Choi, Jeonghye

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  • Publication
    Online Retailing in Spatially Dispersed Offline Markets
    (2010-05-17) Choi, Jeonghye
    This dissertation comprises three essays that study online demand coming from local offline markets. In the first essay, I study two social influence effects reflected in physical proximity and in demographic similarity, respectively, on online demand evolution. As these effects can be time-varying, I specify their dynamics using a polynomial smoother embedded within the Bayesian framework. Using new buyers at Netgrocer.com in Pennsylvania, I find that the proximity effect is especially strong in the early phases of demand evolution, whereas the similarity effect becomes more important with time. In the second essay, I study social influence effects emanating from two types of buyers in the installed base—search buyers, those acquired by online search, and WOM buyers, those acquired by offline word-of-mouth (WOM)—on online demand evolution. Since Internet retailers acquire buyers from multiple locations over time, I allow time-varying parameters to also vary across counties. Using data on new buyers at Childcorp.com, I find that WOM buyers are on average of “better quality”, however, substantial variation in the temporal parameter paths over counties suggests that a third of the markets are better able to breed social influence from search buyers. In the third essay, I examine how online demand in a location is affected by the relative size of the target population holding the absolute size constant. I hypothesize that in regions where this target group is in the minority online category sales will be higher (H1) and will be relatively price-insensitive (H2). I further conjecture that online sales of niche brands, relative to popular brands, will be even more responsive to preference minority status (H3). Finally, I show that niche brands in the tail of the Long Tail sales distribution (Anderson 2006) will draw a greater proportion of their total sales from high preference minority regions (H4). Sales data from Childcorp.com supports all four hypotheses. This dissertation concludes with a short chapter, briefly discussing the key findings and describing areas for future research.