Malika Korganbekova of the Kellogg School of Management will unveil research on how privacy regulations affect ecommerce for consumers, platforms and sellers. Regulators in Europe and the U.S. say personalization can be harmful because it can manipulate consumer choice without the individual being aware of it. Current tracking methods do lead to consumers purchasing more expensive items, the study found. However, platforms’ and consumers’ interests may be more aligned than regulators think. Platform profits are mostly driven not through selling higher margin items but through repeat purchases. Privacy restrictions degrade the consumer experience by offering poorer product matches, as better ones occur under the personalized condition in this field experiment. And while platforms can partially mitigate their losses, such restrictions hurt small sellers—who are more likely to end up at the bottom of rankings, stifling competition and winnowing down the diversity of offerings.

Key Takeaways:

• Personalization led to lower search costs, the study found. Compared to the non-personalized group, personalized group consumers scrolled less (-83 products), filtered less (-1.9%), purchased faster (-2 days) and purchased more (+1.4%).
• Compared with the non-personalized group, the personalized group had a higher purchase price on items (0.5%), were less likely to return products (-10%) and were more likely to make a repeat purchase (2.3%).
• Platform revenue was up 2% and profit up 1.3% (mostly due to repeat purchases) under the personalized condition versus the non-personalized one. Platforms can partially mitigate their losses using a probabilistic identity recognition algorithm the researchers have created, which uses device-level data to piece together identity. Without using IP addresses, they clam an 85% accuracy rate. This algorithm can also be used to help mitigate the impact on small sellers.
• Small sellers benefited the most, with an increase of 29 – 87% in revenue and an increase of 15% visibility under the personalized condition. Big sellers, meanwhile, saw an increase of 2.7% under this condition.