Herding Among Retail Shoppers: the Case of Television Shopping Network
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RESEARCH ARTICLE
Herding Among Retail Shoppers: the Case of Television Shopping Network Ye Hu 1 & Kitty Wang 1 & Ming Chen 2 & Sam Hui 1
# Springer Science+Business Media, LLC, part of Springer Nature 2020
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. Keywords Herding . Moderators of herding . Retailing . TV shopping
1 Introduction Herding behavior refers to the behavior of individuals behaving similarly as a group without directions to coordinate. Academic research widely documents the evidence of “herding” behavior, where later arrivers, when making their own decisions, take into account earlier arrivers’ behaviors and subsequently make similar choices. In the retailing context, the outcome of herding may result from many reasons. One type of reason is social influence [3, 42, 48]. Such influence can be “verbal” such as word-of-mouth where information about product quality is disseminated through reviews and other forms of user-generated content [11, 15, 28, 39]. It * Ye Hu [email protected] * Sam Hui
1
Department of Marketing and Entrepreneurship, C.T. Bauer College of Business, University of Houston, Houston, TX 77004, USA
2
Belk College of Business, University of North Carolina at Charlotte, Chapel Hill, NC, USA
can also be “non-verbal” in the sense that product quality is not revealed directly by previous consumers or users; however, their choices are “silently” observed by others facing similar choices [14]. In the literature, both irrational and rational herding behavior has been documented. In the retailing context, later buyers can “mindlessly” replicate what earlier buyers do, often yielding suboptimal outcomes [38]. However, the literature also finds evidence that herding behavior can be highly rational in nature [19, 47]. The ration
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