The most trusted provinces in China, according to Taobao

Buyers in China care where their goods come from. It has been well established that a product's country of origin adds to the branding effect. Think of Belgian chocolates, Swiss watches and South Korea's kimchi.

Research shows that this geographical preference applies to goods made within China as well in the realm of online shopping. Data from e-commerce platform Taobao shows that Chinese buyers prefer to purchase products from some provinces more than others.

Beijing, Shanghai, Zhejiang, and Jiangsu are the most preferred shopping destinations. Anhui, Jiangxi, Shanxi, and Heilongjiang are least preferred while Hubei and Henan lie somewhere in the middle. Consumers also like to buy from their home province.

This implies that province-level governments have an incentive to continue investing in the branding of their province's products. Already, in 2015, Zhejiang province issued a directive to build the Zhejiang brand, which mandated the participation of businesses and governments at all levels. Hubei and Henan quickly followed suit and there are now dedicated websites to help Chinese cities with the branding of their products.

At first glance, these efforts would be useful in attracting international investment. But they are also useful in attracting domestic trade from other provinces.

Professor Pradeep K. Chintagunta from the Chicago Booth School of Business and I co-authored a study on consumers' shopping patterns across provinces in China. This was recently published in the journal Quantitative Marketing and Economics.

Why do buyers look at the province? There is always risk and uncertainty in online shopping. To reduce their risk, buyers often look at seller reputation and reviews. In large marketplaces like Taobao however, good reviews can be plentiful and hence inconclusive. At the time of our data collection from 2011 to 2013, there were eight million sellers on Taobao. Beyond reviews and the perceived quality of the products, the seller's location is another cue for buyers to ascertain their risk.

In other words, the location becomes a brand associated with the products' quality and the sellers' trustworthiness and efficiency.

It is easy to assume that buyers will prefer to buy from their home province or nearby provinces, possibly due to familiarity and lower transport costs due to a shorter distance. In that case, buyers in a group of nearby provinces should show similar levels of preference for sellers located in this group.

Interestingly, that was not the case. Our analysis of weekly Taobao sales figures found that buyers from Province A may show a preference for sellers from Province B, but not vice versa. For example, Zhejiang buyers have a lesser preference for Guangdong sellers but Guangdong buyers find Zhejiang an attractive seller province.

This is not because the product is only available in certain provinces. We chose data across eight common product categories such as women's shoes, cellphones and disposable diapers. Our checks showed that "standard" products were sold in all provinces. For shoes, which came in various designs, we were also able to find a visually identical pair of shoes in nearly all provinces.

At the time of data collection, Taobao sellers could not launch targeted marketing promotions based on the buyers' province. Sellers only got to know the buyers' location after an order had been placed. Hence, marketing timing was not a factor affecting buyers' preference for sellers from a certain province.

It thus seems that the seller's location has a certain role to play in these asymmetric shopping patterns. Besides the distance to the seller's province, the location also determines if there is trust.

Previous studies compared respondents' views of "the provinces they found most trustworthy". People trusted their home province the most. Beijing, Shanghai and Guangdong also ranked among the most trusted provinces. There was a high correlation between asymmetric province dyadic trust and preferences for online shopping: Buyers showed stronger preferences towards and hence bought more from provinces they trusted more.

We also looked at the provinces' socioeconomic standards, and found that buyers preferred to buy from places with similar socioeconomic levels as their own province. Migrants also showed strong support for sellers from their home province, particularly in the category of women's shoes.

Our findings are similar to a study conducted in the US. The study by Daniel Elfenbein and his co-authors, using monthly eBay data collected in 2015 and 2016, found that buyers showed geographic preferences for certain states. However, the factors were different. US buyers tend to buy from states with similar ethnic make-up, religion and political affiliation as their own state. This is not surprising, given the huge differences in social, religious and economic environments of the two countries.

As online shopping booms, particularly during the pandemic, it would pay for provincial or state governments to increase their efforts in place branding. This would help to attract more sales, be they from international or domestic customers. This is particularly relevant and important for e-commerce platforms and businesses in Singapore and Southeast Asia since their sellers and buyers are located in different regions, provinces or countries, and a seller's location might be an important factor for buyers to choose sellers.

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