Location matters to online shoppers
Wharton School professor David Bell, whose specialist subject is digital marketing and e-commerce, has made headlines with a new book, Location is (Still) Everything, proclaiming consumers’ physical locations play a significant role in determining online shopping habits.
"What’s important is the location of the customers themselves relative to their offline options," Prof. Bell told The Washington Post. "Physical circumstances define your offline options and, therefore, the attractiveness of the online option."
Online purchases are significantly affected by which stores are near the consumer and whether they have "trendy and friendly neighbors," according to Prof. Bell.
Proximity also increases trust, as when eBay customers find their neighbors’ feedback more reliable than those of purchasers living further away, not least because selecting the same area to live in indicates similar tastes. "If you move to a new American city," inc.com concluded, "you will gradually adopt the brand preference of that city."
Prof. Bell’s advice to online retailers is to ensure that packaging is eye-catching so that neighbors (or better still, colleagues when packages are delivered to the customer’s workplace) notice what others are buying.
As to whether, and how, online retailers are using this information to improve targeting, he told The Washington Post that it can be done easily but "it’s just sort of on the cusp now." All orders contain zip codes so it’s easy to locate customers and see who else might be nearby.
"What’s really interesting is a lot of things spread purely through observation. And that’s why packaging and doing things to make the product public are really important. … You can’t succeed in the virtual world unless you understand where and how your potential customers are situated in the real one," Prof. Bell advises.
Discussion Questions
Does it make sense that where people live influences where they buy online? What can retailers do to make online purchases more public so that they influence neighbors and colleagues?
While it’s helpful for retailers to develop e-commerce sales in markets where they don’t have physical stores, the results of this study shouldn’t come as a surprise. Familiarity with a local brick-and-mortar store (or even a local branch of a national chain) is likely to give the e-shopper confidence in the merchandise content and store experience, along with a way to deal more easily with returns. The rapid growth of BOPIS (“Buy Online, Pickup In Store”) and related omni-channel initiatives will continue to drive this trend.
“You can’t succeed in the virtual world unless you understand where and how your potential customers are situated in the real one” is one of the most insightful and intelligent statements I’ve read in a long time. Makes me want to explore David Bell’s other insights.
Truth is everything influences everything. We live, work, play—and buy—in one big energetic soup. Every once in a while we discover an energetic link such as the influence of physical location on buying behavior and get all excited. Saying we are “on the cusp” of understanding such things may be a gross overstatement. We really understand very little about how “IT” all works and in my view we are afraid to understand it. It is simply too marvelous.
Prof. Bell’s advice to online retailers regarding attractive, eye-catching packaging seems to present a paradox for retailers selling online.
On the one hand, attractive packaging makes sense in terms of standing out and being noticed. (And many neighbors certainly watch what gets delivered.) Attractive packaging can help create perceptions of value.
On the other hand, there is the move toward “green” packaging with a minimum of flash, using biodegradable materials and soy ink. Amazon certainly seems to be very good at positioning their brown box with an “a” and an arrow. In fact, even if brands or retailers have eye-catching packaging, Amazon typically covers it with its brown box.
Totally agree. Location is critical to purchase decisions in a variety of ways:
Context: People want different different shopping experiences depending on their location/context. In line at the bank? In your car at a red light? In a store with your smartphone out? At home on your couch?
Anchoring: Shoppers make decisions based on the alternatives available to them. That calculus varies widely based on location.
Search: Any Google searches (in fact, the majority from mobile devices) are influenced by the geography of the searcher. As 30-40 percent of an e-commerce site’s traffic comes from search, this is a huge influencer.
Awareness: E-commerce sites do best in geographies where they have physical stores. Stores serve as brand ambassadors and powerful social proof for e-commerce sites.
I agree with David 100 percent. Clearly there are regional preferences for products, especially in some categories of food, CPG, and certainly anything fan-related. But I agree the most with the package on the porch premise. Most packages are shipped in brown corrugated boxes. Some have unique printing, but that doesn’t do much given that there are much better ways of creating visual distinctions at a distance. Imagine the benefits to a brand that spends a trifle more for bright pink boxes, say for a baby clothing brand. The neighbors would readily see the boxes and might think something like, “Wow they bought XYZ, I better look into that for my baby.”
As retailing moves more to online transactions, a sense of community will still be desired by the shopper. I think the perspective in the article has some merit. There are some good examples of online merchants that localize feedback. This is also another example of where the small, local merchant is on relatively even playing ground with huge companies. That’s a rare thing these days.
Possibly from a country standpoint (how many Americans have actually shopped at Alibaba as compared to Amazon?) but I’m not sure it works regionally within the U.S. Not saying it doesn’t, but suggesting my physical location plays a role in my online shopping isn’t something I am convinced of yet. I have lived in the northeast and the northwest in the last 10 years and in both places I still purchased primarily from Amazon or national chains like Bed, Bath and Beyond, Best Buy, Lowe’s, Staples, etc. online.
Looks like I have a new book to read.
There is almost certainly a correlation between proximate retail options and online shopping behaviors. If a shopper can get what they’re looking for at a fair price just down the street, they’re more likely to invest a few minutes of their own effort to get the product themselves than to pay a premium or wait for delivery from an online retailer.
That said—and having not read the book—it seems to gloss over one key factor: Amazon and other online retailers’ assortments dwarf the several hundred thousand SKUs available at local retailers. The more niche the product or taste, the likelier the product is to be purchased online.
The idea of branded packages that “pop” from doorsteps is intuitively a good idea. For many years, Amazon did little to no traditional marketing. Instead, it thought of its investments in faster, cheaper delivery (and other customer experience improvements) as a more effective form of marketing, and let the smiling brown boxes and word of mouth drive awareness.
It is also at least part of the reason formerly pure-play online retailers like Bonobos, BaubleBar, and others are opening stores or showrooms on prominent shopping streets. A physical presence can certainly build brands and drive awareness, and the playbook is evolving.
I’m not surprised at the general findings reported here, and am ordering the book IMMEDIATELY!
We discovered a dozen years ago that location IN THE BRICK-AND-MORTAR STORE was nearly everything. In fact, modeling behavior across a series of stores showed just how location CONTROLLED purchase behavior of categories, across the center of store domain. See figure 9.6 in my chapter in “Shopper Marketing.“
I have been urging audiences for several years to recognize that when a shopper is in an aisle, the largest percentage of time they are NOT there to buy something from that aisle, but simply because that particular aisle happens to be going from where they are to where they want to be. Other than the millions of shopping trips we have followed on a second-by-second basis, the retail industry, both suppliers and retailers themselves, are largely oblivious to this, what should be an obvious fact. The reason behind that obliviousness is that the entire retail world is obsessed with the relation of shoppers to the few single products they end up putting in their carts.
When I tried to explain how the whole store was affecting the shopper’s behavior in a single location to a researcher at one of the top three brand manufacturers in the world, while standing in a store of the number one retailer in the world, she dismissively commented, “Oh, that’s just background noise!” Never mind that that noise was eating her and her colleagues’ lunches.
It reminds me of the story of George, telling his friend Harry, “Did you know that ignorance and apathy are the main problems in the world?” Harry said, “No I didn’t know that, and I really don’t care!” 😉
I thought the answer to the poll would be that location is unimportant, until here comes this study on location. Interesting! I can understand that propinquity breeds familiarity. More comfortable and trusting of individuals with the same demographics and ethnicity, workplace, regional preferences, opinions, etc.
This is retail and location, location, and location is still one of the most important success factors. With online, the location is for the consumer vs the retailer. Not having access to a local Walmart will drive online sales for Walmart. Staples has learned this point. Having store available reduces the purchase trauma of things like is the color right, does it fit, etc. Delivering in a professionally designed shipping box is one of the best ideas I have heard in online sales.
Essentially, the requirement to buy online or in-store frankly revolves around lowering the risk to the shopper, which means building trust in the brand and product. If I know that I take a risk and buy something online that I haven’t been able to “check out fully,” and I can return it close by, it lowers my risk. If people “like me” gave positive reviews, it also lowers the risk.
I think the review was very insightful and it reinforces the traditional “path to purchase” studies that have been around for some time.
I’m confused as to exactly what this study is trying to say. If it’s simply that people (still) have regional preferences, or that a person who lives next to a supermall is less likely to order her clothes online than one who lives in Nowhere, NV, then my thought is: well, duh!!!
OTOH, if it’s trying to say that people will ignore free shipping or lower prices in favor of someone (simply) being closer, then I disagree with the premise. They might, of course, be influenced by delivery times, but that’s obviously a factor of proximity…so I guess that would rate a “DUH!” too.
My own research into spatial relevance — how the location of a customer’s home reveals specific traits in purchase behaviors and preferences — indicates that such influences do make sense.
I’d say the most effective way to make online purchases more public is to inspire consumers to become brand ambassadors, essentially encouraging them to participate in the publicity. Several tools can assist. A loyalty program, for instance, can be structured to encourage consumers to provide feedback through social media, to enter contests through which they compete with other brand loyalists and to then be rewarded for their purchases and activities with other branded products, such as t-shirts or tote bags.
It makes sense, and it’s important to recognize when and why location matters.
As far as proximity to brick and mortar competitors, the old catalogue retailers (Sears, Montgomery Ward) knew this and thus they had the small brick and mortar catalogue offices in rural and small towns all across the country.
As far as brand preference, never underestimate the power of a well developed brand. It makes sense that environmental brand preferences (regional, workplace, sporting events, ethnic enclaves) reinforce personal brand preferences. There is a reason companies define their consumer target and spend millions in media and sponsorships.
None of this information is new; frankly, I believe it’s overstated. Ultimately, the brand is the most important attribute; location (tangible or virtual) is a derivative of the brand properties — attributes, consumer target, and so forth.
More than anything else, this study shows that brand matters to the consumer. Retailers should look for ways to leverage their brands across physical and online venues.
The results seem to also suggest that the associative properties of a brand influence what and where the consumer transacts the majority of purchases. Retailers should keep the power and value of branding in mind as they allocate marketing funds. Promotions are good ways to drive traffic and business in the short-term, but a strong brand with a compelling brand promise is important to the long-term health of a retailer.
Amazon is one company that makes sure you know it is an Amazon shipping box, regardless of your location since they can ship anywhere. Location is also useful for ecommerce retailers to customize their offers based on local factors like weather, which affects shopping patterns and items researched.
This is an interesting article. I can see how location plays a role in online shopping. I personally look for businesses in an area that can ship to me quickly, without paying additional fees.
As for the trust thing, online ratings and reviews mean a lot more to me than my neighbor’s opinion. It is a numbers thing. I will value my neighbors, friends and family more if comparing one online review to one opinion of someone in my close circle. However, if compared to 100 reviews, I am going to trust the 100 reviews.
Having said that, sub-consciously, you do trust things that your circle trusts.
How is packaging going to affect location, though? You can have really nice packaging from stuff shipped from China. Location doesn’t really play a part here, does it?