Online buyers are still significantly influenced by a business's geographical location, study finds

Online buyers are still significantly influenced by a business’s geographical location, study finds
Credit: Syda Productions/Shutterstock.com

Professor Gianvito Lanzolla and Dr Hans Frankort, examined a large online B2B marketplace to identify the key factors which influence a buyers' decision to make a purchase.

They analysed the activities of companies across a multitude of industries that were registered to an online marketplace during a 21-month period.

It's a myth that digital marketplaces are fair

The study found that while digital transformation could provide companies with more possibilities for connecting with buyers, this was not completely true in terms of business realities.

In fact, rather than providing a more level playing field, digital marketplaces were more segmented than traditional ones.

While digital marketplaces are often seen as meritocratic platforms in B2B markets, the research shows that in reality, they are 'winner-takes-all', with only a small percentage of online companies receiving the majority of buyers' attention.

This is good news for online businesses with established geographical locations synonymous with a particular industry. For example, technology businesses with headquarters in Silicon Valley and in Bangalore or for financial services with addresses in the City of London.

Key findings

Online buyers are still significantly influenced by a business’s geographical location, study finds
Credit: City University London

  1. Location matters - B2B digital marketplaces are subject to the same bias as their off-line counterparts, with location having an impact how potential buyers engage with sellers online
  2. Online doesn't equal fair - B2B digital marketplaces are subject to clues or 'signals' that show biased, social hierarchies are at play. These hierarchies share the same 'signals' as off-line marketplaces including, brand and reputation; location; certification and legal status.
  3. All signals matter - In B2B digital marketplaces, where these signals can be difficult to spot – all signals matter and companies should take care how they present themselves to the public. Buyers will gauge a seller's online profile and use these 'signals' to divide companies into a perceived hierarchy.
  4. Marketplace monopolies - The divide between online companies that are seen and those that remain unseen, is likely to increase and widen, leading to de-facto monopolies within the B2B digital marketplace.

The digital bubble

The data shows that a buyer's perception of where a company or seller stands in the marketplace's hierarchy will impact the likelihood of them contacting that company or seller.

Specifically, the higher a or seller is perceived to be in the hierarchy, the greater chance of contact from who have a much lower position in the same hierarchy.

This research presents many opportunities for entrepreneurs and policy makers to address these trends. For instance, by establishing ting new benchmarks that can substitute these social comparison dynamics or creating new mechanisms to increase the visibility of companies at the fringes.

Professor Lanzolla adds, "What is certain, is that going forward, we need to think differently about digital marketplaces if we want to ensure a fairer, more unbiased system."

Online buyers are still significantly influenced by a business’s geographical location, study finds
Credit: City University London

Explore further

Study finds online marketplaces overplay safeguards and ignore social aspects of transactions

More information: G. Lanzolla et al. The Online Shadow of Offline Signals: Which Sellers Get Contacted in Online B2B Marketplaces?, Academy of Management Journal (2015). DOI: 10.5465/amj.2014.0051
Journal information: Academy of Management Journal

Citation: Online buyers are still significantly influenced by a business's geographical location, study finds (2017, February 16) retrieved 27 November 2020 from https://phys.org/news/2017-02-online-buyers-significantly-business-geographical.html
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