A major challenge for Internet retailers, versus bricks-and-mortar retailers, is to understand what influences consumer behavior. Can the well-grounded knowledge of consumer decision-making from the bricks-and-mortar environment be transferred to the online environment? In the online environment the lack of “hands on” experience with the good or service may create greater evaluation difficulties (difficulty in choosing among available alternatives) and higher perceived risk (potential loss in making the purchase) for consumers. Bricks-and-mortar environments provide physical attributes and cues that consumers can use to evaluate goods and services that the Internet may not. The underlying construct is tangibility; the ability to use the five senses to judge the potential purchase. As intangibility increases, evaluation difficulty (ED) and perceived risk (PR) are likely to increase and, in these cases, the purchase may not be made.

The intriguing aspect of intangibility is that it has three dimensions: (1) mental (the ability to mentally grasp the product), (2) physical (the degree to which a product can be touched or seen) and (3) generality (the ease or difficulty in precisely defining or describing a particular product). For example, physical intangibility may not be an issue for an online computer retailer because touch and feel are probably not used in the evaluation process. However, it would be an issue for an online jean retailer. For mental intangibility, the retail environment may have little influence on the evaluation process relative to the type of good or service being offered. By understanding the relationships among intangibility, ED and PR in both online and offline environments, retailers will be able to focus on strategies that increase their bottom line.

The paper explores the effects of the three intangibility dimensions on consumers’ ability to evaluate goods and services and the perceived risk (PR) and evaluation difficulty (ED) associated with the purchase. These relationships are examined in two retail settings; bricks-and-mortar and the Internet. The investigation incorporates prior product knowledge as a moderating factor in the proposed framework. This allows for a comparison of the effects and relationships that exist between intangibility and its consequences in general, and ED and PR in particular.

The findings confirmed the validity of the three intangibility dimensions (physical intangibility, generality, and mental intangibility) with each dimension having different effects on ED and/or PR. Specifically, increased mental intangibility and generality increase ED as well as PR. Physical intangibility has a negative relationship with PR when mental intangibility is weak. In these situations, physically intangible goods and services involve a greater reliance on prior experience as opposed to an assessment of the cues from the physical attributes; thus making the evaluation process easier and improving the consumers’ confidence in their purchase decision.

The intangibility – ED – PR relationship is different between bricks-and-mortar retailers and online retailers. The differences can be explained by the unique characteristics and functions of these two purchasing media. Unlike traditional stores, the Internet is able to provide considerable information in an easy to use format that reduces the search costs needed to make a purchase decision. In the online environment, this helps reduce the impact of mental intangibility associated with goods and services on ED and PR. On the other hand, because the Internet is both physically and mentally intangible to many consumers, a trust-based partnership is difficult to be established and strengthened in an online operation, increasing the positive relationship between ED and PR in online versus offline purchasing.

Prior knowledge was found to be a significant moderator of the proposed relationships among intangibility dimensions, ED, and PR in both buying mediums. For consumers who have high levels of prior knowledge, there was a weaker impact of mental intangibility on ED and PR. As opposed to mental intangibility, physical intangibility was negatively correlated to PR only for high-knowledge consumers and only in the online purchasing mode.

The major implications for marketing practitioners include:

Ø      First, the study affirmed that there are significant differences in the offline and online retail mediums. Although the Internet is recognized as an ineffective means of communicating physical cues, it does not necessarily make the purchase of goods/services any more difficult to evaluate. Therefore, it might be effective for service providers to offer customer testimonials to help consumers develop a sense of knowledge toward the good/service.

Ø      Second, the research revealed that the impact of mental intangibility and generality on ED and PR could be lessened on the Internet. This suggests that online retailers should focus on the content, style, categorization, and access of the information presented on their Internet sites.

Ø      Third, despite the increasing acceptance of the Internet, online purchases are still perceived as riskier than offline purchases. Thus, the focus of online retailers must be to facilitate the first few online purchases. As an example, online marketers can utilize the interactive nature of the Web to facilitate communications with prospective consumers, by either providing “virtual advisors,” or offering customer testimonials.

Ø      Finally, an implication for both online and offline marketers is that they should apply appropriate strategies to each good/service individually according to its intangibility levels. The individualization of intangibility is necessary in that each good/service is different, especially when taking virtual products into consideration. As well, retailers should place more attention on minimizing the effects of mental intangibility rather than on minimizing the effects of physical intangibility of a good/service.