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It has been proved that product characteristic is an important factor in determining its suitability for online stores. However, little research has been done to examine the impact of product characteristics on consumer's perception of risk in online shopping. This paper classifies online products into four categories on the basis of their price and sensory nature. Further, an empirical analysis is conducted to examine the consumer's perception of product risk and delivery risk across commodity and sensory products. The difference in perception of risk is also analyzed across high range and low range commodity and sensory products. The findings reveal that consumers perceive a higher product risk and delivery risk for sensory products as compared to commodity products. The results also claim a significant impact of the price of the product on product performance risk.IntroductionFollowing widespread Internet connectivity and Internet usage, India has now entered the phase of Internet transactions or e-commerce. The increase in the number of Internet users, changing demand of Indian consumers, increasing per capita income, and government policies like liberalization are creating favorable conditions for the growth of e-commerce. A large number of players are entering the industry everyday with new offers and ideas. However, virtual market is still not suitable to offer all the products. Consumers are apprehensive and lack trust in online vendors.e-Commerce in IndiaInternet was introduced in the country in the year 1995. However, in less than two decades, India has become the third largest Internet using country in the world. Increasing Internet penetration, changing consumer mindset and favorable government policies due to liberalization in 1991, have paved the way for the growth of e-commerce in India.The development of e-commerce in India can be broadly categorized into two phases. Online matrimonials in 1996 and online recruitments in 1997 were among the first one to enter Indian e-commerce market. This phase of Indian e-commerce was characterized by low Internet speed, inadequate logistic infrastructure and low consumer acceptance. In short, online businesses were restricted to a smaller consumer base of NRIs and HNIs. The IT downturn in 2000 led to the failure of approximately 1,000 online businesses in India, and with this, the first phase of Indian e-commerce ended.The second phase of Indian e-commerce started in 2005 with the entry of low-cost carriers in aviation sector. People started using online medium to search for travel- related information and to book tickets. Using online medium for travel transactions increased consumer's confidence on the virtual medium of shopping. This helped online retail to gain consumer acceptance.According to Internet and Mobile Association of India (IAMAI, 2013), the overall e-Commerce market in India, which includes B2C, B2B, C2C and C2B segments, crossed US$10 bn in the period 2007-2011. Out of which, B2C segment dominated with a share of 56.7% in 2010-11.Products and Services Available OnlineThe products and services that are available online can be broadly classified into five categories:1. Online Travel - Travel being one of the most standardized services has got maximum acceptance. Online travel includes buying tickets of railways, flights or buses. Booking for hotels or buying tour packages also comes under this category. As per the statistics, 81.4 % of the entire e-commerce revenue comes from this segment (Avendus, 2011).2. Online Retail/e-Tailing - Online retail comprises online sale of products like books, mobile, clothes, accessories, etc. It is still in its introductory stage in India, but is growing at a very fast pace.3. Online Classifieds - These are the portals that connect buyers and sellers. Online classifieds in comparison to print media is growing at a faster pace in the country. It is expected that the industry will double by 2015. …
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