Herding Among Retail Shoppers: the Case of Television Shopping Network

Abstract

Herding behavior refers to the behavior of individuals behaving similarly as a group without directions to coordinate. Herding can demonstrate rational characteristics. When consumers believe that others may have private information about a product, they infer unobserved information through other people’s behaviors, thereby engaging in similar actions themselves. While rational herding behavior has been found mostly in high involvement environments such as the financial markets, this paper provides evidence that such behavior may also occur in a comparatively lower involvement environment such as retailing. To demonstrate herding behavior and test shoppers’ rationality in such, the authors employ a unique dataset from a major TV shopping channel. In this setting, information about other buyers’ purchase decisions is only sometimes observed by shoppers. Evidence suggests that herding happens among shoppers and the herding behavior appears to exhibit rationality. The authors find that herding effects (1) are stronger when relative price discount is smaller, (2) are more prominent for a product category with less digitalizable attributes, and (3) appear to happen mainly in the earlier part of a sales pitch when shoppers have less information about a product and are more uncertain about their product valuation.

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Fig. 1
Fig. 2

Notes

  1. 1.

    We discuss in detail when the “sold box” is used in the data section.

  2. 2.

    Note also that herding differs conceptually from “information cascade,” which often refers to the phenomenon that consumers ignore private information without having a tangible reason to. In our study, we use the moderating effects on observed sales (“sold box”) to infer the rationality of following the herd, with a tangible reason.

  3. 3.

    We use the parameter estimate from Table 3 column (1) row one for this calculation. The actual magnitude of herding effect is context dependent, as we discuss further in the paper.

  4. 4.

    The indirect measures of product popularity used in the literature include the volume of online reviews [16], click-through counts of webpage visits [41], sales ranks published by retailers [16], and potential buyer participations in the auction bidding process [38].

  5. 5.

    At any point of time during a sales pitch, the sales hosts control when to display and take off the “sales box” that shows how many units of products have been sold thus far.

  6. 6.

    The database from the TV shopping network does not contain “sold box” information, an indication of the non-strategic role of the “sold box” in the TV shopping programs.

  7. 7.

    For ease of reading, we suppress the subscript i for all future references of ti, with the understanding that Ti, the total length of pitch i, is pitch specific.

  8. 8.

    The model described in Eq. 1 is a dynamic model with fixed effects, which can lead to biases in estimates under certain sample size conditions [33]. We replicated the analysis using the SAS procedure PROC Panel, which addresses such potential biases. The results remain substantively consistent.

  9. 9.

    However, a set of time-invariable variables Zi (e.g., relative price discount as hypothesized in H2) are useful when examining their moderating effect on herding (Sit).

  10. 10.

    We acknowledge that there can still be a relationship between sales and the use of “sold box,” as the host may rely on their prior experience and/or “hunches” to display the “sold box” strategically.

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Correspondence to Ye Hu or Sam Hui.

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Hu, Y., Wang, K., Chen, M. et al. Herding Among Retail Shoppers: the Case of Television Shopping Network. Cust. Need. and Solut. (2020). https://doi.org/10.1007/s40547-020-00111-8

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Keywords

  • Herding
  • Moderators of herding
  • Retailing
  • TV shopping