Tailoring Technology for Heterogeneous Shoppers: Implications for e-Retail Channel Competition

With the growing number of shoppers entering e-marketplaces, e-retailers commonly use tailoring technology to cater to diverse shopper needs and gain a competitive advantage. However, the impact of shopper heterogeneity in this tailoring competition remains unclear. Focusing on e-retailers' tailoring practice, we fill the gap by revealing its impact on e-marketplace channel competition and sellers' coordination decisions. We find that shopper expertise with competing e-retailers and pricing contracts with product sellers significantly alter the downstream landscape, and all stakeholders should rethink e-retailers' tailoring strategies. We discover that e-retailers may aim to sell to experienced consumers under a sell-to contract, while sellers target inexperienced consumers. Conversely, under a sell-on contract, the seller's target aligns with the e-retailer of higher tailoring capabilities. Surprisingly, inexperienced consumers influence all market participants more than experienced consumers. Notably, the preferred target consumers of all parties may shift when tailoring is effective only for experienced consumers.