Online retail contributes to decline in product quality: study

Consumers may revel in the convenience of online shopping, but the low prices on the internet are often accompanied by even lower product quality, warns new research co-written by a University of Illinois business professor.

Yunchuan ''Frank'' Liu says when manufacturers bypass retailers and sell directly to consumers online, product quality can suffer.

''The research shows that there is a negative effect in that the quality of the product can go down,'' he said. ''Although there are many positive aspects to e-commerce, the issue of declining product quality is a very big negative, which could increase in significance in the future. This should be alarming to consumers and public policy makers who champion the convenience of online shopping.''

The study, which will appear in the journal Management Science, studies the effect of channel structures – that is, online versus offline channels – on the product quality of goods produced by manufacturers, said Liu, who co-wrote the study with Nicholas C. Petruzzi, a professor of business administration at Illinois, and Hongyan Shi, of Nanyang Technological University in Singapore.

Although shopping is more convenient than ever before, Liu says manufacturers have little incentive to produce high-quality goods when selling their wares online.

''In the traditional approach, manufacturers had to go through a 'middleman' to get their products to market,'' Liu said. ''If consumers purchase goods through a retailer, they have to physically drive to the shop, talk to a salesperson and compare it to the competition. Compared to an online transaction, where the consumer is pretty much relying on information supplied by the manufacturer, the purchase of a product at a bricks-and-mortar store is complicated.''