Large Online Product Catalog Space Indicates High Store Price: Understanding Customers’ Overgeneralization and Illogical Inference

Abstract

Although e-commerce has been around for more than two decades, it is still so relatively new to most consumers that they often draw parallel from the bricks-and-mortar world to make (sometimes illogical) inference about the online world. This study demonstrates how one such illogical inference can affect customers’ price perception. Through a series of five experiments, we show that an online store with larger online product catalog space is perceived to be selling more expensive products, and thus customers who care more about quality (price) evaluate it more (less) positively. This is because customers have learned that large interstitial space among products in a bricks-and-mortar store is associated with high price, and they simply use this association without thinking that online space is not costly and should not signal high price. Therefore, when an online store is price oriented and would like to attract customers who place great importance on price, it should not present large space around their products in the product catalog. On the contrary, if an online store would like to attract customers who care more about quality, it should show a loose product catalog that is not at all costly but transmits a high-price store image.