This article previously circulated under the title, “Who Is Hurt By E-Commerce? Crowding Out and Business Stealing in Online Grocery.” I am especially grateful to Liran Einav for invaluable discussions at various stages of this project. I received useful comments and suggestions from David Autor, Effi Benmelech, Tim Bresnahan, Luigi Guiso, Jakub Kastl, Fabiano Schivardi, Alessandra Voena, the editor, and two anonymous referees as well as participants in presentations at Alicante, Cagliari, EIEF, IFN-Stockholm, Paris School of Economics, Collegio Carlo Alberto, the 2010 IO FOOD conference (Toulouse), the Workshop on the Economics of ICT 2011 (Evora), the 2011 ZEW Conference on the economics of ICT (Mannheim), EARIE 2011 (Stockholm), the 2012 Management and Economics of ICT Conference (Munich), the 2012 Telecom ParisTech conference on the economics of ICTs (Paris), and the AEA meeting 2013 (San Diego). I thank Stan Ernst and Neal H. Hooker for sharing their data on the number of US-based e-grocers. Financial support from SIEPR in the form of the B.F. Haley and E.S. Shaw dissertation fellowship is gratefully acknowledged. All errors are my own.
The effect of Internet distribution on brick-and-mortar sales
Version of Record online: 10 DEC 2013
© 2013, RAND.
The RAND Journal of Economics
Volume 44, Issue 3, pages 569–583, Fall 2013
How to Cite
Pozzi, A. (2013), The effect of Internet distribution on brick-and-mortar sales. The RAND Journal of Economics, 44: 569–583. doi: 10.1111/1756-2171.12031
- Issue online: 10 DEC 2013
- Version of Record online: 10 DEC 2013
I examine the introduction of an online shopping service by a large supermarket chain also operating a network of brick-and-mortar stores. The establishment of the Internet channel led to a 13 percent increase in overall revenues, with limited cannibalization of traditional sales. I study the mechanisms underlying this result, focusing on two areas. First, I demonstrate the importance of the reduction of customers' travel costs in the attraction of new business. Second, I provide some evidence that revenues increase more in markets where the chain faces more competitors, suggesting that the online channel can help divert business from rival supermarkets.