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    The Impacts of Increasing Search Frictions on Online Shopping Behavior: Evidence from a Field Experiment
    05 Mar 2019Working Paper Summaries

    The Impacts of Increasing Search Frictions on Online Shopping Behavior: Evidence from a Field Experiment

    by Donald Ngwe, Kris J. Ferreira, and Thales Teixeira
    This paper challenges the logic that making it easier for consumers to search across a wide assortment of products is the best strategy for online retailers. Experiments show that adding extra search costs to find discounted items can improve gross margins and sales by increasing the number of items inspected and serving as a self-selecting price discrimination mechanism among customers.
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    Author Abstract

    Many online stores are designed such that shoppers can easily access any available discounted products. We propose that deliberately increasing search frictions by placing small obstacles to locating discounted items can improve online retailers’ margins and even increase conversion. We demonstrate using a simple theoretical framework that inducing consumers to inspect higher-priced items first may simultaneously increase the average price of items sold and the overall expected purchase probability by inducing consumers to search more products. We test and confirm these predictions in a series of field experiments conducted with a dominant online fashion and apparel retailer. Furthermore, using information in historical transaction data about each consumer, we demonstrate that price-sensitive shoppers are more likely to incur search costs to locate discounted items. Our results show that increasing search frictions can be used as a self-selecting price discrimination tool to match high discounts with price-sensitive consumers and full-priced offerings with price-insensitive consumers.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: January 2019
    • HBS Working Paper Number: HBS Working Paper #19-080
    • Faculty Unit(s): Technology and Operations Management
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    Kris Johnson Ferreira
    Kris Johnson Ferreira
    Assistant Professor of Business Administration
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