Are Repeat Buyers in Cryptomarkets Loyal Customers?

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Are Repeat Buyers in Cryptomarkets Loyal Customers? Repeat Business Between Dyads of Cryptomarket Vendors and Users

The Internet has proven to be an effective way to buy and sell, even for illegal products. Crypomarkets are an innovation that provide greater protections for venders and consumers of illegal products. A cryptomarket is a marketplace that hosts multiple sellers, provides anonymity and additional services such as aggregating customer feedback ratings and comments. Cryptomarkets allow vendors to reach a large number of potential buyers while attracting little police attention.

Décary-Hétu and Quessy-Doré examined cryptomarkets to better understand the role customer loyalty plays in market function. In economic terms, loyalty is the buyer’s tendency to repeatedly purchase from the same vendor, despite other vendors being available. A range of factors can affect a buyer‚Äôs loyalty to a vendor, such as competition, reputation, product familiarity, purchase experience and perceived transaction value. Resource limitations force organizations to do the same, by prioritizing certain customers. Illicit markets are competitive settings however and so cost still plays an important role in purchase decisions.

The researchers developed a custom software tool to monitor the activities of cryptomarket participants by gathering data from cryptomarket pages. Information of particular interest were product listings, vendor profiles, and feedback. This study included data from an active cryptomarket with 15,873 listings from 1,135 vendors in September 2015. This market made use of consistent and mostly unique usernames for buyers by representing their names with two letters. This allowed for more confident isolation of individual buyer activity.

On average, repeat buyers made purchases from 15 vendors and concentrated a third of their purchases with a single vendor across the entire marketplace. There was a great deal of variation between buyers across the market, which may be due to purchases across a range of products. Within a specific product category, repeat buyers purchase from just three vendors with 60% of their purchases coming from the same vendor, on average.

Vendors do not appear to foster more loyalty from repeat buyers. Furthermore, neither visibility nor customer- base size appear to impact the number of customers loyal to a vendor. Repeat buyers may decide to buy from vendors apart from their main supplier to limit their dependence on a single vendor and to establish their trustworthiness on the cryptomarket. Cryptomaket vendors can disappear without a trace. Vendors generally require a verification of the buyer’s intentions through prepayment or an endorsement from another vendor; the latter being less risky for the buyer. This is in addition to normal value-seeking motivations for changing suppliers in a competitive market.

Vendors that provide more information about their products and themselves appear to have the best chance of building customer loyalty. Surprisingly, vendor reputation does not seem to play a great role in establishing a loyal customer base.

Cryptomarkets are competitive and inherent anonymity creates some challenges for vendors. Customer loyalty is positive for vendors as it inspires repeat business. Not all vendors manage to build a loyal customer-base and buyers may be careful to maintain a diversity of vendor relationships, but generally favor a small number of suppliers.

Cryptomarket customers carefully manage a balance between trusted suppliers and needed diversification.