Buyers in China care where their goods come from. It’s been well established that the country-of-origin of a product adds to the branding effect. Think of Belgian chocolates, Swiss watches and South Korea’s kimchi.
New research has shown that this geographic preference applies domestically, and to online shopping, too. Data from e-commerce platform Taobao shows that Chinese buyers prefer to purchase from some provinces than others.
Beijing, Shanghai, Zhejiang, and Jiangsu are the most preferred shopping destinations. Anhui, Jiangxi, Shanxi, and Heilongjiang are least preferred; while Hubei and Henan lie somewhere in the middle. Consumers also like to buy from their home province.
This implies that province-level governments certainly have the incentive to continue investing in the branding of their province’s products. For example, in 2015, the Zhejiang province issued a directive in building the Zhejiang brand, requiring the participation of businesses and governments at all levels. This is followed by Hubei and Henan provinces and there are now dedicated websites to help Chinese cities with their city branding.
At first glance, these efforts would be useful in attracting international investment. But they are also useful in attracting domestic trade from other provinces.
The study, which I co-authored with Professor Pradeep K. Chintagunta from the Chicago Booth School of Business, was recently published in the journal Quantitative Marketing and Economics. We set out to find consumers’ shopping patterns across provinces in China.
Why do buyers look at the province? There is always risk and uncertainty in online shopping. To reduce their risk, buyers often look at seller reputation and reviews. In large marketplaces like Taobao, however, good reviews can be aplenty, and hence uninformative. At the time of our data collection, from 2011 to 2013, there were eight million sellers on Taobao. Beyond reviews and perceived quality of the products, the seller’s location becomes another cue for buyers to ascertain their risk.
In other words, the location becomes a brand associated with the products’ quality and the sellers’ trustworthiness and efficiency.
Preference is unrequited
It is easy to assume that buyers will prefer to buy from their home province or nearby provinces, possibly due to familiarity and lower transport costs due to a shorter distance. In that case, buyers in a group of nearby provinces should show similar levels of preference for sellers located in this group.
Interestingly, that was not the case. Our analysis of weekly Taobao sales figures found that buyers from Province A may show a preference for sellers from Province B, but not vice versa. For example Zhejiang buyers have a lesser preference for Guangdong sellers but Guangdong buyers find Zhejiang as an attractive seller province.
This is not because the product is only available in certain provinces. We chose the data across eight common product categories such as women’s shoes, cellphones and disposable diapers. Our checks showed that the “standard” products were sold in all provinces. For shoes, which can come in various designs, we were also able to find a visually identical pair of shoes in nearly all provinces.
Time also does not affect buyers’ preference for sellers from a certain province. At the time of data collection, sellers could not launch marketing promotions based on the buyers’ province. They only knew the buyers’ province after an order had been placed.
It thus seems that the location has a certain role to play in these asymmetric shopping patterns. Besides the distance to the seller’s province, the location also determines if there is trust.
Previous studies compared respondents’ views of “their most trustworthy provinces”. People trust their home province the most. Beijing, Shanghai and Guangdong also ranked among the most trusted provinces. There was a high correlation between asymmetric province dyadic trust and preferences for online shopping: Buyers showed stronger preferences towards and hence bought more from provinces they trusted more.
We also looked at the provinces’ socio-economic measures, and found that buyers preferred to buy from places with similar socio-economic levels as their own province. Migrants also showed strong support for sellers from their home province, particularly in the category of women’s shoes.
Our findings are similar to one in the United States. The study by Daniel Elfenbein and his co-authors, using monthly eBay data collected in 2015 and 2016, found that buyers showed geographic preferences for certain states. However, the factors were different. US buyers tend to buy from states with similar ethnicity make-up, religion and political affiliation as their own state.
This is not surprising, as there are large differences in the social, religious and economic environments of the two countries.
As online shopping boomed, particularly during the pandemic, it would pay for provincial or state governments to increase their efforts in place branding. This will help to attract more sales, be they from international or domestic customers. This is particularly relevant and important for e-commerce platforms and businesses in Singapore and Southeast Asia since their sellers and buyers are located in different regions, provinces or countries, and a seller’s location might be an important factor for buyers to choose among sellers.
The article is an abridged version of the one first published on ThinkChina.