Are all signals equal? Investigating the differential effects of online signals on the sales performance of e-marketplace sellers

In the competitive e-marketplace today, sellers are using an increasing number of signals to entice customers to make online purchases. However, how differential these signals are in terms of their capacity to improve sales performance has not yet been investigated. The paper aims to discuss this issue.

Drawing on signaling theory and grounded in the context of China’s largest e-marketplace, Taobao, this study investigated the different effects of five commonly used signals on the sales performance of e-marketplace sellers.

The authors find that warranty has the highest effect on sales performance, followed by overall rating, mean detailed seller rating, percent of positives, and web site quality.

First, this study builds on signaling theory and contributes to the e-marketplace literature by providing new insights into how specific signals differentially affect sales performance in the e-marketplace (with evidence from a large-scale empirical analysis). Second, the study extends the applicability of signaling theory to the e-marketplace domain by incorporating distinctive features of the e-marketplace into the original signaling theory. Finally, the findings lend practical support to e-marketplace sellers’ investment decisions on signals and provide guidelines for deployment of such signals.