Why Neighborhood Social Capital Enhances Social Learning for Experience Attributes of Products: Evidence from Internet Fashion Retailing

“Social learning” delivers information from existing customers to potential customers. It is especially important when the information that is conveyed pertains to experience attributes, i.e., attributes of products that cannot be fully verified prior to the first purchase. Experience attributes are prevalent and salient when consumers shop through catalogs, home shopping networks, and over the Internet. Firms therefore employ creative and sometimes costly methods to help consumers resolve uncertainty; we argue that uncertainty can be partially resolved through social learning processes that occur “naturally” and emanate from local neighborhood characteristics. Using data from Bonobos.com, a leading US online fashion retailer, we find that local social learning not only facilitates customer trial, but also that the effect is economically important as about half of all trials were partially attributable to it.

“Neighborhood social capital”, i.e., the propensity for neighbors to trust each other and communicate with each other, moderates the social learning process, and makes it more efficient. Social capital does not operate on trials directly; rather, it improves the learning process and therefore indirectly drives sales when what is communicated is favorable.