Looking to increase sales conversions? Haoyan Sun says try live chat.
By Margie Peterson
Image by iStock/Irina_Strelnikova
When a person is shopping online for, say, a sweater, she might have questions about sizing or material that aren’t answered by the product information listed on the merchant’s posting. If she can instant message the seller with her questions in a live chat, she’s more likely to buy the sweater.
That’s among the findings of a study by Haoyan Sun, assistant professor in decision and technology analytics at Lehigh, in collaboration with Jianqing Chen, professor at University of Texas at Dallas and Ming Fan, associate professor at University of Washington, Seattle.
Sun and her fellow researchers analyzed data from Taobao, one of the world’s largest online marketplaces, and the most profitable business of Alibaba, the mammoth Chinese online commerce company. Taobao is similar to eBay but with important differences: sellers don’t pay Taobao a commission on goods sold and the platform allows sellers to host their own live chat for free in which they can receive and respond to customer questions by instant message 24 hours a day.
Sun’s study looked at the aggregated monthly information of 1,446 sellers on Taobao in the category of women’s clothing over a 10-month period from May 2011 to February 2012. The researchers chose to focus the study on women’s clothing because product attributes are very different even within the same category, and customers are also heterogenous, as they could have questions about sizing, material or style.
The researchers found that the use of the live chat feature gave sellers an advantage, especially when they were conscientious about answering customers’ questions in a timely fashion. That responsiveness significantly improved the merchant’s conversion rate–the number of people who look at something online then buy it.
“Usually in e-commerce, the conversion rate is lower than 2 percent, meaning if 100 people have looked at your product page, on average only two people will make a purchase,” Sun says.
But those purchases increase substantially when sellers are diligent about answering customers’ questions on live chat.
“On average, we see sellers respond about 50 percent of the time to questions,” Sun says. “If they respond 100 percent of the time, they can increase the conversion rate by 9 percent.”
Live chat especially assists vendors who already have lots of good customer reviews. “The high number of reviews help you convince customers to make the purchase,” she says. “When you see a lot of reviews, you think there must be a lot of purchases.”
Live chat also helps when the information about a product online is limited.
“Not every seller wants to put up a lot of information,” Sun says. “There’s information overload and not every customer wants to read 10 pages of description.”
Services like live chat may have contributed to Taobao becoming the leading consumer-to-consumer marketplace in the world.
“Twenty years ago, eBay was also trying to establish themselves in China but they lost the competition,” Sun says. “One of the key differences was that eBay charges a commission for each sale.”
It is completely free to open a store on Taobao. In addition, Taobao’s live chat service, which is absent in eBay, is an important advantage that makes Taobao more competitive with eBay in China, according to Sun. Buyers on the site use the service to discuss or even haggle with sellers, which resonates well with the vibrant marketplace culture in China.
So how does Taobao make money? “They monetize traffic,” Sun says. The platform sells ads and other add-on services which make a merchant’s product more prominent when people do online searches for such items.
Advertising is helpful but sellers neglect the live chat option at their peril, the research shows. “You pay money to attract customers, so you should pay attention to them and convert them into paying customers,” Sun says. “Our findings show the live chats help sales conversions.”
Why it Matters
The research results demonstrate that human interactions can play a significant role in e-commerce, even in this age of big data and automation.