consumer engagement. Evidence from two reports in 2012 show that, with concerns about personal privacy, 75% of the consumers on Pinterest (one of the most popular s-commerce sites in the U.S.) hesitate to purchase products after discovering them on the site (Caine, 2012); only 8% of consumers feel extremely safe buying products or services through social networking sites (SNS) (CNBC, 2012). Privacy risk and interpersonal impression have been highlighted as the most interesting research topics in the field of social media (Shiau, Dwivedi, & Lai, 2018). Indeed, privacy concern has been identified as a major factor restraining e-commerce (Berendt, Günther, & Spiekermann, 2005; Dinev & Hart, 2006) and social networking sites (Belanger, Hiller, & Smith, 2002; Shin, 2010). However, according to some recent reviews of the literature on social commerce (Lin, Li, & Wang, 2017; Zhang & Benyoucef, 2016; Zhou, Zhang, & Zimmermann, 2013), although trust has been extensively studied, there is insufficient research into privacy issues. In this regard, a closer examination of the impact of privacy concerns is needed to understand how consumer trust and engagement can be constructed to facilitate purchase decisions in s-commerce environments.

Prior research into s-commerce has focused on the new design features and mechanisms of s-commerce sites (Ahmad & Laroche, 2017; Curty & Zhang, 2013; Huang & Benyoucef, 2013; Kim & Park, 2013; Lin et al., 2017; Zhang & Wang, 2012). The design features of s-commerce in terms of transactional, relational, and social emphases have the potential to increase consumer participation, reshape companies’ business and marketing strategies, and, particularly, to strengthen customer and merchant ties through relational features (Curty & Zhang, 2013). Meanwhile, several studies have examined how purchase intention can be increased on s-commerce sites by social and relational aspects of s-commerce, such as social support and relationship quality (e.g. Liang, Ho, Li, & Turban, 2011; Zhang, Lu, Gupta, & Zhao, 2014; Bai, Yao, & Dou, 2015), social presence (Zhang et al., 2014), social factors (Huang & Benyoucef, 2017), social desire (Ko, 2018), degree of friendship (Li, Liang, & Li, 2018), and closeness (Ng, 2013). Although these studies provide new insights into how consumers engage on s-commerce sites with technical and social aspects, they have major limitations because consumer privacy concerns are not fully taken into consideration. There is a paucity of research focusing on privacy concern issues in the context of s-commerce (Zhang & Benyoucef, 2016).

Privacy assurance is one of the most important features of social networking and s-commerce sites (Bansal, Zahedi, & Gefen, 2015; James, Warkentin, & Collignon, 2015). In fact, researchers call for research into privacy and risk concerns, recommending government agencies to keep users informed and give them control in order to avoid theses privacy concerns (see literature review of social media of Kapoor et al., 2018). Typically, online service providers use privacy statements and privacy seals to facilitate consumers’ trust and their willingness to make online purchases (Kim, Ferrin, & Rao, 2008; Kim, Steinfield, & Lai, 2008). Consumers hesitate to disclose their personal information during shopping because privacy assurance within s-commerce sites is often not expected or is undefined (Dwyer, 2007). Without privacy protection mechanisms and regulations built for ensuring online privacy and security, s-commerce practitioners will struggle to sustain active consumer engagement in online settings (Kim, Ferrin et al., 2008, 2008b) and find it difficult to translate consumer interactions into sales growth and business values (Yadav, De Valck, Hennig-Thurau, Hoffman, & Spann, 2013). Social media has the potential to improve customers’ experiences, to strengthen bonds among users and the company and to foster customer evangelization through word-of-mouth (AlAlwan, Rana, Dwivedi, & Algharabat, 2017). However, little is known about whether consumers using s-commerce sites will make an actual purchase decision if their privacy can be protected effectively by s-commerce sites’ privacy policies or other third-party regulations (Bansal et al., 2015).

To close this research gap, we aim to provide new insight into the privacy management and complex purchase-decision-making process in s-commerce environments by understanding consumers’ privacy concerns from their root causes. Therefore, this study set out to answer the following research question: How does institutional-based privacy assurance influence consumers’ trust and social interaction and purchase behavior in the context of s-commerce?

Expanding on the privacy-trust-behavioral intention model developed by Liu, Marchewka, Lu, and Yu, (2005), we posit that enhancing the effectiveness of privacy management could accelerate consumers’ trust toward s-commerce sites and thereby increase their behavioral intentions and actual behaviors. Specifically, we examine how institutional privacy assurance (i.e., privacy policies and industry self-regulation) affects consumers’ trust toward s-commerce sites and how such a trust facilitates pre-purchase activities (i.e., word-of-mouth communication and observing other consumers’ purchases) and purchase intentions, which in turn increases the likelihood of actual purchase. Due to the vast majority of s-commerce audience being young consumers, this study has been conducted studying millennial behavior.

This study aims to make the following contributions: First, it widens privacy-trust research in the s-commerce context. Second, it considers a broad view of social interactions by studying not only word-of-mouth valence and content, but also the passive observation of learning interactions. Third, it extends the Privacy-Trust-Behavior model, analyzing how institutional privacy assurance increases users’ trust toward s-commerce websites, what positively affects social interactions and, consequently, users’ purchase intention and actual purchase behavior. Finally, rather than merely examining consumers’ behavioral intentions, our study investigates consumers’ actual purchase behavior. This provides further insight into the consumer decision-making process in s-commerce sites.