When Does the Recommendation of Other People Matter in Social Commerce Even Though They Have Not Purchased Either?

Owing to the lack of human bandwidth online, feedback systems have been introduced as a means of providing information on quality. Existing studies on the effects of ratings systems have had conflicting results. With this in mind, this study investigates the relative contribution of information according to search cost. It focuses on Groupon, based on its unique provision of daily deals, most of which are local and unique services not sold elsewhere and limited to a single day. In cases like that of Groupon, in which usable information for evaluating product quality is limited and search costs are high, consumers may rely on less persuasive information, such as others’ preferences and ratings. Using Groupon data, this paper confirms that under conditions of high search cost, pure preference can positively influence actual sales. It also finds that this effect is magnified as search cost increases.