In the digital era, there’s no doubt consumers are more connected to each other and to global retail brands than ever before.
But despite this connectivity, researcher David R. Bell makes the case in his new book, “Location is (Still) Everything,” that the neighborhoods we live in — and the acquaintances we encounter there — still have deep influence on how we shop.
That may have seemed intuitive in an era in which shopping was done at the corner store. But Bell, a professor at the University of Pennsylvania’s Wharton School who specializes in digital marketing and e-commerce, says those elements retain a strong pull, even on our online shopping habits.
Here, Bell chats with The Washington Post about his findings. The conversation has been edited for length and clarity.
Sarah Halzack: Even in a world where we do more of our shopping virtually and less of it at physical stores, your research has found location still has strong influence on our buying behavior. Can you explain that?
David R. Bell: The thesis of the book is a riff on “location, location, location.” It used to be that where you physically put the store determined the activity of customers. But now, what’s important is the location of the customers themselves relative to their offline options. So, say, you live in Manhattan and have two small kids and live right next to a 24-hour Duane Reade. I live in the Philadelphia suburbs and have two small kids and am 30 minutes from the supermarket. So the relative attractiveness of a company like Diapers.com is much less for you than it is for me. So the physical circumstances define your offline options and, therefore, the attractiveness of the online option.
The second thing is, the location of the customer determines with whom they might share information and who might observe their behavior.
One of your findings is that shoppers on eBay are more likely to buy a product from a seller who lives close to them. What’s going on there?
Bell: I think we all have a level of comfort with physical proximity, and there’s two reasons for that. One is, we just feel better about it if anything were to go wrong; there’s a higher level of comfort. Consumers in the U.S. are more likely to search a Canadian Web site than an Australian one for the same kind of news because of that feeling of closeness.
The second thing is, your physical closeness is also a proxy for your tastes. We’ve all decided where to live in the real world. So, the fact that you’ve chosen to live in Washington, D.C., means that you value what D.C. has to offer. You’ve done a cost-benefit analysis. Therefore, you might place a higher level of trust in a fellow D.C. person than you would in someone from, say, Los Angeles.
You found a similar phenomenon with online product reviews, right? That people are more trusting of those written by people geographically close to them?
Bell: Yes. Again, it’s partly a proxy for overlapped tastes. The whole “birds of a feather flock together” idea. If one person or location likes seller A, on average, the neighbor in that location is more likely to like that seller than someone who is further away.
So what’s the lesson in that for an online retailer?
Bell: Trying to understand how you can leverage what goes on in a location. Just simple things, like, if I’m Birchbox, would I rather ship the box to your office or to your home? Well, probably to your office, because there will be more social exposure. More people are going to see it when you open it.
Sometimes, though, birds of a feather don’t flock together. Talk about your findings about these “isolated customers” and why they might be a ripe target for online retailers.
Bell: The isolation thing was one of the more fun studies I did. The interesting idea for an online seller is, in some locations, it’s not the total number of customers that matters, it’s what the proportion of those customers is relative to total customers. So, let’s say you have two locations that have 100 potential customers for your product. In one location, they are a part of a community of 200, so they comprise half the community. In another location, they’re part of a community of 1,000 people, so they’re a minority. The second location will have more stores because there are more people, but the relative amount of effort that each store expends to cater to those tastes is going much lower. So, in those locations where customers are really isolated in their tastes and preferences, they’ll be particularly drawn to the Internet option.
This is especially true for niche-type products. So if you’re a young parent and most of your neighbors are senior citizens, you have a hard job getting diapers. So, if the customers are isolated, they will be highly restricted to an online option.
So are many Web retailers using this information yet to better target customers?
Bell: I think it could be really easily done. But it’s just sort of on the cusp now.
It’s highly usable for two reasons: There’s a huge amount of data out there about physical location, and those data tend to be pretty cheap and easy to get access to. And you always know when someone shops online what their ZIP code is.
In terms of practical applications, we used it [in a research study] with Diapers.com. We also used it with another food start-up — I can’t share the name — that I was involved in. The idea there was there’s a whole wave toward people being more into food because they’re watching “MasterChef” and such. But if I live in a small town and all we’ve got is TGI Friday’s and Chili’s, we might be really receptive to a delivery service that would send us restaurant-prepared meals from Santa Monica. That’s exactly what we found with this food start-up. In locations where people were being primed to be more gourmet with their tastes but didn’t have physical access, they were hot spots for us.
You write about how proximity seems to have more influence over our “public-facing” purchases, such as a car. For example, you talked about how in the late 1980s more than half of all automobiles sold in Tokyo were white. Why does that matter to online retailers?
What’s really interesting is a lot of things spread purely through observation. And that’s why packaging and doing things to make the product public are really important. You don’t even have to have a conversation, you can have things happen organically through social exposure.
Why is this particularly applicable with purchases that others are likely to see?
Bell: Even in the old days of branding, there’s a whole idea that you are saying something about yourself through the products that you consume. That’s why in a place like Los Angeles, people are spending a much higher fraction of their income on automobiles. They’re in them more often, and it’s more of a social signal of status or wealth.
More from The Washington Post: