The Impact of Increasing Search Frictions on Online Shopping Behavior: Evidence from a Field Experiment

Abstract

Many online stores are designed such that shoppers can easily access any available discounted products. The authors propose that deliberately increasing search frictions by placing obstacles to locating discounted items can improve online retailers’ margins and even increase conversion. The authors demonstrate this using a simple theoretical framework that suggests inducing consumers to inspect higher-priced items first may simultaneously increase the average price of items sold and the overall expected purchase probability by inducing consumers to search more products. The authors test and confirm these predictions in a series of field experiments conducted with a dominant online fashion and apparel retailer. Furthermore, using information in historical transaction data about each consumer, the authors demonstrate that price-sensitive shoppers are more likely to willingly incur search costs when locating discounted items. Our results show that increasing search frictions can be used as a self-selecting price discrimination tool to match high discounts with price-sensitive consumers and full-priced offerings with price-insensitive consumers.