Iowa researcher finds online merchants who emphasize price are less reliable
Thursday, March 1, 2012

A new study by a University of Iowa researcher suggests that online merchants who display a dollar sign in the titles of their Google search engine results may be less reliable than merchants who don't.

"We found that merchants that can't compete on service attract customers using the lure of a good deal," says Gautam Pant, a professor of management sciences in the Tippie College of Business. "If you're a retailer with a low reputation, you use what you have and price is the best thing they have to attract customers."

"If you're a retailer with a low reputation, you use what you have and price is the best thing they have to attract customers."
Gautam Pant

As a result, they tend to use dollar signs and advertise their low prices in search engine results to attract attention, making them the online equivalent of the Manhattan street vendor hawking cheap watches in a very loud voice. You might get a good deal on a watch, but if it breaks, don't go looking for him to exchange it.

Pant's observation was part of a larger study in which he and his co-authors measured online reliability using visual cues in search engine results. Buying online has carried with it more risk than buying in a brick-and-mortar store, in part because search engines like Google and Yahoo! simply list search results with no effort at providing consumers with reliability information. Many websites provide places for consumer reviews, but Pant said those are not always reliable and often provide only minimal information, so he and his co-authors are looking for a method that consumers can use to judge vendor reliability.

In this study, they launched 243 internet searches on Google, Yahoo! and Microsoft for digital cameras made by major manufacturers and sold by online merchants. They then looked at how the search engine results were physically arranged on the first few result pages and correlated that to the merchants' ratings from the Better Business Bureau (BBB) to see if the arrangement provided visual cues to the seller's reliability.

They found that some cues did, in fact, reflect on the reliability scores, such as merchants who used dollar signs in their results from Google also had markedly lower scores from the BBB.

They also found that many of the merchants who appeared in the paid results but not in the organic results received low marks from the BBB. Again, he said this reflects some retailers' ability to compete on nothing but price.

"Organic search results are the result of a complex formula that search engines use, so it's hard for merchants to get favorably placed in them," Pant says. "This doesn't mean that all of the retailers in the paid results are less reliable, but it's easier for merchants that can't compete on reliability to get visibility using paid results."

Pant also found a correlation between lower price and lower reliability. Merchants that sell for less, he said, are generally less reliable.

The researchers also found some idiosyncrasies unique to each search engine. For instance, vendors who appeared more frequently in Yahoo!'s search results generally had lower reliability scores. But the same was not observed for vendors who appeared multiple times in Google and Microsoft.

The research also found that combining the various visible cues from search results can provide effective predictions about the reliability of the vendors appearing in those results. Based on this idea, Pant says developers can create applications that analyze search engine results to provide such reliability predictions to consumers in real-time.

Pant's paper, "Can visible cues in search results indicate vendors' reliability?" was published recently in the journal Decision Support Systems. His co-authors were Zhongming Ma of California State Polytechnic University-Pomona, Olivia R. Liu Sheng of the University of Utah, and Alicia Iriberri of the University of Illinois-Springfield.