E-Commerce Profitability & Consumer Purchase Behavior

Consumers often evaluate alternatives differently based on whether they are performing the search online, or offline physically in a store. Information is available more systematically online for consumers to evaluate thus enabling them to rate each and every feature of the product. However, certain attributes (such as size) are difficult to judge without the physical inspection of the product and consumers clarify their preferences only after viewing the product offline. In this paper we attempt to understand how preferences change when evaluating products online versus offline. Specifically, we study the change in utility derived from the various attributes of a product and the relationship between the utility to a consumer from these attributes online and offline. Additionally, we analyze the impact of changing preference on the change in willingness to pay for each of the product attributes, and change in willingness to pay for features when it has been evaluated both online and offline. The change in willingness to pay demonstrates how consumers might over-value or under-value features based on their mode of evaluation. Consumers often use the non-compensatory decision making process when making purchase decisions, and the ability to filter products online impacts which products are finally included in the consumer’s choice set. In this paper we also attempt to understand if a consumer is more noncompensatory while evaluating products online or offline.