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Risk-Reduction Strategy for New E-Retailers – A Signaling Theory Approach

Building up the signal theory, this study examined the effects of brand ally, physical store, and warranty on reducing risk perception and enhancing purchase intention for new electronic retailers. A 2 x 2 x 2 experimental design was performed to test the impacts of the three risk-reduction strategies and to examine the effects of individual vs. combined signals. The analyses revealed significant effects of each strategy at reducing risk perception and boosting purchase intention. Also, the findings suggest that a combination of more signals is not necessary more effective risk-reduction practice, and the type of signals will determine the influence. The implications of the findings and future research directions were also discussed.