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Who Is Hurt by E-Commerce? Crowding out and Business Stealing in Online Grocery

  • Andrea Pozzi

    (EIEF)

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.

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File URL: http://www.eief.it/files/2012/09/wp-14-who-is-hurt-by-e-commerce_crowding-out-and-business-stealing-in-online-grocery.pdf
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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1114.

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Length: 48 pages
Date of creation: 2011
Date of revision: Sep 2011
Handle: RePEc:eie:wpaper:1114
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  1. Chris Forman & Anindya Ghose & Avi Goldfarb, 2009. "Competition Between Local and Electronic Markets: How the Benefit of Buying Online Depends on Where You Live," Management Science, INFORMS, vol. 55(1), pages 47-57, January.
  2. Fabiano Schivardi & Eliana Viviano, 2011. "Entry Barriers in Retail Trade," Economic Journal, Royal Economic Society, vol. 121(551), pages 145-170, March.
  3. Liran Einav & Ephraim Leibtag & Aviv Nevo, 2010. "Recording discrepancies in Nielsen Homescan data: Are they present and do they matter?," Quantitative Marketing and Economics, Springer, vol. 8(2), pages 207-239, June.
  4. John Haltiwanger & Ron Jarmin & C.J. Krizan, 2009. "Mom-and-Pop Meet Big-Box: Complements or Substitutes?," Working Papers 09-34, Center for Economic Studies, U.S. Census Bureau.
  5. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
  6. Holmes, Thomas J, 2001. "Bar Codes Lead to Frequent Deliveries and Superstores," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 708-25, Winter.
  7. Andrea Pozzi, 2009. "Shopping Cost and Brand Exploration in Online Grocery," Working Papers 09-10, NET Institute, revised Sep 2009.
  8. Sinai, Todd & Waldfogel, Joel, 2004. "Geography and the Internet: is the Internet a substitute or a complement for cities?," Journal of Urban Economics, Elsevier, vol. 56(1), pages 1-24, July.
  9. Toivanen, Otto & Waterson, Michael, 2011. "Retail Chain Expansion: The Early Years of McDonalds in Great Britain," CEPR Discussion Papers 8534, C.E.P.R. Discussion Papers.
  10. Goldfarb, Avi & Prince, Jeff, 2008. "Internet adoption and usage patterns are different: Implications for the digital divide," Information Economics and Policy, Elsevier, vol. 20(1), pages 2-15, March.
  11. Ellickson, Paul, 2005. "Does Sutton Apply to Supermarkets?," Working Papers 05-05, Duke University, Department of Economics.
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