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The effect of Internet distribution on brick‐and‐mortar sales
Author(s) -
Pozzi Andrea
Publication year - 2013
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12031
Subject(s) - cannibalization , revenue , business , brick and mortar , competitor analysis , the internet , distribution (mathematics) , industrial organization , channel (broadcasting) , advertising , service (business) , marketing , commerce , telecommunications , finance , computer science , mathematical analysis , mathematics , world wide web
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.