Algorithmic Assortment Curation: An Empirical Study of Buybox in Online Marketplaces

Abstract

Online marketplaces have revolutionized online sales by creating platforms that connect millions of buyers and sellers. While the presence of numerous third-party sellers attracts customers, it also results in a proliferation of listings for each product, making it difficult for customers to choose between the available options. To address this issue, online marketplaces employ algorithmic tools to curate and present different product listings to customers. Although tools that assist customers in choosing between different products, such as recommender systems and reviews, have been extensively studied, there is limited evidence regarding tools that help customers choose between different listings of the same product. This paper focuses on the Buybox, an algorithmic tool that prominently presents one option as the default choice to customers.

We assess the Buybox’s influence on marketplace dynamics by examining its staggered introduction within a major product category in a leading online marketplace. Our results show that the Buybox’s implementation increases the number of orders and enhances the efficiency of the customer journey. This is evidenced by an increase in conversion rates and a more pronounced Buybox effect on the mobile channel, where search frictions are higher compared to the desktop channel. The Buybox introduction simplifies the process of posting new products to the marketplace, potentially reducing friction for sellers. We find supporting evidence for this hypothesis, as the number of sellers offering a product increases after the Buybox’s introduction.

Our analysis reveals that the Buybox is an effective tool for reducing search frictions and stimulating competition among sellers. Customers benefit from lower prices and higher aver- age quality levels when competition for the Buybox is intense. However, the marketplace becomes more concentrated following the Buybox’s introduction, representing an unintended consequence that platforms and vendors should manage. Our study contributes to the growing literature on algorithms in platforms by examining how algorithmic curation affects marketplace participants and overall marketplace dynamics.

Keywords: algorithms, algorithmic curation, online marketplaces, empirical operations, Buybox, marketplace operations