From Fatwallet to eBay: An investigation of online deal-forums and sales promotions

Sales promotions are an important part of retail advertising strategy. Traditionally, research on sales promotions has generally assumed that the buyers are end consumers who do not engage in reselling, in large part due to high transaction costs. However, the recent Internet related technologies have dramatically lowered the cost of transferring goods between consumers, leading to relative ease of reselling activity amongst individual consumers. Little is known about the impact of this phenomenon on retailer's sales promotion strategy. In this research we investigate the reselling activity in online auctions for products that active deal seekers can obtain at deeply discounted prices from retailers. We further investigate the role of deal-forums in the resale process. Data is collected from an online deal-forum (http://www.fatwallet.com/) and eBay to test various reselling-related hypotheses. The results show that there is a significant abnormal increase in the number of newly posted auctions of a product after the deal information of this product is posted on deal-forum website. We also find that there is a significant price incentive for individuals to resell. The implications for sales promotion research and practice are discussed.