E-commerce Can Reduce Customer Risks: Andersen

Electronic commerce can reduce risks that customers normally face during face-to-face transactions. This was the view brought forward by Ajit Kambil, an associate partner and senior research fellow at the Andersen Consulting Institute for Strategic Change. Kambil's findings were published in Andersen's Outlook Point of View.

Explaining Kambil's study, Jaime G. Del Rosario, country managing partner at the Philippine office of Andersen Consulting said that for a company to move their clients to e-commerce, they need to reduce the risks normal in the physical transaction.

"If a company can succeed in reducing one or two of the normal risks of transacting physically, then they have a great value proposition to moving their customer base to e-commerce," said Del Rosario.

Expounding on these risks, Del Rosario said a purchase can present a psychological risk to a buyer when he is embarrassed in some way, angered, or made to experience negative emotions.

"Many banks have used the Internet to address this risk in one of their most potentially humiliating settings: the loan approval process," said Kambil in his study. "By providing online calculators for customers to use in privacy, they avert some of the discomfort that can occur in a meeting with a loan officer."

Relationship risks present the possibility that the purchase will adversely affect a relationship the customer has with another party.

Del Rosario said that functional, quality, and obsolescence risks are lessened when electronic commerce helps a product meet a customer's requirements. Kambil said functional risks are those where a product might not have the features desired by the customer.

Quality risks involve products failing during use, while obsolescence risks mean the product may lose value as new and better versions are brought to the market.

"Electronic commerce offers a number of ways to reduce these customer risks," Kambil said.

Selection and delay risks may waste a customer's time and incur opportunity costs. Kambil said customers usually confront selection risk when they go to a store seeking to purchase a specific product. He said that limited shelf space or delayed restocking may result in a dissatisfying range of products from which to choose.

"Electronic commerce can also reduce customers' selection risk for physical stores -- by allowing them to review the selection they will encounter on the shelves prior to making the trip to the store," said Kambil.

As for delay risk -- the risk that a product or service will not arrive or be available in a timely manner -- Kambil said that many electronic storefronts reveal whether the product is instantly available or back-ordered. "This electronic inventory access, and the tracking information provided by today's delivery services, helps customers manage delay risks."

Moving on to the risks of physical injury, Kambil said the multimedia capabilities of the Internet and other e-commerce technologies also provide a rich medium for providing information and instructions on the safe use or assembly of a product.

Lastly, with electronic commerce, Kambil said, companies can reduce their customers' financial risks. One aspect of doing so, he said, is to ensure that financial transactions are secure.

"These examples only begin to explore how the Internet and other e-commerce technologies can be used by companies to help their customers understand and manage risks," wrote Kambil.

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