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Battle of the Retail Channels: How Product Selection and Geography Drive Cross-Channel Competition

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Author Info

  • Erik Brynjolfsson

    ()
    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

  • Yu (Jeffrey) Hu

    ()
    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Mohammad S. Rahman

    ()
    (Haskayne School of Business, University of Calgary, Calgary, Alberta T2N 1N4, Canada)

Abstract

A key question for Internet commerce is the nature of competition with traditional brick-and-mortar retailers. Although traditional retailers vastly outsell Internet retailers in most product categories, research on Internet retailing has largely neglected this fundamental dimension of competition. Is cross-channel competition significant, and if so, how and where can Internet retailers win this battle? This paper attempts to answer these questions using a unique combination of data sets. We collect data on local market structures for traditional retailers, and then match these data to a data set on consumer demand via two direct channels: Internet and catalog. Our analyses show that Internet retailers face significant competition from brick-and-mortar retailers when selling mainstream products, but are virtually immune from competition when selling niche products. Furthermore, because the Internet channel sells proportionately more niche products than the catalog channel, the competition between the Internet channel and local stores is less intense than the competition between the catalog channel and local stores. The methods we introduce can be used to analyze cross-channel competition in other product categories, and suggest that managers need to take into account the types of products they sell when assessing competitive strategies.

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File URL: http://dx.doi.org/10.1287/mnsc.1090.1062
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 55 (2009)
Issue (Month): 11 (November)
Pages: 1755-1765

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Handle: RePEc:inm:ormnsc:v:55:y:2009:i:11:p:1755-1765

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Related research

Keywords: Internet markets; electronic commerce; cross-channel; competition; retailing; channel; niche products; geography; long tail;

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Cited by:
  1. Ajay K. Agrawal & Christian Catalini & Avi Goldfarb, 2011. "The Geography of Crowdfunding," NBER Working Papers 16820, National Bureau of Economic Research, Inc.
  2. Askenazy, P. & Celerier, C. & Irac, D., 2010. "Vente à distance, internet et dynamique des prix," Working papers 288, Banque de France.
  3. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 84-90.
  4. Wu, Chongqi & Mallik, Suman, 2010. "Cross sales in supply chains: An equilibrium analysis," International Journal of Production Economics, Elsevier, vol. 126(2), pages 158-167, August.

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