Journal of Retailing 82 (2, 2006) 155–164 From Fatwallet to eBay: An investigation of online deal-forums and sales promotions Ram D. Gopal a,∗ , Bhavik Pathak a,1 , Arvind K. Tripathi b,2 , Fang Yin a,3 a Department of Operations and Information Management, School of Business, University of Connecticut, Storrs, CT 06269-2041, USA b Management Science Department, Box 353200, University of Washington Business School, Seattle, WA 98195-3200, USA Abstract Sales promotions are an important part of retail advertising strategy. Traditionally, research on sales promotions has generally assumed that the buyers are end consumers who do not engage in reselling, in large part due to high transaction costs. However, the recent Internet related technologies have dramatically lowered the cost of transferring goods between consumers, leading to relative ease of reselling activity amongst individual consumers. Little is known about the impact of this phenomenon on retailer’s sales promotion strategy. In this research we investigate the reselling activity in online auctions for products that active deal seekers can obtain at deeply discounted prices from retailers. We further investigate the role of deal-forums in the resale process. Data is collected from an online deal-forum (http://www.fatwallet.com/) and eBay to test various reselling-related hypotheses. The results show that there is a significant abnormal increase in the number of newly posted auctions of a product after the deal information of this product is posted on deal-forum website. We also find that there is a significant price incentive for individuals to resell. The implications for sales promotion research and practice are discussed. © 2006 New York University. Published by Elsevier Inc. All rights reserved. Keywords: Online deal-forums; Sales promotions; Advertising strategy; Online auctions; Virtual communities Introduction Internet technologies have fostered the development of numerous online communities or groups, widely known as virtual communities. These virtual communities facilitate information-sharing among participants with specific inter- ests and maximize the knowledge base of the participating entities. In this study, we examine those virtual communities that focus on sharing various deal information of consumer products that leads to lower purchasing price of an item. We will refer to these virtual communities as deal-forums. The deal information is valuable to all deal-forum participants including both those who have a need for the product and those who are interested in reselling products to make a profit. ∗ Corresponding author. Tel.: +1 860 486 2408; fax: +1 860 486 4839. E-mail addresses: Ram.Gopal@Business.uconn.edu (R.D. Gopal), Bhavik.Pathak@Business.uconn.edu (B. Pathak), tripathi@u.washington.edu (A.K. Tripathi), Fang.Yin@Business.uconn.edu (F. Yin). 1 Tel.: +1 860 486 5295; fax: +1 860 486 4839. 2 Tel.: +1 206 221 5369; fax: +1 206 543 3968. 3 Tel.: +1 860 486 6182; fax: +1 860 486 4839. For the potential resellers, another Internet phenomenon – online auction houses – provides a cost effective way to reach potential buyers without the restriction of space and time. This relatively new phenomenon – reselling activities among consumers facilitated by deal-forums and online auc- tion houses – poses a new challenge for the sales promotion strategies of manufacturers and retailers. Theses resellers may buy discounted items in bulk to maximize their profits by reselling and thus, may defeat the objectives of sales pro- motions offered by firms. In this research we investigate the reselling activity in online auctions for products that active deal seekers can obtain at deeply discounted prices from retailers. We further examine the role of deal-forums in the resale process. Data are collected to test the hypothesis that there exists an abnormal increase in the supply of a product at online auction houses after the deal information of the same product is available on the deal-forum. The results of this research may have several important implications on firm’s sales promotion strategies. Blattberg and Neslin (1990) discuss the role of sales pro- motion objectives in sales promotion planning process and highlight important promotion objectives which include: (1) 0022-4359/$ – see front matter © 2006 New York University. Published by Elsevier Inc. All rights reserved. doi:10.1016/j.jretai.2006.02.002