Psychological distance perceptions and trust beliefs for internet-only and hybrid retailers: implications for marketers

This dissertation introduces the concept of psychological distance to the Internet marketing literature and discusses the impact of physical retail presence on consumer perceptions of the firm. In particular, online retailer’s physical presence attributes are shown to be influential in reducing psychological distance and developing initial trust beliefs, which in turn have implications for consumers’ service inferences, satisfaction expectations, and purchase intentions. Three studies empirically test the interplay between psychological distance theory and physical retail presence. Study 1 finds that online firms that also have a local retail store (local hybrids) are perceived to be less psychologically distant and more trusted than online firms with a non-local retail store, and that Internet-only retailers are more psychologically distant and less trusted than either local or non-local hybrid firms. Study 2 replicated the effects identified in Study 1 and further demonstrated that media content conveying images of the firm’s tangible features (e.g., buildings and/or employees) can reduce psychological distance and enhance trust beliefs for Internet-only retailers and non-local hybrids, but that such media generally had null effects for an online firm with a local retail outlet. Thus, media content that stresses an online retailer’s physical presence appears to be an effective way to reduce psychological distance, increase trust, and promote competitive parity with retailers that do not have a local physical presence. Study 3 holds geographic distance constant so that the non-spatial elements of psychological distance may be adequately tested. Study 3 finds that consumers’ familiarity with a retailer’s location reduces psychological distance and elicits higher trust beliefs and that retailers in familiar locations have marketing advantages over retailers in less familiar locations. Indeed, the effects of retailer location on the marketing outcomes were consistently in the opposite direction of the psychological distance results in all three studies. Lastly, a mere presence effect was identified in the first two studies and further clarified in Study 3. This effect suggests that online retailers garner benefits by operating a retail location, even if it exists at a great distance from the consumer. However, the mere presence effect is not strong enough to level the playing field with online firms that have a local store, as local hybrids are less psychologically distant and retain greater trust than non-local hybrids. Study 3 clarifies this effect using unfamiliar locations at a great distance from consumers. Results suggest that retailers with non-local stores are only less psychologically distant than virtual retailers when the location is familiar to consumers. Overall, these studies add to the existing literature by showing that the existence and location of a physical retail store is an important consideration for online retailers in initial encounters when the consumer has little or no previous knowledge of the firm. Related research has shown that physical presence is important for building trust and increasing purchase intentions for unfamiliar retailers. This research extends such findings to include a broader set of marketing outcomes, demonstrating that physical store presence also affects service and problem responsiveness inferences, and satisfaction expectations. The research also adds geographic distance to the physical presence research framework and investigates factors that retailers can use to circumvent the general inhibiting effects of spatial distance, namely media emphasizing tangible features and a familiar retail location. In addition to extending the consumer marketing literature, this dissertation has implications for managers. First, the unknown retailers that are likely to benefit from psychological distance-reducing strategies are conceivably not retailers with the financial capacity to invest in stores in every locale. Thus, these retailers should attempt to reduce psychological distance perceptions by emphasizing physical presence information. After emphasizing its presence in the physical environment, retailers are confronted with the inhibitor of geographic distance. The present research suggests that media highlighting physical retail facilities and employees can be used to attenuate this effect by increasing tangibility-based associations. Moreover, hybrid retailers should attempt to increase familiarity with their existing locations and then consider location familiarity among the criteria when expanding. The dissertation provides additional details related to these strategies as well as examples of retailers that have applied them in recent years.