Charge for Online Trustworthiness

Researchers at Brandon University, University of Alberta, and Conestoga College began with curiosity about differences in retail price spreads. Specifically, why do prices for comparable items usually differ more among ecommerce than among brick-and-mortar (B&M) channels? It would seem that because of the greater ease of price comparisons online, there would be less dispersion. But from three months of data collection, the researchers verified greater price spread for the ecommerce vendors on product categories such as batteries, flash drives, toys, espresso makers, vacuum cleaners, and TVs.
     The data collection also provided two explanations: First, because there are more online than offline sites available to the shopper, there are simply more opportunities for different mixes of prices, quality, and services. Second, consumers pay more attention to the reputation of the retailer when purchasing online than when purchasing at a shop. Ecommerce is considered to be riskier, principally because of the increased chances of consumer fraud and data security breaches. Retailers differ in a perceived reputation for trustworthiness. This opens opportunities to reputable ecommerce retailers who can charge because of their online trustworthiness.
     Such trustworthiness is enhanced when an ecommerce retailer has a B&M presence. Researchers from Florida State University, Saint Mary’s College of California, York University, and Lieberman Research Worldwide have shown how differences between ecommerce sales with or without a B&M partner are especially high for unknown retailers. Sales are higher even when the B&M store is physically distant from the shopper rather than across town. If consumers know you have an actual store, not just a virtual one, they trust you more.
     Although your earned trustworthiness enables you to set higher prices, remember how sales increase with promotional discounts. But do you maintain the same everyday pricing and same special pricing in both the online and offline channels?
     Researchers at Katholieke Universiteit Leuven analyzed retail situations in which a promotional discount was offered in one of the channels, but not the other. As common sense predicts, shoppers who were aware of the difference in pricing moved their purchases away from the channel which maintained the regular price and toward the one offering the discount.
     What these research findings did add to our common sense notions was the finding that the cross-channel cannibalization effect was stronger when the discount was online. Internet specials ate away at storefront sales revenues more than storefront specials ate away at internet sales revenues.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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Show Online What’s in Store
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