Large Online Product Catalog Space Indicates High Store Price: Understanding Customers’ Overgeneralization and Illogical Inference

Although e-commerce has been around for more than two decades, it is still so relatively new to most consumers that they often draw parallel from the bricks-and-mortar world to make (sometimes illogical) inference about the online world. This study demonstrates how one such illogical inference can affect customers’ price perception. Through a series of five experiments, we show that an online store with larger online product catalog space is perceived to be selling more expensive products, and thus customers who care more about quality (price) evaluate it more (less) positively. This is because customers have learned that large interstitial space among products in a bricks-and-mortar store is associated with high price, and they simply use this association without thinking that online space is not costly and should not signal high price. Therefore, when an online store is price oriented and would like to attract customers who place great importance on price, it should not present large space around their products in the product catalog. On the contrary, if an online store would like to attract customers who care more about quality, it should show a loose product catalog that is not at all costly but transmits a high-price store image. Previous research has shown that because offline store space is costly, customers tend to associate large interstitial space among products in a bricks-and-mortar store with high price. Drawing on consumer inference and signaling theories, the present research suggests this offline association could be overgeneralized to online contexts and lead customers to illogically infer high price based on large interstitial space among products in an online product catalog (i.e., online product catalog space, OPCS). We conducted five experiments to test whether and why OPCS affects customers’ online store price perception and its downstream effect on store evaluation. Our findings indicate that (1) an online store with larger OPCS is perceived to be selling more expensive products (Study 1); (2) the effect of OPCS is due to offline–online overgeneralization rather than online learning, because either a reminder of offline–online differences (Study 2) or sufficient web design knowledge (Study 3) diminishes the effect of OPCS on store price perception, and only people who believe that large offline space is linked with high price show this effect (Study 4); and (3) customers who care more about quality evaluate a store with larger OPCS m