Sector Risks

Consumer risks in e-commerce

Online transactions have become a part of our daily lives. Whether you need furniture, a book, or even grocery, shopping it online is the first idea that pops up in our mind! With the ease and simplicity that it brings into the system, some consumer risks automatically enter the picture which we can avoid with the help of consumer risk management.

Performance Risk

Since the transactions happen online, the buyer cannot physically touch or feel the product. This of course makes the transaction riskier. Pictures, although often are representative of the product, don’t always depict the exact product. Along with this, there is no way to make sure if the item being shipped to you is free from defects or not. For example, if you’re purchasing a book, it’s quite natural to flip through the pages to make sure every page is printed legible or to see if any of the pages are damaged.
Online transactions do not offer us this freedom. Product reviews are in general, a satisfactory way through which consumers try to minimise the risk of buying an inaccurate product, however, the risk of receiving a defective product cannot be averted. This leads to performance risk a buyer may face while purchasing any product.

Data Risk

Online transactions are heavily dependent on payment methods like credit and debit cards etc. These details are extremely sensitive and can have precarious consequences if not used securely. Phishing sites are sites which pretend to be a website which it is not and these are extremely common nowadays. They have the primary aim to steal sensitive information like CVV numbers, passwords, bank details etc. There are other sophisticated hacking techniques like Man-In-The-Middle(MITM) attack which use techniques like Packet Sniffing, SSL stripping etc. Using a good browser, a VPN, strong router login credentials, and installing browser plugins to always enforce using HTTPS on requests are good practices before processing any kind of online transactions. One must be aware of the increasing cybersecurity risks and not engage themselves in unknown websites. Learning about cyber risk management can help you learn about these risks and help find ways to stay out of cyber risks.

Time Loss Risk

What if the product isn’t as good as it seems? I took a lot of time to search and decide on this item, will I have to start all over again?
Although many E-commerce platforms offer a refund or an exchange for the item, the consumers still risk losing the time invested in reaching the purchase decision. Apart from this, returning the product is often perceived as a hassle as the responsibility of returning the product now shifts on to the consumer.

Financial Risk

A general theory in microeconomics tells us that consumers always try to maximise their utility. However, behavioural economics tells us that this is not always the case and transactions by consumers do not always maximise their utility. One of the few reasons behind this is when the product information is asymmetric or there is a lack of information about the product for the consumer.
A classic example of this scenario happens in a typical online transaction where the consumer is often faced with the risk of paying more for a product due to a lack of perfect information about the product. This risk, known as financial risk, can be reduced by investing more time in researching the item of purchase. However, it would not cause a significant reduction of financial risk after a certain point and would instead contribute to increasing the time loss risk. One may avoid such financial risks with the help of Financial risk management.


Some risks can be averted, while some continue to influence us in probabilities, small and large. Hope this article helped you in getting insights into the various risks E-commerce have.
However, given the present – day scenarios and after having a look at user statistics, it is not difficult to see that E-commerce is quite the preferred choice among consumers. It’s the wisdom of crowds after all!
Submitted by: Ananyapam De, Student risk committee member

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