If you have an eCommerce business, you probably think that location doesn’t matter. But that isn’t always the case.
New research from the Wharton School suggests that real-world factors such as location can actually have a big impact on online businesses. In this instance though, the location that matters is that of the customers rather than the business itself. In an interview with Knowledge @ Wharton, Marketing Professor David Bell explained:
“What we’re finding is that it’s still about location, but this time it’s about the location of the customer. Where is that customer and with whom does that customer also live? That’s what’s really important in the world of eCommerce.”
Here are more of Bell’s observations:
The reason that a customer’s location matters so much is pretty simple, when you think about it. Existing customers can sometimes be the most powerful source of referrals, even for online companies. That’s because customers often talk to friends and acquaintances in the offline world about their experiences with online companies. So their location, in relation to potential new customers, is paramount.
Bell offered a practical example based on his research surrounding online men’s clothing retailer Bonobos.com:
“The firm that we looked at…in locations where customers were more apt to talk to each other and trust each other, there was a greater sales diffusion online. The target customer in this case is a male, aged 25-45, who is somewhat fashion-forward. It turns out that a good proxy for where those males are congregating is the number of bars and liquor stores per capita in a location. We had some sociological theory that told us about interaction and then we were able to go to public data and find a variable that was actually a pretty good proxy.”
So what’s the takeaway from all this data?
Bell insists that more online companies are learning the importance of also operating offline. Of course, there are still benefits to operating online, says Bell. It makes it easier to reach large numbers of potential customers, makes fulfillment easier and makes it easier to scale your business. But it could be a mistake to only focus those efforts online.
He says that businesses can find correlations between online customers and their offline activities, as Bonobos.com found. And finding these links can help to plan offline marketing activities that can lead to online sales.
Location Photo via Shutterstock