The sales generated by retailers in online commerce have been increasing for years. With special discount campaigns such as "Singles Day" or "Black Friday," suppliers entice customers with low prices. Although selling over the Internet brings advantages for retailers in terms of cost and reach, it also comes with potential disadvantages from a manufacturer's perspective. A recent study involving FB4 professor Markus Dertwinkel-Kalt now provides an explanation for brand manufacturers' concerns about online business.

Many retailers not only operate brick-and-mortar stores, but also sell their products over the Internet, either in their own online stores or on platforms such as Amazon or eBay. By selling online, suppliers save retail costs that are incurred in stationary stores, for example, for staff and the provision of sales space. At the same time, they can reach a larger number of customers through online business. However, research shows that manufacturers fear that online business could damage their image. This damage is seen primarily as a consequence of reduced prices, as increasingly found in online retail.

In a recent study, Markus Dertwinkel-Kalt from the Faculty of Economics at WWU and Mats Köster from the Central European University in Vienna, investigate the claim that online retailing damages the image of manufacturers. They use a model of salience-driven attention for this purpose. They assume that online discounts draw consumers' attention to the price of a product. This lowers the perceived quality of the product. Manufacturers can respond to this by lowering the actual quality of a product as well, but this increases the damage to their brand image.

The analysis shows a novel external effect that discounts in one sales channel can have on customer behavior in another channel: Accordingly, online discounts can reduce a consumer's perceived quality and thus willingness to pay for a brick-and-mortar purchase. In this way, the researchers provide an explanation for brand manufacturers' attempts to limit online sales by retailers despite the benefits of lower retail costs and greater reach.

The study is titled "Attention to online sales: the role of brand image concerns" in the Journal of Economics & Management Strategy. Click here to access the full text.