Thursday, February 23, 2012
Posted by D. Daniel Sokol
Andrea Pozzi (EIEF) asks Who Is Hurt by E-commerce? Crowding out and Business Stealing in Online Grocery.
ABSTRACT: I study the impact of e-commerce on competition in retail markets. Using scanner data from a large chain that markets grocery online and through traditional stores, I illustrate that selling online reduces the barrier of geographic differentiation and allows stealing business from competitors. Between 60% and 70% of the sales made online by the chain are stolen from other grocers, the rest coming from self cannibalization. I show that small stores are suffering the largest losses from this reallocation of market shares, as they were more heavily relying on geographic differentiation to survive the competitive pressure of big-box stores.