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Is online retail killing coffee shops? Estimating the winners and losers of online retail using customer transaction microdata

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  • Relihan, Lindsay

Abstract

Is online retail a complement or substitute to local offline economies? This paper provides the first evidence that consumers use time saved from online retail to increase their trips for time-intensive services like coffee shops. I use new, detailed data on the daily transactions of millions of anonymized customers. I then estimate a discrete choice model of consumer trip choice, which embeds time use mechanisms and accounts for correlations in trip utility shocks. I show that the model matches key features of observed behaviour that are missed by more standard models, such as the disproportionate increase in trips to nearby coffee shops when consumers switch to online groceries. Model counterfactuals are used to forecast changes in future trip demand and outline strategies, which offline retailers can use to compete against online retail. For consumers, I find that the welfare gains from online grocery platforms go disproportionately to high-income consumers.

Suggested Citation

  • Relihan, Lindsay, 2022. "Is online retail killing coffee shops? Estimating the winners and losers of online retail using customer transaction microdata," LSE Research Online Documents on Economics 117805, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:117805
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    File URL: http://eprints.lse.ac.uk/117805/
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    References listed on IDEAS

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    1. Diana Farrell & Lindsay E. Relihan & Marvin W. Ward Jr. & Chris W. Wheat, 2020. "The early impact of Covid-19 on local commerce: changes in spend across neighborhoods and online," CEP Occasional Papers 50, Centre for Economic Performance, LSE.
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    Cited by:

    1. Su, Yichen, 2022. "Measuring the Value of Urban Consumption Amenities: A Time-Use Approach," Journal of Urban Economics, Elsevier, vol. 132(C).
    2. Chung, Jamie, 2023. "The spillover effect of E-commerce on local retail real estate markets," Regional Science and Urban Economics, Elsevier, vol. 101(C).

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    More about this item

    Keywords

    online; retail; time use; tips;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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