Impact of Live Chat on Purchase in Electronic Markets: The Moderating Role of Information Cues

Abstract

Live chat tools have emerged as a channel for fostering synchronous communication between sellers and buyers. The role of live chat in the e-commerce environment, however, is largely underexplored. Using granular data from Alibaba, we examine the effect of live chat on consumers’ purchase decisions. After controlling for the selection process that customers with high purchase intentions are more likely to initiate live chat in the first place, we find that live chat can increase the purchase probability of tablets by 15.99%. We also investigate how the effect of live chat is moderated by existing information cues: product sales volumes and seller feedback scores. The substitutional or complementary patterns allow us to understand how live chat tools change the ways consumers evaluate product quality and seller credibility. We observe a substitutional effect of live chat on seller feedback score such that sellers with low feedback scores benefit more from live chat conversations than sellers with high scores. On the contrary, products with a high past sales volume sell better after live chat, indicating a reinforcement effect. Such findings deepen our understanding of the difference between various information cues in electronic markets. As one of the first systematic studies to investigate live chat, our paper contributes to web trust conceptual frameworks with empirical analyses and sheds light on practical decisions faced by e-vendors and platform designers.

Keywords: live chat, reputation systems, feedback score, past sales volume, online word-of-mouth, e-commerce, electronic market

JEL Classification: L81, C36