Spatial Proximity, Consumer Online Purchase and Platform Marketing Strategies

Abstract

Maximizing sales using different marketing strategies is one of the key functions in online retail operations. In this research, we investigate how spatial proximity can affect consumers’ purchase behaviors and how an ecommerce platform can leverage this effect to increase sales. Spatial proximity, defined as geographic closeness of consumers, plays a significant role in their purchase behavior. However, existing literature mainly focuses on its effect on new product adoption while largely ignoring other consumer decisions, such as purchase quantity and inter-purchase time, which are equally critical for online retail operations. Further, the impact of consumer spatial proximity on supply-side marketing strategies, as well as its dynamics and heterogeneous impact, remains understudied. Based on social identity theory, this study examines these issues using a unique dataset from a leading ecommerce platform in Asia. The results indicate that consumer-to-consumer (C-C) spatial proximity has a significant impact on consumer online purchases (when and how much to buy) and the platform’s marketing strategies (price and promotion), and that such effects can change over time. Further, significant heterogeneity exists across consumers and product categories with different levels of social identity. The findings suggest that the focal platform can increase its annual revenue by more than $5,218,541 (an increase of 6.37%) by using C-C spatial proximity-based price and promotion strategies for one category (personal care and health) alone. Consequently, this study provides important theoretical and managerial implications for marketing researchers and practitioners in online retail operations.

Keywords: spatial proximity, online retail operations, social identity theory, consumer purchase