Metaverses and E-Business: Risks and Advantages

Subject: E-Commerce
Pages: 6
Words: 2052
Reading time:
8 min
Study level: Undergraduate

Risk Perceptions

The speed of conducting purchases in metaverses is slowed considerably because of actual or perceived risks that surround shopping in virtual reality regardless of the privacy and security issues. Such issues as the possibility of credit card fraud and personal information disclosure have been reported by the focus groups as the major factors that influence the decision to buy a certain product online.

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It should be further noted, that the focus groups reported two types of risks that adversely affect their purchase intention. Firstly, this is the product category itself. To be more precise, shoppers are less likely to purchase a service online due to lack of feasible assurance than a tangible product that is standardized with online seller being only a re-seller of an established brand. Secondly, there is a possibility of fraud and privacy concerns when products are being purchased through not-established parties. Spread of other technologies that are used for information gathering or noncommercial communication only adds up to consumer perception of purchasing in metaverses as a risky endeavor. Results of the focus group discussion also indicate that purchasing from users rather then from company itself are the most risky, as perceived by shoppers in the virtual reality. To be more precise, services are purchased from regular users in a virtual world similar to that of Second Life. This means that security of a given transaction is a factor of reputation of a seller, which then is a factor of anti-fraud policy in place in Second Life. Furthermore, the policy is changed from time to time, whereas seller “reputation” is a factor of previous online activity, which certainly can be purposefully manipulated through activities of other users or through registration of multiple accounts. As such, there is definitely risk involved even though it does decrease over time; however, the established reputation of metaverses being not safe during the early stages of development lowers user purchase activity.

Risk perceptions associated with lack of certainty in purchasing channel and the product category to which a product or a service belongs, as reported by the focus groups, are consistent with the study conducted by Ana Fernandez and Anthony D. Miyazaki (2001). The two scholars hypothesized that the level of risk associated with purchasing a product or a service in metaverses should decrease, when the means of purchasing become more standardized and custom, e.g. a standardized policy for assessment of sellers’ reputation is developed. Furthermore, even though a service or a product is often virtual in nature, acceptance by off-line markets of these services and products as being relatively custom will provide “tangibility” to products and services sold. The concern pointed out by the focus group echoes the research results of Nanacy Gonchar (2000).

There also are possibilities of currency fluctuations, as many goods are purchased using currency in place at a given virtual world, e.g. “Linden Dollars” in Second World, whereas actual U.S. dollars must be exchanged with currency rate being established by owners of virtual world itself (Linden, 2007).

The following risks have also been identified by the respondents in the open questions that constitute the two categories of risks covered and some that do not fall under the provided general classification scheme:

  • Privacy infringement by an e-tailer including sharing of personal information with other parties;

This issue is most representative for metaverses, as the metaverses itself are oftentimes perceived by conservative users as being a “game” and a “waste of time”.

  • Fraudulent behavior of other users in metaverses including the possibility of non-delivery of ordered goods and services;

This risk also includes the fear of being double billed and made to purchase undesirable goods as well as the possibility that user “reputation” will turn out to be fake.

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  • Inability to return the goods purchased or receive money back for services not provided;

The number of companies that provide clear return policy online is relatively low with the number of companies that provide a clear return policy having tripled from 1998 to 2002 (Lynch & Beck, 2001). When it comes to metaverses, the case is even worse, as the return policy and trading between secondary parties is secondary to primary organizational activities.

The outcomes of the research are also consistent with the shopping scheme presented by Sandeep Krishnamurthy and Anthony D. Miyazaki (2002), under which the possibility of fraud compromises the highest risk associated with purchasing both in metaverses and online in general.

Advantages of Metaverses for Online Shoppers

Convenience and Time Saving

Convenience and 24/7 accessibility of product information as well as the option to actually buy the product has been cited as one of the major factors that stimulate online purchasing by the focus group. Convenience and ability to serf the information without the necessity to drop other tasks whether at home or at work also stimulates purchase online. Interestingly, the focus group did not acknowledge the fact that metaverses could be used as a tool for attracting and sustaining customers due to the marketing potential that virtual reality opens. Finally, shoppers in metaverses do not need to change location and be physically present at the point of sale.

The outcomes of the study are also consistent with the works by Wang (2006) and Walzer and Colavito (2005). Scholars state that informational awareness of perception of online shoppers of them being more aware of the quality of a given product when searching online is a critical factor when it comes to online activity. Furthermore, for many goods and services trading through metaverses is the only way available to actually purchase the needed goods and services.

Speed of Purchase and Delivery

Ability to search the product through availability in a given geographic location also stimulated purchasing online, as customers also control delivery process. The issue is particularly relevant for services offered online and intangible goods, e.g. avatars, virtual property, virtual services. Availability of direct communication with the seller and option to objectively and independently review “credit history and reputation” based on anti-fraud policy in place a given virtual world has also been cited as one of the major benefits by the focus group.

Informational Access

Access to information and ability to independently research options available in metaverses has been cited by the focus group as one of the major factors for safe purchase online. This issue has two implications: on one hand, shoppers receive access to the needed information to make a knowledgeable decision; on the other hand, sellers use technology to create environment that would be beneficial for customers including value through physical product and the following informational offerings. Going even further, as companies are building interactive relationships with customers, this directly impacts the selection of product information online as well as improves user experience. Finally, due to the fact that metaverses social community in nature with multiple communication and socialization options, the very process is perceived as being pleasant.

Implications of Metaverses for Retailers

Despite the fact that consumer purchase in metaverses is getting safer, the fears associated with the possibility of fraud are still omnipresent, as reported by the focus groups. The research conducted has a number of implications that are intended, in the first place, on reduction of shoppers’ fears.

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Firstly, provision of such important information as return and refund policies for both purchases from users and from the company is crucial when it comes to trading in metaverses. Secondly, currency rate fluctuations must depend not solely of company decision to issue more virtual money, but also must be tied to tangible methods of payment, such as gold or U.S. dollar similar to that of a process employed by banks. Integration of safety seals and membership in such organizations as Better Business Bureau would also raise the level of trust on the side of shoppers; whereas companies could also employ safety seals based on performance of individual users. Finally, availability of money back policy and return procedures would also increase the level of trust for shoppers in metaverses.

Companies should consider undertaking strategies that target not only risk perceptions of customers, but actually reduce the risks associated with purchasing in metaverses including active membership in fraud prevention organization, SSL encryption of private data, and fair treatment policy with personal information being kept private.

It should be noted, that the degree of trust and the possibility of fraud is closely related to the present regulation in force. To be more precise, even though seller’s actions might and should be directed at minimization of risk associated with the purchase, lack of legal base for metaverses as well as the ways to detect and persecute those who involve in fraudulent actions undermines the level of trust on the side of customers.

Metaverses, being a strong communication channel, can help sellers by facilitating existent marketing functions. As such, such factors as design and availability of functions, promotion of interaction between customer and the sellers, e-tailers can significantly increase their sales. Socialization is the key factor that facilitates selling and buying in metaverses; even though this fact is recognized by e-tailers, a higher emphasis should be placed.

When it comes to access to the information, which also has a positive impact on online shopping tendency, the impact of this factor on e-tailers should be viewed from two distinct perspectives. Firstly, this is the ability to process information, which customer’s skill and proficiency to interpret information. And, secondly, these are situational and information related factors (Berryman, et al. 1998).

Such factors as the level of intelligence and education, product knowledge and experience directly influence individual’s ability to process information. As such, when dealing online, sellers must have a clear picture of the target audience, their purchasing strategy in order to use it to own benefit. E-tailers should also take into account that web sites that offer information through a complex nexus of hypertext links can severely restrict the informational processing ability to of customers especially those with lower level of online skills. Consequently, sellers in metaverses that target new segments of the market that are yet to be formed primarily from those with lack of experience should consider making informational presentation in a virtual world as simple as possible (Dittmar, Long, & Meek, 2004).

Influence of situational and information related factors include such aspects as time spent processing information, information condensation and the pace of delivery. E-tailers should also take into consideration pre-formed biased attitudes of customers to certain aspects of design or information presentation. Given customers are, in the first place, searching for unbiased information; sellers should consider presenting information independently, possibly, through comparison and contrast, which would create the effect of unbiased presentation. As indicated by scholars, many customers do not distinguish between the brand and the actual advertising drawing a direct parallel between the two. As such, sellers should also be cautious when involving in advertising and presenting commercials of other businesses in order to ensure that their own brand will not be affected.

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Given respondents also place high emphasis on availability of customer support, sellers should consider introducing this feature if it has not been introduced yet. Furthermore, the case could be outsourcing to Third World Country, since online business provides vast opportunities of cost minimization, whereas the quality of services still remains to be of high quality.

It should be noted, that virtual reality opens vast opportunities for businesses. Despite the fact that there is a relatively high level of risk associated with dealing in metaverses and so far this has been the most critical factor that prevents customers from dealing online, the general tendency remains positive with a greater number of people engaging in trading in metaverses. To be more precise, the current turnover of Second Life accounts for over $1,000,000 daily with over 5 million users. As such, business should consider undertaking the needed measures to reduce both perception and actual level of risk associated with shopping in metaverses, introduce multiple delivery and payment options, given convenience is one of the most critical factors, improve information layout and access to ensure that buyers both receive the message intended and at the same time receive the access to the needed information to make a reasonable purchase decision. Finally, the first thing to keep in mind is the primary intention of metaverses, which is socialization – this is the key to making money for e-tailers.

Works Cited

Berryman, Kenneth, Lorraine Harrington, Dennis Layton-Rodin, and Vincent Rerolle. “Electronic Commerce: Three Emerging Strategies.” The McKinsey Quarterly (1998): 152.

Dittmar, Helga, Karen Long, and Rosie Meek. “Buying on the Internet: Gender Differences in On-Line and Conventional Buying Motivations.” Sex Roles: A Journal of Research 50.5-6 (2004): 423.

Gonchar, Nancy. “Living in Cyberspace: Recognizing the Importance of the Virtual World in Social Work Assessments.” Journal of Social Work Education 36.3. (2000): 587.

Linden, Zee. “Protecting Yourself from Fraud and about the Risk API.”Linden Research, Inc. Second Life. Web.

Lynch, Patrick D., and John C. Beck. “Profiles of Internet Buyers in 20 Countries: Evidence for Region-Specific Strategies.” Journal of International Business Studies 32.4 (2001): 725.

Miyazaki, Anthony D., and Ana Fernandez. “Consumer Perceptions of Privacy and Security Risks for Online Shopping.” Journal of Consumer Affairs 35.1 (2001): 27.

Miyazaki, Anthony D., and Sandeep Krishnamurthy. “Internet Seals of Approval: Effects on Online Privacy Policies and Consumer Perceptions.” Journal of Consumer Affairs 36.1 (2002): 28.

Walzer, Norman, and Justin Colavito. “Internet Purchases by Rural Residents: Implications for Community Development.” Journal of the Community Development Society 36.1 (2005): 54.

Wang, Alex. “When Synergy in Marketing Communication Online Enhances Audience Response: The Effects of Varying Advertising and Product Publicity Messages.” Journal of Advertising Research 46.2 (2006): 160.