Open Shop in Multiple Platforms

Women Leading Research: Jie Zhang

SMITH BRAIN TRUST – Online retail platforms, like Amazon’s marketplace, dominate ecommerce in many parts of the world, driving sales for big companies and individual sellers alike. Their influence is so huge, they’ve been called "the shopping malls of the future." But in crowded markets, how can vendors stand out and maintain a competitive edge?

Jie Zhang, Professor of Marketing and the Harvey Sanders Fellow of Retail Management at the University of Maryland’s Robert H. Smith School of Business, and two co-authors studied China’s online marketplaces and found that vendors benefit from being in multiple places, according to their recent working paper, “Multi-platform Shoppers and Their Purchase Behavior.”

“We found that operating stores on multiple platforms could be a way to strengthen relationships with existing customers and reduce customer attrition,” Zhang says.

In China, the Alibaba-owned online retail platform Tmall dominates, accounting for 57 percent of internet retail sales across the country. Amazon.com, by comparison, took in just 44 percent of total online retail sales in the United States last year. Tmall is so popular in China, it has inspired some merchants to shutter their own online retail stores, opting instead to set up shop on Tmall and other online shopping platforms.

“Chinese consumers really like the online retail platforms, as they provide convenient access to a large number of retailers in one place,” Zhang says. “And they have secure and familiar payment options, as well, and other services provided by a platform.”

As more and more online shoppers opt to “multi-home” across online platforms, many end up making purchases from the same retailer on multiple platforms. Those online shoppers, the “multi-platform shoppers,” are of particular interest to retailers, and to Zhang, whose latest research studies closely their behavior.

Conventional wisdom might suggest that opening stores on multiple platforms would attract different shoppers, expanding the target market for a seller. What is less intuitive is how browsing at a retailer’s nearly identical stores on multiple online platforms may affect the same shopper’s purchase behavior.

Zhang and her co-authors conducted an empirical study on how shopping on multi-platforms might affect spending with the same retailer. They used a unique dataset from a women’s clothing merchant with identical stores on three major retail platforms in China, after carefully controlling for self-selection effects.

The retailer, which had never operated retailing operations on its own website, sold identical items at identical prices, in each of its three online retail platform stores. The researchers reviewed data that covered the time period when the retailer opened stores at different time points on the three platforms, and included detailed customer transaction in the three stores.

The researchers found that the act of shopping from a single retailer’s store on multiple platforms does increase a shopper’s spending with the retailer. “Our analyses suggest that the likely reason is that increased exposure to marketing stimulation, due to multiple store visits, leads to more opportunities to make impulse purchases,” Zhang says. 

This means that although the stores online look identical and sell identical products, they aren’t strict substitutes of each other in the eye of the same shoppers. Opening stores on multiple platforms has two big benefits for sellers -- they can attract different shopper segments and be more enticing to their existing shoppers. The result: More spending from both groups.

“After consumers become a retailer’s multi-platform shoppers, their total spending with the focal retailer had increased,” Zhang says, “while their purchase frequency and spending at the original platform did not decrease.”

The stores on different platforms act, in effect, boosted each other, rather than taking from each other. Around the world, half of online shoppers made purchases from marketplaces three or more times a month, according to a global survey by Forrester Research.

Although China’s online retail platforms dominate the ecommerce landscape in a way that far outstrips its U.S. counterparts, a similar trend could begin to play out here as well, Zhang says. 

According to Feedvisor Consulting’s survey of 1,600 Amazon third-party sellers, 65 percent of them also had stores on eBay.com, and 59 percent had plans to expand to other platforms.

Jie Zhang is a professor of marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland.

Research interests: Internet retailing, customized promotions, retail management and quantitative marketing models. She develops and applies advanced econometric and statistical models to study consumer purchase behaviors and retail strategies in the digital and multichannel retail environments. Her recent research projects focus on retail deal platforms, multiplatform purchase behavior, online shopping cart abandonment, app publishers’ monetization strategies, and innovative loyalty programs.

Selected accomplishments: Her research has twice been selected as a finalist for the Paul Green Award by the Journal of Marketing Research, has won the Procter & Gamble Marketing Innovation Research Award, the MSI-ACR “Shopper Marketing” Research Proposal Competition, and has been sponsored by the Marketing Science Institute.

About this series: The Smith School faculty is celebrating Women’s History Month 2018 in partnership with ADVANCE, an initiative to transform the University of Maryland by investing in a culture of inclusive excellence. Daily faculty spotlights support activities from the school’s Office of Diversity Initiatives, starting with the seventh annual Women Leading Women forum on March 1, 2018.

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