Impact of Live Chat on Purchase in Electronic Markets: The Moderating Role of Information Cues

Live chat tools have emerged as a channel for fostering synchronous communication between sellers and buyers. However, a positive link between live chat and conversion does not suggest causation because customers with high purchase intention are more likely to initiate live chat in the first place. Our research accounts for such selection and studies the impact of live chat with the presence of information cues: product sales volumes and seller feedback scores. Using granular data from Alibaba, we find that live chat can increase purchase probability of tablets by 15.99%. Further, the substitutional or complementary patterns between live chat and the information cues allow us to understand how live chat tools change the ways consumers evaluate product quality and seller credibility. We observe a substitutional effect of live chat on seller feedback score such that sellers with low feedback scores benefit more from live chat conversations than sellers with high scores. On the contrary, products with a high past sales volume sell better after live chat, indicating a reinforcement effect. Such findings deepen our understanding of the difference between various information cues in electronic markets and delineate the specific type of benefit live chat brings if put into best use by sellers and online marketplace designers.