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Consumer heterogeneity and online vs. offline retail spatial competition

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  • Mingming Shi

    (Renmin University of China)

  • Jun Zhou

    (Renmin University of China)

  • Zhou Jiang

    (Renmin University of China)

Abstract

This paper develops a game-theoretic spatial model featuring consumer heterogeneity in online vs. offline retailers’ spatial competition. We find that consumers’ browse-and-switch behavior intensifies the competition because both offline and online retailers’ price and profit decline when the behavior occurs, but it is not necessarily a threat to offline retailers especially when the product relates more closely to experience. We consider six equilibrium scenarios for different combinations of consumer behaviors when considering a hybrid retailer. The analysis taking consumer heterogeneity into consideration shows that the hybrid retailer operating both online and offline is not always the winner. Particularly, the business opportunity for the offline retailer lies in consumers’ willingness to pay in store, and whether the retailer launches an online store depends on the type of products and services provided.

Suggested Citation

  • Mingming Shi & Jun Zhou & Zhou Jiang, 2019. "Consumer heterogeneity and online vs. offline retail spatial competition," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-19, December.
    • Handle: RePEc:spr:fobric:v:13:y:2019:i:1:d:10.1186_s11782-019-0059-9
    DOI: 10.1186/s11782-019-0059-9
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    References listed on IDEAS

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    Cited by:

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    3. Kerry Liu, 2020. "Chinese consumer finance: a primer," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-22, December.
    4. Yang Yang & Jianming Yao, 2021. "Resource integration optimization of convenience service platforms adopting dynamic service modes in new retail," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-19, December.

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