Acquiring customers through online marketplaces? The effect of marketplace sales on sales in a retailer's own channels

Online retailers are increasingly using third-party online marketplaces (e.g., Amazon, Taobao) as an alternative sales channel to their website. While cross-channel sales elasticities have been established for many sales channel combinations (e.g., adding bricks to clicks), we lack an understanding of whether the use of third-party marketplaces grows or cannibalizes a retailer's sales. Practitioners argue that firms can build their e-commerce business through acquiring customers by selling on the marketplace. Indeed, a marketplace could complement a retailer's offering (e.g., acquiring new customer segments), although inventory effects might mitigate this complementarity. Alternatively, cannibalization might occur from losing customers from one's website to the online marketplace. The present research investigates which of the two opposing forces prevails using a time series of category sales data from one of the largest global marketplace sellers. The authors use vector autoregressive modeling to show that marketplace sales increase sales on a retailer's website (0.014% for every 1% in marketplace sales). This effect is strongest for categories with large choice and low product prices. Acquiring customers through the marketplace might be cheaper than through other sources (estimated at 24% of initial sales). However, online retailers should be aware that this strategy strengthens the marketplace and may have potential negative long-term consequences (e.g., through marketplace control of the customer relationship).     

Exploring the influence of online reviews and motivating factors on sales: A meta-analytic study and the moderating role of product category

Online reviews, which significantly influence product sales, have been a central research topic in the field of marketing. Meanwhile, some motivating factors related to online retailers have been linked to product sales. While several articles have examined the impact between online reviews and motivating factors on product sales, many of the conclusions drawn are contradictory. From 28 studies focusing on online reviews and sales, this study performs a meta-analysis to analyze the true impacts of six review-related factors (i.e., the number of reviews, star ratings, standard deviation of ratings, helpfulness, review length and sentiment), and two motivating factors (i.e., price discounts and special shipping) on product sales. Meanwhile, this paper also studies how one product-related factor (i.e., product age) and one reviewer-related factor (i.e., reviewer's reputation) influence the relationship between online reviews and product sales. In addition, to study the moderating effect of product category, we divide the selected literature into two subgroups which are search and experience products. The results indicate that only review length and special shipping have no significant impact on product sales, while product category has a valid and specific moderating effect on the relationship between these determinants and sales. The presented conclusions will have important implications for academic research and for future industry practice.     

When consumers can return digital products: Influence of firm- and consumer-induced communication on the returns and profitability of news articles

The news industry is being massively disrupted by the digital distribution of news. Consequently, publishers have revised their business models and integrated pay-per-article options. To reduce pre-purchase uncertainty, consumers can use information from firm-induced (e.g., newsletters), or consumer-induced communication (e.g., likes). These communication activities avoid purchases with poor fit but also increase customer expectations. Consequently, their effect on sales, returns, and profitability is unclear. For digital products, these effects are even less clear because product quality is difficult to evaluate pre-purchase, and products can be returned at almost no cost, even after consumption. In this study, we investigate the effects of firm- and consumer-induced communication on digital returns in the context of news articles on a major online platform (Blendle). We rely on a multi-equation model to quantify the effect of firm- and consumer-induced communication activities (i.e., newsletter promotions sent out by the platform and consumer likes from readers) on sales and returns and calculate their profitability impact. Our results show that newsletters decrease returns but do not significantly affect sales. In contrast, consumer likes have a twofold effect by increasing sales and decreasing returns. A simulation shows that both newsletters and likes increase profitability and that likes have a higher potential. Our results offer much needed guidance for online aggregators of digital products (e.g., audiobooks, e-books or news articles), as well as for online publishers based on pay-per-unit business models.     

Financial consequences of adding bricks to clicks

Many e-commerce retailers are adding “bricks to clicks” – that is, opening an offline channel in addition to their digital sales channel(s). Taking the perspective of such an online pure player, this research assesses the effects of offline channel additions on the financial performance (e.g., sales, profits) and customer behavior (e.g., basket size, return rate) in the extended channel network as well as the initial online channel of the retailer. Across two studies, one at the zip code level and the other at the customer level, we find that the channel addition of a fashion and lifestyle retailer is synergistic in terms of increasing not only overall sales but also profits. At the same time, the new offline channel does not significantly cannibalize the existing online shop, as new customers are attracted through the channel addition. The effects of channel additions, however, are influenced by characteristics of customers gained before the channel addition and of the trade area around the newly opened stores: among existing customers, those who bought more in the online channel do not react as positively to the addition of an offline channel, and trade areas with socioeconomic characteristics that are often viewed as disadvantageous for digital retailing (e.g., an older population, lower average income) show a stronger positive sales effect of a brick-and-mortar addition. The attractiveness of the offline channel for these customer segments highlights that adding bricks to clicks might be most attractive for those customers who were previously unwilling to purchase from an online-only retailer.     

The impact of customer-generated evaluation information on sales in online platform-based markets

As the online platform-based market expands, research into the impact of consumer-accessible information in this market on performance has received significant attention in recent years. In this study, we focus on customer-generated evaluation information (CGEI). The purpose of this study is to demonstrate the effect of CGEI—both quantitative (i.e., star rating, star rating volume) and qualitative (i.e., customer review content) aspects—on actual sales in an online platform-based market. We analyze the regression of quantitative GCEI on sales and for qualitative GCEI we apply the Latent Dirichlet Allocation (LDA) topic modeling. We discover that star ratings do not always lead to increased sales, implying that star ratings and sales have an inverted U-shaped relationship. Furthermore, the results demonstrate that star rating volume has a positive effect on sales. We reveal that the review contents of product quality and added value have a positive effect on sales, whereas those of seller service have no effect on sales. This study provides some insight into how customer-generated information can increase actual sales in online platform-based markets.     

Default lines

Most consumers don't think about the potential range of choices in a sales transaction; thus, they often accept the pre-selected "default" choice. Companies can benefit immensely from well-designed defaults, though, and Daniel Goldstein tells us how.     

How 3D Virtual Reality Stores Can Shape Consumer Purchase Decisions: The Roles of Informativeness and Playfulness

The recent rise of consumer virtual reality (VR) hardware raises important questions in the field of online marketing: what makes 3D VR more informative and playful than conventional 2D media such as a still image and a video, and how it affects the online purchase decision-making process. In this study, we mainly focus on three interface features—interactivity, visual–spatial cues, and graphics quality. We explore how each of these three interface features enhances playfulness and informativeness of shopping interface and further influences subsequent product evaluation and purchase intention. The results of the study provide two meaningful insights. First, interactivity and visual–spatial cues significantly enhance perceived informativeness and playfulness; however, the role of graphics quality was found to be more critical for 2D displays than for 3D VR environment. Second, informativeness and playfulness influence the purchase decision-making process in distinct ways. More specifically, a playful interface may enhance consumers' preference for hedonic product benefits (e.g., a stylish and attractive design), whereas informativeness is a more important explanatory variable for subsequent purchase intentions. We discuss the theoretical contribution and managerial insights the research provides for online retailers and designers.     

Is Online Word of Mouth Higher for New Models or Redesigns? An Investigation of the Automobile Industry

Changing consumer preferences, entry of new competitors with better products, and product improvements by existing competitors make new products a necessary investment for most companies. In addition to the investments in R&D and production of new products, firms also need to invest in advertising to promote them. The growing use of social media by consumers therefore makes online consumer conversations an attractive additional format for firms to promote products at a lower cost. This is particularly so in the automobile industry where advertising costs are very high. Whether consumers discuss a newly introduced product, and help to promote it, however, may depend on how new the product is. This is the question that we investigate in the context of the automobile category. Specifically, we examine whether online consumer conversations are more likely for new models (e.g., Chevy Volt introduced in 2010) or redesigns of existing models (e.g., the redesign of Chevy Impala in 2010). We use data from two online sites where consumers discuss automobiles – consumerreports.org and edmunds.com – for our analysis. Our empirical investigation also accounts for the effects of sales on word of mouth and the simultaneity between sales and word of mouth. Additionally, we also consider the effect of satisfaction on word of mouth and the endogeneity of satisfaction. Our results across two datasets suggest that redesigns stimulate significantly more conversations than new models. Managerial and research implications of the findings are discussed.     

Cross-channel effects of omnichannel retail marketing strategies: A review of extant data-driven research

The authors review 50 empirical retailing research papers that have appeared over the last 20 years to take stock of what we know, need to know better, and do not know yet about within-retailer cross-channel effects of omnichannel retail marketing strategies on (a) consumer responses over their purchase journeys, i.e., online and/or offline search, purchase intention, frequency, amount, returns, loyalty, and (b) the retail firm's aggregate outcomes (e.g., sales, costs, profits, product returns) by channel and overall. Specifically, the authors focus on five strategies: (1) the addition of online channel by an offline retailer; (2) the addition (or subtraction) of offline channels by an online retailer; (3) addition of mobile shopping channel (website and/or app) by offline and/or online retailer; (4) cross-channel integration strategies; and (5) retail marketing mix strategies. The author/s integrate findings from empirical research on these strategies into a number of ‘insights’ about ‘what we know’. Prominent among these are the following: Adding a transactional online channel to an offline channel improves the retailer's overall sales even though offline channel sales can be cannibalized to some degree. Adding an offline channel by an online retailer, however, boosts online channel sales as well as overall sales of the retailer. Similarly, adding a mobile shopping channel usually increases customer purchase frequency and amount and overall sales of the retailer in the long-term. Strategies for greater cross-channel integration generally have a positive effect on a retailer's overall performance while online advertising has positive effects on offline channel consideration and sales as well as overall sales of a multichannel retailer. Other insights or findings that need further study or open questions are also identified. The paper closes with managerial implications of the derived empirical insights, and suggestions for future research.     

TOOR: A Novel Product Title Optimization Method Based on Online Reviews in E-commerce

Titles of online products play an important role in attracting consumers and promoting product sales in e-commerce. However, current online product titles only cover basic features and cannot reflect the preferences of consumers exactly. To address this problem, this research proposed an online title optimization method based on the analysis of online reviews, which is called TOOR (Title Optimization based on Online Reviews). In this research, we analyzed and compared product features extracted from online product titles and online reviews from the point of view of consumers and applied features extracted from reviews to title optimization. In order to verify the effectiveness of the proposed method, two experiments were conducted in this paper, selecting four typical smartphones as experiment samples and Taobao.com as the data resources. The experimental results indicated that features extracted from online reviews can better reflect the consumers’ concern, and the titles optimized by the TOOR method are more appealing to consumers and have higher click-through rates.     

Which Products are More Responsive to In-Store Displays: Utilitarian or Hedonic?

In-store displays aim to boost sales of both utilitarian and hedonic products. Noting typical differences in the information processing and purchase behavior evoked by these product types, and building on congruency theory principles, the authors propose that different types of in-store displays (i.e., island, end-of-aisle, or shelf signage) are more appropriate for utilitarian versus hedonic products, and the use of price or product promotions might reinforce these effects. With a database that combines three data sources (scanner, observational, and survey), this article presents an analysis of a market share model at the SKU level. The results confirm that in-store displays have differential effects on sales, depending on their characteristics; congruency between the decision-making process of utilitarian versus hedonic products and the characteristics of in-store display types moderates their effectiveness in terms of SKU sales. Shelf signage strongly increases the sales of utilitarian products, whereas island and end-of-aisle displays increase sales of hedonic product categories more effectively. The use of congruent promotions creates synergistic influences that reinforce these effects. In particular, price promotions improve the impact of shelf signage on utilitarian products, and product promotions strengthen the impacts of island and end-of-aisle displays on hedonic products. These results extend prior research on in-store marketing actions and the nature of utilitarian versus hedonic products, as well as providing recommendations for retailers and manufacturers seeking to optimize their retail space and commercial budgets.     

How Product–Environment Brightness Contrast and Product Disarray Impact Consumer Choice in Retail Environments

A conceptual model is developed to predict how consumers respond to in-store displays as a function of the extent to which a product’s brightness level (i.e., its perceived light-emitting quality) contrasts with that of its background environment and the product’s level of disarray. We show that products whose brightness levels contrast more with those of the retail environment are more preferred because they visually “pop out” (e.g., a dark product in a brightly lit store environment). However, this preference reverses when the products that pop out appear in disarray (i.e., are perceived to have been previously touched by other shoppers). Because most stores are bright environments, darker (vs. lighter) products in disarray are more likely to be perceived as contaminated and less pleasant, leading to avoidance behaviors, evident in reduced sales and preference. Theoretical and managerial implications are discussed.     

Consumer Product Redistribution

Abstract

Formats for product redistribution are emerging and evolving, creating alternative channel options for consumers' disposition of unwanted possessions. These retail formats operate in both informal (e.g., garage sales) and formal (online auctions) economies. As consumers participate in redistribution channels, some retailers are confronted with new competition and the potential for declining sales. This article expands on both recycling and disposition literature by examining consumer disposition behavior and the flow of used products through various redistribution channels. Strategies are offered to address consumer disposition behaviors as well as to assist retailers in combating traditional and non-traditional competition.     

Experiential goods with network externalities effects: An empirical study of online rating system

This paper uses online users' reviews and sales information from May 2003 to March 2007 to study a new experiential product: online video game (or virtual world). The results suggest that, first of all, for a hedonic product such as an online video game, the availability of online review system could not fully transform experience attributes into search attributes. The empirical study confirms that negative word-of-mouth has more significant impact than positive reviews. The study empirically verifies that the existence of direct network externalities (i.e. a product's value increases when more consumers join the network) is crucial for a hedonic product. The size of the user base signals the quality of the game, and works like a search attribute for potential users. A large user base will reduce the negative impact from unfavorable reviews.     

Price competition during and after promotions

We provide a framework for setting regular prices and using promotional discounts in a duopoly where long‐term promotional effects are present and the firms' pricing and promotional strategies are common knowledge (e.g., as in online markets). We show that at equilibrium, the two firms may not promote and instead adopt an Everyday Low Price (EDLP) strategy. Consumers' tendency to stockpile promoted products, the level of brand loyalty and product differentiation, and the possibility of a postpromotional sales increase critically influence regular prices, price discount rates, and profits. Under some conditions consumer stockpiling intensifies promotional competition and reduces firms' profits while the possibility of attracting new consumers reduces the need to heavily promote and ensures better profits. Managerial implications are discussed. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

It is different than what I saw online: Negative effects of webrooming on purchase intentions

Webrooming is a two-stage shopping process that begins with examining product options online followed by making a purchase at an offline store. In four experiments, we investigate webrooming effects on product evaluation and purchase intentions. The results suggest that webrooming (vs. non-webrooming) has negative impacts on (1) perceived product performance vis-à-vis expectations and (2) purchase intentions for the products offline. Our moderated-mediation analyses show that webrooming leads to lower perceived product performance, which in turn results in lower purchase intentions, and participants’ Need for Touch (NFT) moderates the negative mediation effect, which is stronger with instrumental NFT than autotelic NFT. However, this moderated-mediation effect is attenuated when products are searched across multiple categories. These findings contribute to the marketing literature by providing a more nuanced understanding of how two-stage, webrooming behavior affects consumers’ cognitions and purchase decisions. They also provide several managerial implications that when controlling for time intervals between the stages, (1) webrooming may adversely affect retailers’ business outcomes when webrooming within a single (e.g., blankets), related (e.g., baby products), and unrelated product categories; (2) thus, creating an integrated online-to-offline cross-channel customer experiences is critical to minimize the negative webrooming effects on final sales.     

I'll have what she's having: (Social) Perceptions of default options and implications for marketing and decision making

The power that default options have in shaping choice has been well established, yet relatively little is known about how decision makers experience and interpret such preselected options. Research suggests that individuals assume defaults represent a recommended course of action, yet the basis for this recommendation is unclear. Across two experimental studies, we explored consumer theories of default recommendations, examining spontaneous and experimentally manipulated perceptions of the basis of the default, and the impact on decision making across different contexts. Evidence across diverse populations and tasks shows that options were retained to a greater extent when represented as the default, consistent with classic default effects. Furthermore, a significant default effect emerged when the decision context was framed as complex. In line with research on social influence, defaults were most effective when they were presumed to reflect the most popular option (regardless of context). Interestingly, participants rated defaults as being more likely to represent the most popular option, regardless of decision context or default explanation provided to them. These findings highlight the importance of understanding the contexts in which default choices are relied upon and how those defaults are perceived by decision makers.     

The Impact and Determinants of Nine-Ending Pricing in Grocery Retailing

Research into nine-ending pricing indicates a clear effect on sales but strong variance, suggesting that their effects are context dependent. This research relates nine-ending effects to a broad set of determinants and investigates the influence of brand, category, store, and store area clientele characteristics. The numerous empirically supported hypotheses indicate that the framework built on level and image effects is well adapted for explaining the effectiveness of nine-endings. They validate that a wide and indiscriminate practice of nine-ending pricing is not effective. The findings show that the impact of nine-endings can lead to sales losses (e.g., premium brands); however, a nine-ending price is more effective for increasing sales of small brands (e.g., low market-share, low price, and new items) that belong to weaker categories (e.g., low price, low budget-share). The effect erodes as the store's nine-ending pricing practices intensify. For category sales, a simulation reveals the existence of a threshold for which overuse is counterproductive.     

考虑零售商销售努力的双渠道供应链定价策略研究

随着电子商务市场的日益成熟,制造商建设线上直销渠道来适应新的商品销售环境成为趋势。制造商线上直销渠道的建立占领了部分原本属于线下零售渠道的市场份额,对线下零售渠道造成冲击。针对双渠道供应链中的竞争,将零售商销售努力行为考虑在内,通过构建博弈模型分别研究了在集中决策模式和分散决策模式下,制造商与零售商的定价策略。研究发现,在集中决策模式下,线下零售渠道与线上直销渠道之间的价格差异随着两个渠道潜在需求量之间差异的增大而增大,并且两个渠道的最优价格分别与其市场潜在需求成正比。在分散决策模式下,两个渠道的最优价格亦与潜在需求成正比,并且线下零售渠道的最优价格随零售商销售努力程度的增加而增加,线上直销渠道的最优价格随着零售商销售努力程度的增加而减少。     

Online shoppers' response to price comparison sites

Customers' perceptions of price differ in the online environment due to the presence of price comparison sites. The purpose of this study is to examine how price comparison sites affect price and value perceptions of online shoppers across different product types and price consciousness levels of online shoppers. The results of the study indicate that the price information provided by an online price comparison site influences online shoppers' perceptions of internal reference prices. However, the influence of a price comparison site on value perception differs according to product type. As evidenced by the significant interaction effect between product type and price comparison site information, the presence of price comparison sites increases both transaction and acquisition value perceptions for the non-look-and-feel product category (e.g., notebook computers), but not for the look-and-feel product category (e.g., jeans). Contrary to the expectation, online shoppers' price consciousness influences their price and value perceptions independently of price comparison site information.