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E-commerce and the end of price rigidity?

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  • Hillen, Judith
  • Fedoseeva, Svetlana

Abstract

Online grocery platforms play an increasing role in many countries’ food sectors. However, little is known about their pricing strategies. Are online prices less rigid than prices in brick-and-mortar stores, as theoretical and empirical studies from non-food sectors suggest? What does an acquisition by an internet giant imply for price adjustments in a formerly traditional offline store? Using a large data set of daily Amazon Fresh price quotes, we analyze the frequency and magnitude of price changes online. We find highly frequent and mostly small price adjustments for all major food categories sold by Amazon Fresh. For products from Whole Foods Market, which was acquired by Amazon in 2017 and whose assortment has since then been distributed online and offline, price behavior is completely different: Prices continue to be sticky and to follow traditional offline retail pricing patterns. We conclude that Amazon has indeed introduced a new way of dynamic pricing into food retail. However, at least until now this change is limited to Amazon Fresh’s online channels and has not yet spread to the acquired Whole Foods Market stores.

Suggested Citation

  • Hillen, Judith & Fedoseeva, Svetlana, 2021. "E-commerce and the end of price rigidity?," Journal of Business Research, Elsevier, vol. 125(C), pages 63-73.
    • Handle: RePEc:eee:jbrese:v:125:y:2021:i:c:p:63-73
    DOI: 10.1016/j.jbusres.2020.11.052
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    1. Prakash, David & Spann, Martin, 2022. "Dynamic pricing and reference price effects," Journal of Business Research, Elsevier, vol. 152(C), pages 300-314.
    2. A. V. Lialina & K. A. Morachevskaya, 2022. "Economic Access to Food and COVID-19: New Challenges for the Russian Exclave," Regional Research of Russia, Springer, vol. 12(3), pages 335-349, September.
    3. Qin, Chang-Xiong & Liu, Zhao, 2022. "Reference price effect of partially similar online products in the consideration stage," Journal of Business Research, Elsevier, vol. 152(C), pages 70-81.
    4. Daniel Penido de Lima Amorim & Marcelo Resende, 2024. "Exchange Rate Pass-Through to Brazilian E-Commerce Prices," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(1), pages 25-43, January.
    5. Dedola, Luca & Ehrmann, Michael & Hoffmann, Peter & Lamo, Ana & Paz-Pardo, Gonzalo & Slacalek, Jiri & Strasser, Georg, 2023. "Digitalisation and the economy," Working Paper Series 2809, European Central Bank.
    6. Yao Li & Yugang He & Renhong Wu, 2023. "Traversing the Macroeconomic Terrain: An Exploration of South Korea’s Economic Responsiveness to Cross-Border E-Commerce Production Technology Alterations in the Global Arena," Sustainability, MDPI, vol. 15(15), pages 1-20, July.
    7. Vivian Chu & Tatjana Dahlhaus & Christopher Hajzler, 2023. "Digitalization: Prices of Goods and Services," Discussion Papers 2023-27, Bank of Canada.

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    More about this item

    Keywords

    Amazon Fresh; Dynamic pricing; Food retail; Online grocery shopping; Sticky prices; Whole foods;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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