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CHAPTER 1 INTRODUCTION
With the rapid growth of e-commerce, consumers are gradually becoming accustomed to online shopping, and the number of online shoppers is increasing year by year. According to a global online shopping survey across 10 countries, about 93% of consumers have purchased a product on the Internet (Pitney Bowes Inc., 2011). Furthermore, about 69% of consumers are reported to be highly capable of making online purchases (Maxwell &
Hudson, 2011). Consumers can now buy almost anything on the Internet simply by making a few clicks, and online shopping has the convenience of not being limited by location or time. However, the lack of trust between sellers and buyers still interferes with consumers’
online transaction decisions (Ba & Pavlou, 2002; Utz, Matzat, & Snijders, 2009). Trust remains a critical factor in electronic transactions, and consumers continue to be concerned about the credibility of sellers. Therefore, most online marketplaces use some form of feedback mechanism, such as an evaluation system, to promote mutual trust between sellers and buyers (Ba & Pavlou, 2002; Bolton, Katok, & Ockenfels, 2004; Resnick, Zeckhauser, Friedman, & Kuwabara, 2000).
Because of the information asymmetry between sellers and buyers, potential online
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buyers tend to rely on evaluation systems and others’ feedback when making decisions (Ba
& Pavlou, 2002; Gregg & Scott, 2006). Moreover, information asymmetry may bring about transaction disputes or even result in fraud, such as the non-delivery of purchased items, misrepresentation, and the sale of black market goods or triangulation (Gregg & Scott, 2006). Triangulation occurs when the seller buys a product from another seller or merchant using a stolen credit card or account and then resells it online (Gregg & Scott, 2006). In addition, the existing online evaluation systems have limitations, as they cannot resolve problems such as anonymity, online identity and online fraud (Gregg & Scott, 2006;
Resnick et al., 2000). Sometimes, sellers offer cheap goods to attract buyers and accumulate positive ratings or negotiate with buyers so that they will not leave negative ratings.
Moreover, some sellers retaliate against buyers who give negative ratings (Gregg & Scott, 2006). Steiner (2003) confirms that about 19% of eBay users have received retaliatory feedback and about 16% have been a victim of feedback extortion. Online shoppers also face other retaliatory behavior, such as telephone harassment, the sending of threatening packages and the use of threats to induce the purchase of online goods or services. To avoid receiving threats from sellers, consumers can obtain relevant information from news media or online shopping forums and avoid leaving negative feedback when retaliation is likely.
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Other sellers engage in a more systematic form of manipulation by constantly posting reminders to leave feedback in an attempt to influence buyer evaluation and to sustain good standing. Seller manipulation is also observed on sites such Taobao.com but also on well-known online marketplaces, such as eBay and Yahoo!
Today, the world’s most famous online marketplaces (e.g., eBay and Amazon.com) have the best choice of consumers. As a result of the rapid growth of online shopping in China, the C2C online marketplace Taobao.com has become one of the most well-known online shopping websites in Asia. Taobao.com was launched in 2003 by the Alibaba Internet business group, which was founded in 1999 (iResearch, 2012; Oberholzer-Gee & Wulf, 2009). In 2011, there were approximately 500 million registered users of Taobao.com and the site received over 60 million unique visitors per day. The largest C2C online marketplace in China, Taobao.com accounts for over 80% of the e-commerce transactions in China (iResearch, 2012). The website provides a platform for individual sellers and small businesses to sell items via auction or as a buy-it-now (BIN) fixed-price offer. Most sellers choose the BIN model by setting a fixed price and waiting for buyers to purchase the products directly (Ye, Li, Kiang, & Wu, 2009). Taobao.com also provides an online evaluation system to maintain trust between sellers and buyers. The evaluation system
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enables consumers to check sellers’ rating scores, which are evaluated by buyers, and buyers’ comments. This information is critical for consumers to decide whether or not to purchase from a seller. Accordingly, sellers on Taobao.com tend to care about their rating scores, which are an accumulated value, as they provide clear evidence of their credibility.
A number of previous studies examine the issues relating to online reputation systems.
For example, Ba and Pavlou (2002) investigate the effects of trust building technology.
Bolton et al. (2004) explore the effectiveness of electronic reputation mechanisms, while Resnick et al. (2000) point out the relationship between reputation systems and trust. Gregg and Scott (2006) emphasize the role of reputation systems in reducing online auction fraud.
Zhou and Windle (2008) suggest the design of an effective reputation system for online marketplaces. The extant research indicates that the potential negative characteristics of sellers are hard to present in reputation systems (Resnick et al., 2000). Moreover, although online marketplace providers try to enhance the reliability of their evaluation systems by adopting credit card and real name authorization, evaluation manipulations still occur. As mentioned, most evaluation systems have difficulty deterring and disclosing these manipulations. Therefore, the evaluation system approach still has a number of limitations.
In particular, manipulation of evaluation by sellers tends to create unreliable transaction
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environments in which there are large amounts of positive feedback and few negative ratings (Gregg & Scott, 2006; Resnick & Zeckhauser, 2000).
The purpose of this study is to examine the effects of seller manipulation on buyer evaluations, namely, rating scores and text comments. Although rating scores can be easily influenced, buyers’ comments are not so easy to manipulate. Because ratings are cumulative, a higher score means a more reputable seller. Therefore, sellers tend to care more about their rating scores than comments. Rating scores are also used to reflect the reliability of the sellers on Taobao.com. However, Pavlou and Dimoka (2006) find that 97% of consumers read buyers’ comments and 81% read at least 25 comments, because buyers’ comments contain more information concerning the quality of products than rating scores. The purpose of this study is to examine the effects of seller manipulation on buyer evaluations, which include rating scores and comments, and to examine the consistency between rating scores and comments.
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