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How Amazon and eBay influence the purchase decision making process

by Zhang Kaifu

March 17, 2014

Online shopping

As we buy online, little do we realize how online buying platforms such as e-commerce websites influence our purchase decision making process.

Each time you buy something online, you don’t realize that your choice is not yours alone. Throughout the buying process your decision is influenced—both at a conscious and subconscious level—by an online procurement intermediary. Online intermediaries include e-commerce websites like Tmall.com, Amazon and eBay. Anthony Dukes, Associate Professor of Marketing, USC Marshall School of Business, has researched such intermediaries. During a recent visit to Beijing, Dukes discussed his research with Zhang Kaifu, Assistant Professor of Marketing at CKGSB. Excerpts:

Q. We live in the age of information explosion. If you think about e-commerce, there are millions of options on the internet. Consumers are having a hard time making their choices. What are some of the recent technologies that address these problems for the consumers?

A. Consumers (who) have access to the internet want to know how they can buy products that best fit their needs. Given the plethora of options available to them, it can be overwhelming. Obviously this is a market opportunity for website intermediaries to help consumers match sellers of products. What internet intermediaries do is that they serve as a go-to place for consumers, and sellers on the other side of the intermediaries to offer products for them. What the intermediaries do is that they provide a search environment for consumers to find and evaluate products. They can buy a camera or clothing. Which product best suits my needs? Which would best satisfy me and the things that I’m trying to do?

Q. What are some of the examples when we talk about the search environment?

A. In some of our research, what we call search environment is the online shopping intermediary provides aids that allow consumers to screen products that they might be interested in. For example, if I’m looking for a camera, some search aids will allow them to say, “Okay, I want a camera that is this size and this weight”. And these intermediaries also provide pictures, product descriptions and technical details for the consumer to fully evaluate the product and choose the one that is best fit for them.

Q. What are the key decisions that intermediaries have to make if they want to run the business like T-Mall or buy.com (now known as Rakuten.com Shopping)?

A. Well, they want to have a large number of sellers, so that consumers have lots of options for them. And then another strategic variable is how do I design a search environment for consumers to find the product that they want? What’s interesting in the research is we are finding that, it may not be in the intermediaries’ best interest to have a search environment where consumers can search fully broadly across all different sellers of cameras or any types of products. The reason is that sellers don’t like consumers who can compare prices on a lot of different sellers because the competition is more intense. If the intermediary cuts the price that’s transacted, their profits are also hurt. So intermediaries have a double-edged sword. On one hand they want to make the products attractive for the consumers to find the best products for them, but on the other hand, the intermediaries don’t want to make it too easy to compare among different sellers. That’s really what our research is pointing to. There is a fine line. You want consumers to really appreciate the product that they are going to buy and they’ll pay the price for it. So there is no uncertainty that the product I buy is not a good fit for me. But I don’t want the search environment to be too good that I’m looking at a lot of different sellers selling similar things, because sellers will then feel the competitive pressure and need to pull prices down.

Q. Some consumers are concerned that the internet will potentially intrude their privacy. What is your view on that issue?

A. Privacy obviously is a very big concern and the extent to which privacy is used against the consumers, (even if) it (is) for better pricing information, consumers should be aware of that. An intermediary, in terms of preserving its brand, needs to be concerned about its reputation for preserving privacy. On the other hand, if intermediaries are collecting data that help consumers, make recommendations, or provide alternatives that might suit them better, in that sense consumers can be less worried. If consumers feel comfortable with the recommendations that they are getting, this could be a way of credibly establishing or using data in a way that benefits the consumers. I think credibility is the key. If consumers trust them, they are willing to give them that data and they trust that the data are being used properly. There is a famous case of Amazon some years ago, charging loyal consumers more than ‘unloyal’ consumers, knowing that loyal consumers are not shopping around. And this was of course a setback for the trustworthiness of Amazon. (Watch video below)

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