Brands can sometimes have unique geographic associations, with consumers in different places exhibiting distinct preferences for products produced in some geographical regions. As a result of these associations, geographical regions can become a brand in themselves, with consumers linking them to seller trustworthiness or product quality.

Buying goods online is associated with greater risk and uncertainty, so buyers have to rely on various cues to infer seller trustworthiness and product quality. Past studies suggest that reviews and feedback play a crucial role in online purchases. When purchasing products on platforms that contain thousands or millions of sellers, however, customers tend to consider other factors, either because they are uncertain about sellers’ trustworthiness, or because they do not feel like browsing through all the reviews, or because the reviews might be uninformative or even fake. In these cases, the location of sellers and geographical factors can guide customers’ decisions more strongly.

Over the past few decades, producers and researchers have been trying to clearly delineate geographical associations in branding, as this could guide marketing and business strategies. This led to a growth in the use of so-called origin identifiers, labels that clarify the origin of goods, and the delineation of the so-called ‘country-of-origin effect’.

The country-of-origin effect is the tendency of consumers and marketers to stereotype different types of products based on where they were manufactured. This could mean implying that cars made in Germany or wines made in France and Italy are of a better quality, for example.

Dr Junhong Chu, a Professor of Marketing at the Hong Kong University and the National University of Singapore, and her colleague Professor Pradeep K. Chintagunta, recently carried out a study exploring the geographic associations of brands within China’s domestic trade context. Instead of looking at country-of-origin effects associated with entire countries, they thus examined how consumers and marketers across China view goods sold by sellers from different Chinese provinces.

The researchers specifically analysed trade and purchase patterns in data collected by Taobao, a renowned Chinese online shopping platform owned by the Alibaba Group. By analysing purchases of users living in different Chinese provinces from July 2011 to May 2013, they hoped to unveil any geographic factors influencing people’s buying preferences.  

The research team specifically analysed the purchases of eight categories of products that were often purchased online. These included women’s shoes, smartphones, disposable diapers, bath cream, bibs, water bottles, cloth diapers, and baby wipes.

Interestingly, they found that while buyers in some provinces of China often buy goods arriving from other provinces, these preferences are not always reciprocal. In other words, there appears to be an ‘asymmetry’ in trade patterns between different Chinese provinces, with customers in some provinces buying from sellers in other provinces, while their province sells very few goods to people in those provinces.

The team’s analyses suggest that numerous geographical factors can guide the purchasing choices of Taobao users. In total, Professor Chu and Professor Chintagunta identified eight factors that explained between 75% and 90% of the variance within the online shopping data they analysed – namely, distance, dyadic trust in province, overall seller reputation, cultural and linguistic commonalities, migration, economic factors, social factors, and institutional factors.

Firstly, they found that users often preferred to buy goods that were closer to them, possibly to reduce delivery costs or ensure that goods are delivered faster. These findings hint to a so-called ‘home bias’, which describes customers’ preference for goods sold by sellers in their home provinces. These findings are also explained by the gravity model, which finds that trade volume between two places reduces with the distance between them. 

The second factor that influenced consumers’ decisions was the trust in sellers or in other provinces, which is not always bilateral and can thus contribute to the observed asymmetries. The next was a seller’s online reputation, conveyed through ratings, reviews and other experiences reported by alleged previous customers online.

Professors Chu and Chintagunta showed that similarities between different Chinese provinces could also affect purchasing trends. In fact, many consumers appeared to preferentially purchase goods sold in provinces with similar socio-economic, linguistic, and cultural characteristics.

Migration patterns also seemed to be reflected in the choices of consumers using Taobao. When people migrated from one Chinese province to another, they might preferentially purchase products from sellers in their home province, whether for sentimental, economic, or cultural reasons.

Economic factors, such as the size of the gross domestic product in the buyer’s or seller’s province also appeared to contribute to observed asymmetries, and so did social factors. Specifically, some consumers appeared to preferentially purchase goods shipped from more developed provinces or provinces with educational and occupational structures that resembled those of their home province.

Finally, the researchers found that institutional factors could also influence purchasing choices. Consumers in provinces where institutions supported and promoted online trade tended to purchase more products than people in provinces where online shopping is not as institutionally supported.

In this context, institutional support can be understood as a more developed market that supports sellers financially, legislations that protect online buyers, and a well-functioning legal landscape that can enforce agreements or settle disputes.

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Overall, the team’s analyses unveiled the existence of asymmetric province-to-province trade patterns in China, which resulted from asymmetric pairwise province-to-province preferences. In addition, customers across China appeared to prefer buying from sellers in some provinces when purchasing specific goods, yet these provinces varied based on their home province.

This was particularly true for the purchase of women’s shoes. Buyers in the Chongqing province, for instance, preferentially purchased women’s shoes from sellers in Guangdong, while buyers in the Jiangsu province purchased women’s shoes from Guangdong less often.

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The researchers found that geographical associations in province-to-province trade appeared to be persistent over time. This suggests that the geographical factors influencing customer choices in China are fairly stable and deep-rooted.

The findings gathered as part of this study could inform the marketing and business decisions of online shopping platforms in China. In addition, they could pave the way for further studies looking at geographical and regional branding associations at a micro-level.