WeStore or AppStore: How we shop differently in Mobile Apps vs. Social Commerce

42 Pages Posted: 8 Jul 2021 Last revised: 2 Nov 2021

Date Written: June 25, 2021

Abstract

E-commerce activities on social platforms, namely social commerce, reached $474.8 billion worldwide in 2020, and it is expected to show a 28.4% yearly growth rate over the next eight years. This paper studies how customers' search and purchase patterns differ between a major online retailers' new and rising social commerce channel, WeChat mini-programs, and its native mobile app. We study customers' entire journey using our sequential search model by characterizing detailed decisions from the channel choice to which products to search, when to stop the search and the final purchase. We contribute to the literature on search models by being the first paper to estimate both fixed and marginal search costs in a sequential search model due to the omnichannel setting and observed search path data. We estimate fixed search costs, marginal search costs, and preferences in each channel and uncover differences in customers' search and purchase behavior across channels. We find that WeChat customers have higher fixed search costs yet smaller marginal search costs compared to App customers. Moreover, customer characteristics such as their user level and time of search impact search costs. In light of our findings, we propose two channel-specific strategies that leverage customers' search cost differences across channels. Both strategies, either by lowering fixed search costs to encourage search initiation or reducing the marginal search costs via search-triggering coupons, can significantly increase conversion rate and profit for the online retailer.

Suggested Citation

Hu, Kejia and Karacaoglu, Nil, WeStore or AppStore: How we shop differently in Mobile Apps vs. Social Commerce (June 25, 2021). Available at SSRN: https://ssrn.com/abstract=3874296 or http://dx.doi.org/10.2139/ssrn.3874296

Kejia Hu (Contact Author)

Vanderbilt University - Operations Management ( email )

Nashville, TN 37203
United States

Nil Karacaoglu

Fisher College of Business, The Ohio State University ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

HOME PAGE: http://sites.google.com/view/nilkaracaoglu

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