Business is all about location, location, location. Apparently, this rule also seems to also affect doing business in the World Wide Web, according to David Bell, an associate professor of marketing at University of Pennsylvania?s Wharton School. Though what he refers to is the location of the customers.
In an interview for the BNET.com article, New Key to Success in Online Retail: Geography by Paul Sloan, Bell says his research shows that "customers of Internet retailers are not scattered randomly on the map." Bell explains, "We call it contagion, or neighborhood effects. So even when your business is on the Web, you're going to get more new customers in areas that are contiguous to areas where you already have customers."
Word-of-mouth is one of the reasons which could explain why this would happen even when all these people individually do their online shopping, in private.
This tendency of people in the same neighborhoods shopping at the same online stores might help e-commerce ventures target a specific locality, though there are other data which must be equally considered. For instance, figuring out the 'preference minorities' in the localities you're targeting will give you a clue as to the market where you're actually going to post higher sales figures.
For Bell's discussion on how to figure out the preference minorities, and to understand why he thinks using some pre-Web methods would help online retailers grow their customer base, read the full article here.