Consumer Transportation Costs and the Value of E-commerce: Evidence from the Dutch Apparel Industry

Abstract

Why do consumers value online shopping? We demonstrate that consumer transportation cost savings are at least as important to consumer welfare as their gains from variety. To estimate transportation costs, we assemble novel microdata from the Dutch retail apparel industry and complement these data with precise locations of consumers and stores. We estimate a multiple discrete choice model to characterize consumers' choice of retailer, channel (online/offline), and purchase quantity. Our estimates imply that, in 2018, an average consumer's welfare gain from e-commerce in the apparel category is approximately €450. Reduction of transportation costs accounts for more than half of this gain.

Keywords: E-Commerce, Retail, Convenience, Transportation Costs, Online/Offline

JEL Classification: D12, L81, M31