PERCEIVED UNETHICAL E-STORE CONDUCT NEGATIVELY

IMPACTS REPUTATION AND OPPORTUNITIES

Is it worth it?

Arik Sadeh

H.I.T. Holon Institute of Technology, 52 Golomb St. Holon 58102, Israel

Avshalom M. Adam, Avshalom Aderet

The School of Business Administration, The College of Management, 7 Itzhak Rabin Blvd. Rishon Lezion, 75190 Israel

Keywords: Reputation, Ethics, e-vendors, e-customers, Privacy and Security.

Abstract: What is the extent to which ethical conduct by e-stores impacts their reputation and, in turn, their business

opportunities? Employing the ethical factors of: (i) accurate product description, (ii) e-vendor accountability

and (iii) data privacy and security, we assess e-stores’ ethical conduct. 174 e-stores engaged in business to

consumer retail are surveyed. A comparative website which compares the products or services and prices of

e-stores and scores their reputation amongst e-consumers is utilized. The ratings attained by e-stores with

respect to the ethical factors, reputation and number of actual buyers are studied. The findings of the study

indicate that the perceived unethical conduct of e-stores is highly correlated (0.38) with a negative

reputation, which results, in turn, in relatively fewer actual buyers (correlation of 0.43).

1 INTRODUCTION

The role of e-store ethical conduct has been studied

from a variety of points of view (Sisson and

Fontrodona, 2006; Dillon and Reif, 2006; Flavián

and Guinalíu, 2006). In the Internet environment,

ethical issues and legal regulation overlap, but both

lag behind technological developments.

Furthermore, legal regulation of the Internet, which

would partially legislate for ethical conduct, is

lacking (Bowie and Jamal, 2006). Notwithstanding,

ethical conduct, e.g. trustworthy behavior, which is a

requirement for transactions, is recognized as an

important component of e-commerce. Since trust in

the Internet is hard to come by in a Business to

Consumer (B2C) transaction, several aspects of the

ethical conduct of e-vendors need be studied.

Investigating these aspects is a great challenge,

particularly since the theory pertaining to conduct on

the Internet is being created in tandem with

construction of the Internet itself, which is in

constant flux. Since e-commerce growth continues

despite these hurdles, we were curious to assess

some of our beliefs about the importance, if any,

between ethical conduct and business transactions in

this medium.

Thus, exploration of the role of e-stores’ ethical

conduct has become the focus of a number of our

investigations. In an earlier research paper we

explored the question: “Does ethics matter to e-

consumers?” That research resulted in findings

which indicate that when ethical factors, viz. product

description, vendor accountability and privacy and

security, conflict with commercial factors, namely,

good price and a high quality product, e-consumers

tend to ignore ethical deficiencies (Adam, Aderet

and Sadeh, 2007). In a subsequent paper, we

explored another avenue of enquiry; e-vendor

conduct as observed and perceived by e-consumers.

We distinguished between the vendors’ explicit

commitments to ethical behaviour, as evident from

their web design and from the ethical policy

statements etc they displayed in their e-stores, and

customers' perceptions of the vendors’ level of

ethical commitment. In this pursuit (Aderet, Sadeh

and Adam, 2007) our findings indicated that e-

consumers mistrust vendors’ ethical commitments to

product description and to privacy and security.

329

Sadeh A., M. Adam A. and Aderet A. (2007).

PERCEIVED UNETHICAL E-STORE CONDUCT NEGATIVELY IMPACTS REPUTATION AND OPPORTUNITIES - Is it worth it?.

In Proceedings of the Second International Conference on e-Business, pages 329-334

DOI: 10.5220/0002110803290334

 SciTePress

Now the research question of this paper is:

“What is the extent to which e-stores’ ethical

conduct impacts their reputation and, in turn, their

business opportunities?” Employing the three ethical

factors mentioned above, we assess e-stores’ ethical

conduct in B2C retail. In addition, we look at a

comparative web site, which compares the prices of

e-store products or services and displays reputation

scores awarded to them by e-consumers.

Our hypothesis is that unethical conduct is

reflected in a negative reputation, which in turn

leads to a decrease in business opportunities. A

study of the reputation scores of sellers on the ebay

website corroborates this hypothesis (Resnick and

Zeckhauser, 2001). To explore this hypothesis, we

investigated the Israeli comparative website

www.zap.co.il (henceforth, ZAP). We drew from

this site a list of e-stores, and examined the

relationship between the above three ethical factors

and the ZAP reputation scores given to the same list

of e-stores. Our principal aim is to see whether the e-

stores' poor ethical conduct and the reputation scores

negatively impact their business opportunities

2 METHODOLOGY

We collected 648 questionnaires relating to 174 e-

stores, filled out by 228 respondents (Aderet, Sadeh

and Adam, 2007). The e-stores included in this

research offer goods in all areas of e-commerce:

computers and computer accessories, electronic

appliances, books, furniture, gifts, jewellery,

cosmetics, flowers, and toys. Some e-stores offered

services such as entertainment ticketing. The list of

e-stores was drawn from the popular Israeli ZAP site

that compares e-stores (648 stores during the data

collection period) and offers consumers the

opportunity to score their reputation. The ZAP site

represents the entire population of B2C websites in

Israel, excluding electronic malls and auction

websites. We used strata sampling whereby a

percentage of sites from a given area of e-retail

constituted the percentage of that area in our sample.

Each e-store was evaluated by three or four e-

consumers using a 30-item questionnaire with the

aim of obtaining 3 or 4 evaluations of each site.

In the questionnaire, we asked e-consumers to

report the extent to which e-vendors displayed

ethical protocols addressing each of three ethical

factors: (i) product description, (ii) e-vendor

accountability, and (iii) privacy and security on a

scale of 1 to 10. These are referred to as objective

measures. Participants were also asked to record

their impressions of the e-vendors’ sincerity with

respect to these three ethical factors on a scale of 1

to ten. These are referred to as subjective measures.

Each factor was examined using several variables.

The full list of the 30 variables used is provided in

the appendix.

The overall grade for each ethical factor is

included in the questionnaire (these are variables 17,

25 and 30 in the appendix). These three variables

were then averaged to achieve an overall mean score

reflecting the ethical standing of the e-store

(henceforth "ethical score").

The sample distribution of the "ethical scores" is

presented in Figure 1, where ‘frequency’ refers to

then number of e-stores achieving a certain score on

the 1-10 scale out of the 174 e-stores examined. We

found that the average "ethical score" is 5.79 and the

standard deviation is 1.63.

Table 1: Correlations among main variables of the study.

a b c d e f g h i j k l

Product Description

a Objective 1.00

b Subjective 0.87 1.00

c Overall 0.83 0.90 1.00

Vendor's Accountability

d Objective 0.73 0.71 0.73 1.00

e Subjective 0.72 0.79 0.81 0.83 1.00

f Overall 0.68 0.75 0.77 0.83 0.91 1.00

Privacy and Security

g Objective 0.54 0.62 0.59 0.60 0.61 0.60 1.00

h Subjective 0.55 0.63 0.62 0.59 0.65 0.64 0.91 1.00

i Overall 0.53 0.63 0.63 0.57 0.64 0.63 0.91 0.97 1.00

Ethical Score

0.76 0.85 0.89 0.80 0.89 0.90 0.80 0.85 0.87 1.00

Reputation Score

0.33 0.38 0.35 0.38 0.38 0.40 0.29 0.27 0.25 0.38 1.00

Actual Buyers

0.27 0.16 0.16 0.28 0.24 0.25 0.22 0.22 0.18 0.23 0.42 1.00

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330

Ethical Score

12345678910

Score

Frequency

Figure 1: Frequency of Ethical Scores for the 174 e-stores

examined.

The reputation of each e-store (henceforth

"reputation score") was provided by the ZAP

website on a scale of 1 to 5. Figure 2 presents the

sample distribution of the "reputation score" for 117

e-stores for which the rating was available.

Reputation Score

1 1.5 2 2.5 3 3.5 4 4.5 5

Rating

Frequency

Figure 2: The frequency of the evaluated score provided

by the ZAP comparison site.

The average "reputation score" of the 117 e-

stores is 3.36 and the standard deviation is 0.93

No. of Actual Buyers

2 6 10 14 18 22 26 30 34 38

No. of Actual Buyers

Frequency

Figure 3: Frequency of Actual Buyers from the 174 sites.

Frequency with which the 70 e-stores rated attracted

different numbers of actual buyers.

The third variable investigated was the e-store's

business activity as reflected by the number of e-

consumers who actually bought goods or services

from the e-store and sent back their evaluations,

rating and opinions regarding the purchasing

transaction to the comparative ZAP website ("actual

buyers"). Such ratings were available for 70 of the

174 e-stores we examined. Figure 3 shows the

frequency with which e-stores obtained a certain

number of actual buyers. The number of actual

buyers ranged from 2 to 102, but for simplicity,

stores for which there were 39 or more evaluations

received were grouped together.

Figure 3 shows that the distribution of actual

buyers is very asymmetrical: In most e-store, less

than 10 e-consumers purchased goods and sent their

evaluations to the comparison website.

3 RESULTS

Firstly, we examined the relationships among the

main variables – ethical score, reputation score and

the number of actual buyers. Table 1 presents these

variables and shows the correlations between the

three ethical factors in terms of their "objective

measures”, and "subjective measures” as well as the

overall grade variables for each factor.

The e-stores' ethical conduct measures, both

objective and subjective, are significantly correlated

with their reputation scores. With respect to

objective measures of "product description", "e-

vendor accountability" and "privacy and security"

the correlations with reputation are 0.33, 0.38 and

0.29, while the equivalent values with respect to the

subjective measures of the ethical factors are 0.38,

0.38 and 0.27.

The correlation of the overall "ethical score"

with the "reputation score" is 0.38. This correlation

shows that as e-stores manifest higher ethical

standards, as observed from their websites, their

reputation scores rise.

Table 1 also shows that there is a relatively high

correlation between the reputation score and the

number of actual buyers (r=0.42, p<.05). This

relatively high correlation indicates that as an e-store

achieves a higher reputation score its business

opportunities increase..

In a separate analysis, a comparison between the

ethical scores of each of the 50 most ethical e-stores

and of each of the 50 least ethical e-stores was made.

Results are presented in Table 2.

PERCEIVED UNETHICAL E-STORE CONDUCT NEGATIVELY IMPACTS REPUTATION AND OPPORTUNITIES:

IS IT WORTH IT?

331

Table 2: t tests for the 50 most ethical e-stores vs. the 50

least ethical e-stores in terms of our ethical measures, their

ZAP reputation scores and the number of actual buyers.

Table 2 shows that for all the variables

investigated, there are significant differences

between the two groups. The groups are

significantly different from each other with regard to

all the objective and subjective measures of the 3

ethical categories. For example, the average "ethical

score" for the least ethical group is 3.73 while that

for the most ethical group is 7.60 (p<.001).

Consistently with our hypothesis, these two

groups also differ significantly from each other with

regard to their reputation scores (3.73 vs. 2.98,

p<.05) and with regard to the number of actual

buyers (17.23 vs. 7.71, p<.10). These results indicate

that the unethical conduct of an e-store impacts

negatively on its reputation, which, in turn, impacts

negatively on business opportunities, and vice versa

for the positive effect of ethical conduct on

reputation and business opportunities.

4 DISCUSSION

In previous research, we explored the ethical

conduct of e-stores as perceived by e-consumers and

as displayed by e-vendors. Based on these studies,

here we investigated the relationships between

ethical factors pertaining to e-stores’ websites, their

reputation and their business opportunities.

The present research indicates that unethical

conduct on the part of e-stores impacts negatively

on their reputation and business opportunities.

The current study not only corroborates this

hypothesis, it incidentally also indicates that the

converse is plausible: ethical conduct by e-stores has

a positive impact on their reputation and business

opportunities.

The question we posed in the title of this paper

was “is it worth it?", i.e. does is pay to engage in

unethical conduct. Our results show that it does not.

Furthermore, we find that ethical conduct may lead

to a positive reputation and is reflected in a

website’s commitments and statements, which in

turn also lead to better business opportunities, as

measured by the number of actual buyers.

In other words, e-stores whose product

description is accurate, whose accountability policy

is clearly stated, and that maintain e-consumer

privacy and security acquire a better reputation and

more actual buyers.

The statistically significant differences between

the ethical scores of each of the 50 most ethical e-

stores and of each of the 50 least ethical e-stores

regarding numbers of “actual buyers” implies its

business opportunities. We shall explore this

conjunction in future research.

5 CONCLUSIONS

Our findings support previous research suggesting

that ethical factors play an important role in e-stores’

reputations. Ratings of e-store websites in terms of

defined ethical factors, their reputation scores from a

comparative web site, and the number of actual

buyers were studied for 174 e-stores engaged in B2C

retail. Findings indicate that perceived unethical

conduct correlates highly (0.37) with a negative

reputation which, in turn, results in relatively low

numbers of actual buyers (the correlation is 0.42).

E-stores that present an accurate description of

their products, a clear statement of their policy

regarding e-vendor accountability, and who assure e-

consumers of data privacy and security are found to

have a good reputation and more business

opportunities.

ACKNOWLEDGEMENTS

This research was financially supported by the

Research Unit of The College of Management,

Means of Means of

50 most 50 least P

ethical

sites

ethical

sites

t-stat value

Product

Description

Objective 8.29 5.66 11.99 0.00

Subjective 7.78 4.90 13.96 0.00

Overall 8.19 4.60 18.89 0.00

e-Vendor Accountability

Objective 6.94 2.92 14.32 0.00

Subjective 7.23 3.86 16.11 0.00

Overall 6.98 3.12 16.68 0.00

cy and Security

Objective 8.15 3.53 15.75 0.00

Subjective 7.42 3.39 15.55 0.00

Overall 7.64 3.47 16.33 0.00

Ethical Score

7.61 4.32 15.35 0.00

Reputation Score

3.73 2.98 3.31 0.00

No. of Actual

Buyers

17.23 7.71 1.84 0.07

No. of e-stores

39 27

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332

Academic Studies, School of Business

Administration, Rishon Le'Zion, Israel.

REFERENCES

Adam, A. M., A. Aderet and A. Sadeh. 2007. Does Ethics

Matter to e-Consumers. International Journal of

Internet Commerce. No.1. Issue 1.

Aderet. A., A. Sadeh and A. M. Adam. 2007. Taking the

Perceived Ethical Commitment of Vendors in e-

Business Seriously. E-Business Review, Vol. VII

(Forthcoming).

Bowie, N.E., and K. Jamal. 2006. Privacy Rights on the

Internet: Self Regulation or Government Regulation.

Business Ethics Quarterly. Vol. 16. No. 3. pp. 323-

333.

Dillon, T.W., and H.L. Reif. 2006. Identifying Purchase

Perceptions that Promote Frequent E-Commerce

Buying. International Journal of Electronic Marketing

and Retailing. Vol. 1, No. 1. pp. 48-66.

Flavián, C. and Guinalíu, M. 2006. Consumer Trust,

Perceived Security and Privacy Policy: Three Basic

Elements of Loyalty to a Web Site. Industrial

Management and Data Systems. Vol. 106. No. 5. pp.

601-620.

Ranganathan, C., and Ganapathy, S. 2002. Key Dimension

of Business to Consumer Web Sites. Information and

Management. Vol. 39. pp. 457-465.

Resnick, P., and R. Zeckhauser 2001. Trust among

Strangers in Internet Transactions: Empirical Analysis

of eBay’s Reputation System. Working Paper.

Sison, A. J. G., and J. Fortrodona 2006. Ethical Aspects

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Marketing. Vol. 3. No. 1. pp.5-25.

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APPENDIX

Section A: Product Description Mean S.D.

I. Objective Measures

i. Product information

1 The extent to which there is a graphical image 8.94 1.69

2 The extent to which there is a fully detailed explanation of the product 8.07 2.3

3 The extent to which there is a fully detailed explanation of the product's price 8.92 1.74

7 The extent to which the product price information is visible on the website 8.72 1.89

ii Delivery information

4 The extent to which there is a fully detailed explanation of the delivery methods 6.48 3.46

5 The extent to which there is a fully detailed explanation of the delivery timetable 6.72 3.48

6 The extent to which there is a fully detailed explanation of payment conditions 6.8 3.3

8 The extent to which the delivery methods information is visible on the website 5.39 3.18

9 The extent to which the delivery timetable information is visible on the website 5.88 3.3

iii Website policies

10 The extent to which the website policy is accessible on the website 7.04 3.59

11 The extent to which the policy is accessible from different pages on the web 7.33 3.56

II. Subjective Measures

i. Product information

12 The perceived quality of the product description 7.19 2.4

15 The extent to which you trust the graphical image displayed 7.07 2.39

ii Delivery information

13 The perceived quality of the payment conditions 6.05 3.15

14 The extent to which you trust the delivery and timetable conditions as presented

on the website

6 2.76

iii Website policies

16 The extent to which the explanations in the policy are clear and comprehensible 6.57 3.01

17 Overall grade for the website's product description 6.69 2.43

Section B: E-Vendor Accountability

I. Objective Measures

18 The extent to which the website owner assumes accountability for his/her

products

5.41 3.42

19 The extent to which the website states its policy regarding product return 6.19 3.51

20 The extent to which the website states its policy in case of failure of delivery 3.66 3.25

21 The extent to which the website policy describes the commercial conditions 5.64 3.24

II. Subjective Measures

22 The perceived quality (simplicity and clarity) of the website’s commercial

language

6.87 2.54

23 The perceived ease with which products can be returned and money reimbursed. 4.78 3

24 The perceived trust in doing trade in the website 5.75 2.64

25 Overall grade for the website's accountability 5.2 2.73

Section C: Privacy and Security

I. Objective Measures

26 The extent to which the website is committed to confidentiality 5.88 3.36

27 The extent to which the website is committed to credit card security 6.14 3.28

II. Subjective Measures

28 The perceived impression of confidentiality in the website 5.59 3.03

29 The perceived impression of credit card security in the website 5.36 3.04

30 Overall grade for website's confidentiality and security 5.62 2.92

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