The Rise of Broadband and the Retail Apocalypse: Evidence from Consumer Packaged Goods

Abstract

 I explore consumer behavior in the US consumer packaged goods (CPG) sector during broadband's proliferation from 2006 to 2016. Using household panel and retail scanner data covering over 40,000 brands across 900 categories, I analyze nine household and retailer outcomes: brands purchased, trips taken, retailers visited, offline spending, any online spending, online spending share, prices, price dispersion, and demand elasticities. I combine US Census and FCC data to track the roll out of broadband. Contrary to "retail apocalypse" fears, aggregate CPG trends are muted. Exploiting geographic variation in broadband growth, I find economically small but heterogeneous effects. Digging deeper reveals offsetting generational behaviors, with declines in brick-and-mortar shopping among younger consumers counterbalanced by stability in larger older cohorts, and a concerning "hollowing out" of the middle class. I demonstrate robustness using terrain instruments, within-household adoption, and statistical power tests. This study provides the most comprehensive examination to date of broadband's impact on CPG shopping. The results suggest broadband is driving a gradual evolution rather than a dramatic upheaval in CPGs, while surfacing challenges in engaging key consumer segments.

Keywords: Consumer Behavior, Broadband Internet, Retail, Information Technology, Industrial Organization

JEL Classification: M31, L81, D12, L15, M21