Relational Frictions Along the Supply Chain: Evidence from Social Commerce Among Senegalese Traders

We will connect Senegalese importers to intermediaries in Turkey who interact with manufacturers, and we will use social media to vary the information environment to capture key frictions. Our experiment is grounded in theory, allowing us to precisely map the treatments to the different frictions identified.

2023-11-17

2024-07-01

Outcomes:

For buyers, we will measure three sets of outcomes described below:
1. Supplier-related outcomes: We will administer a detailed survey where we ask for the price, quantity, quality, and contract structure of all input purchases for each of their suppliers. We are interested in how the treatments affect both propensity to transact with new suppliers and their relationship with existing suppliers. We will also measure beliefs about reliability and quality of suppliers, and ultimately the value of the relationships.
2. Buyer-related outcomes: Revenues and profits, and downstream contract with customers. We will refer to the literature on measurement (e.g., de Mel, McKenzie, Woodruff, 2007) and our previous surveys in this setting.
3. Quality and price outcomes: We will use mystery shoppers to measure these. We are interested in quality because we want to see if the experiment leads to quality upgrading. To measure quality, we will hire a few retail experts to assess a random sample.

We will survey suppliers separately and collect similar survey data on (1) and (2). The mystery shopping activity will also be used to accelerate initial orders, induce trade, beyond directly measuring some of the outcomes described above.

Endline surveys will be conducted with studied merchants and suppliers after about 2-6 months. In addition, we may conduct high-frequency phone surveys with merchants. Mystery shoppers will also allow us to collect data like prices, product delivery and fit, price, product quantity and quality, and contract between suppliers and merchants, but also between merchants and end customers.

Our sample will comprise ~1500 Senegalese wholesalers and medium-sized retailers in Dakar within markets (“buyers”), and ~30 intermediaries that live in Turkey or visit regularly (“suppliers”). We choose Turkey as our origin country because it represents a large minority of apparel imports to Senegal and is generally viewed as higher quality than China, though we are open to switching origin country if we find a good reason. We will focus on apparel because (1) it is large, (2) concerns about quality mean contracting frictions are important, (3) variation in fashions and preferences mean search is important.
Design and Treatments: There will be four treatment arms:

1. Search: At the buyer level, we will randomise access to three supplier WhatsApp groups. These are currently existing private groups run by suppliers where they advertise products and prices using high quality pictures and videos. This reduces two types of search friction: (1) cost of finding a new foreign supplier, (2) cost of seeing varieties and quality offered.

2. Reputation building: The theory predicts that if buyers share information about suppliers’ types, they will trade more and learn faster. Thus, within merchants in supplier groups, we will randomise half of them into small buyer groups without suppliers to share information about suppliers and learn about types through "social feedback". We will design this so that buyers in groups are all matched with the same suppliers.

3. Moral Hazard: The theory predicts that buyers can use joint punishment strategies to incentivize the supplier more strongly than they could on their own (as in Greif, 1993). We will thus inform all suppliers about the existence of buyer groups. We will make clear to the suppliers that we will help buyers coordinate and share feedback to ensure that the seller realizes that a joint punishment equilibrium is realistic. We will inform a random part of the buyers that the suppliers have that motivation to measure the moral hazard impact on buyers.

These three treatments shut down/activate some existing features of WhatsApp, ubiquitously used by merchants for their business, to disentangle mechanisms of the impact of social commerce.

4. E-Commerce training: We will inform and train a random subset of merchants on a traditional e-commerce B2B platforms available in Senegal to test differences between traditional e-commerce and social commerce.

Not available

Randomization done by computer.

The unit of randomization is the merchant/firm.

We stratify the randomization by anticipated dimensions of heterogeneity, i.e.,
-- Experience in international import
-- Physical store vs. purely online
-- Clothing industry codes

The randomization will be done on a computer and established pre-randomized IDs dispatched to surveyors.

No

N/A

The target sample is about 1,500 merchants in Senegal and 30 suppliers abroad.

- Search / Supplier social groups (80%): 1200 merchants
- Reputation Building / Merchant social groups (40+10 %): 750 merchants, including 150 not in supplier groups
- Moral Hazard (40%): 600 merchants
- E-Commerce: (10%): 150 merchants
- Pure Control (5%): 75 merchants

Pre-Analysis Plan - Social Commerce