Quantifying Transaction Costs in Online/Off-Line Grocery Channel Choice

Pradeep K. Chintagunta

University of Chicago

Junhong Chu

NUS Business School

Javier Cebollada

Public University of Navarre, Spain


Marketing Science, Vol. 31, No. 1, 2012; pp. 96-114; DOI: 10.1287/mksc.1110.0678

Households incur transaction costs when choosing among off-line stores for grocery purchases. They may incur additional transaction costs when buying groceries online versus off-line. We integrate the various transaction costs into a channel choice framework and empirically quantify the relative transaction costs when households choose between the online and off-line channels of the same grocery chain. The key challenges in quantifying these costs are (i) the complexity of channel choice decision and (ii) that several of the costs depend on the items a household expects to buy in the store, and unobserved factors that influence channel choice also likely influence the items purchased. We use the unique features of our empirical context to address the first issue and the plausibly exogenous approach in a hierarchical Bayesian framework to account for the endogeneity of the channel choice drivers. We find that transaction costs for grocery shopping can be sizable and play an important role in the choice between online and off-line channels. We provide monetary metrics for several types of transaction costs, such as travel time and transportation costs, in-store shopping time, item-picking costs, basket-carrying costs, quality inspection costs, and inconvenience costs. We find considerable household heterogeneity in these costs and characterize their distributions. We discuss the implications of our findings for the retailer's channel strategy.

Keywords: channel choice, online grocery shopping, transaction costs, plausibly exogenous, hierarchical Bayesian, green shopping

Accepted Paper Series

Not Available For Download

Date posted: October 24, 2012  

Suggested Citation

Chintagunta, Pradeep K. and Chu, Junhong and Cebollada, Javier, Quantifying Transaction Costs in Online/Off-Line Grocery Channel Choice (2012). Marketing Science, Vol. 31, No. 1, 2012; pp. 96-114; DOI: 10.1287/mksc.1110.0678. Available at SSRN: http://ssrn.com/abstract=2161278

Contact Information

Pradeep K. Chintagunta (Contact Author)
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)
Junhong Chu
NUS Business School ( email )
Bukit Timah Road 469 G
Singapore, 117591
65-65166938 (Phone)
HOME PAGE: http://www.bschool.nus.edu.sg/staff_profile/cv.asp?ID=2292
Jose-Javier Cebollada-Calvo
Public University of Navarre, Spain ( email )
Campus de Arrosadía
Pamplona, Navarra 31006
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