Does Place of Origin Matter in the Online Marketplace? Empirical Evidence from Taobao.com

Abstract

Due to uncertainties regarding quality in terms of both product and seller, information asymmetry is a significant problem for consumers in the online marketplace. Online sellers are keen to improve their sales by highlighting quality signals such as price, reputation, and e-WOM. In traditional offline markets, place of origin (POO) as an extrinsic cue is an effective indicator through which consumers can evaluate product quality and make consumption decisions. However, its effect on consumers’ purchase decisions in the online marketplace has not been closely examined. In this study, we analyze the impact of POO and its interactive effects with other existing quality signals based on a transaction panel dataset from one of the biggest online marketplaces in the word. Our results demonstrate that POO signal has a significant and positive effect on online retailers’ sales. Furthermore, when multiple quality signals coexist in the online marketplace, the positive effect of POO is attenuated by both word of mouth (WOM) valence and seller’s reputation. Our results highlight the importance of POO in the competitive online market and have implications both for academic research and for online retailing practice.

Keywords: Information Asymmetry, Signaling Theory, Place of Origin, Consumer Decision Behavior