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http://ssrn.com/abstract=995647
 
 

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Battle of the Retail Channels: How Product Selection and Geography Drive Cross-Channel Competition


Erik Brynjolfsson


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Yu Jeffrey Hu


Georgia Institute of Technology - Scheller College of Business

Mohammad Saifur Rahman


University of Calgary - Haskayne School of Business

March 1, 2009

Management Science, forthcoming

Abstract:     
A key question for Internet commerce is the nature of competition with traditional brick-and-mortar retailers. Although traditional retailers vastly outsell Internet retailers in most product categories, research on Internet retailing has largely neglected this fundamental dimension of competition. Is cross-channel competition significant, and, if so, how and where can Internet retailers win this battle? This paper attempts to answer these questions using a unique combination of data sets. We collect data on local market structures for traditional retailers, and then match these data to a data set on consumer demand via two direct channels: Internet and catalog. Interestingly, our analyses show that Internet retailers face significant competition from brick-and-mortar retailers when selling mainstream products, but are virtually immune from competition when selling niche products. Furthermore, since the Internet channel sells proportionately more niche products than the catalog channel - a phenomenon sometimes called the "Long Tail", the competition between the Internet channel and local stores is less intense than the competition between the catalog channel and local stores. The methods we introduce can be used to analyze cross-channel competition in other product categories, and suggest that managers need to take into account the types of products they sell when assessing competitive strategies.

Number of Pages in PDF File: 38

Keywords: Internet markets, electronic commerce, competition, retailing, channel, niche products, geography

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Date posted: June 22, 2007 ; Last revised: May 4, 2011

Suggested Citation

Brynjolfsson, Erik and Hu, Yu Jeffrey and Rahman, Mohammad Saifur, Battle of the Retail Channels: How Product Selection and Geography Drive Cross-Channel Competition (March 1, 2009). Management Science, forthcoming. Available at SSRN: http://ssrn.com/abstract=995647

Contact Information

Erik Brynjolfsson (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)
HOME PAGE: http://digital.mit.edu/erik
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Yu Jeffrey Hu
Georgia Institute of Technology - Scheller College of Business ( email )
800 West Peachtree St.
Atlanta, GA 30308
United States
Mohammad Saifur Rahman
University of Calgary - Haskayne School of Business ( email )
2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
(403) 220-4276 (Phone)
(403) 282-0095 (Fax)
HOME PAGE: http://haskayne.ucalgary.ca/profiles/mohammad-rahman
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