How e-WOM and local competition drive local retailers' decisions about daily deal offerings

Local retailers considering offering daily deals must take into account possible impacts of both electronic-word-of-mouth (e-WOM) and local competition. However, how e-WOM, local competition, and their interactions affect local retailers' decisions to offer daily deals remains unclear. Here we examine these effects utilizing a data set that contains details of daily deals, online reviews, and local competition measures for restaurants in the Chicago area. With a propensity score matching (PSA) method, we show: 1) local retailers with high ratings and high number of reviews were more likely to initiate daily deals; 2) local retailers in an area with a low level of local competition were more likely to initiate daily deals; and 3) the strength and direction of the impact of e-WOM depend on the level of local competition. Our results enhance understanding of local retailers' decisions to offer daily deals and yield important implications related to daily deal sites. •Local retailers' decisions to offer daily deals are impacted by e-WOM and local competition, and their interactions.•We extend the propensity score analysis (PSA) method to continuous variables.•We find that the strength and direction of the impact of e-WOM are moderated by local competition.•Our findings enhance understanding of local retailers’ decisions to offer daily deals and yield important implications for daily deal sites.