Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers

Online prices are increasingly being used for a variety of inflation measurement and research applications, yet little is know about their relation to prices collected offline, where most retail transactions take place. This paper presents the results of the first large-scale comparison of online and offline prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72% of the time for the products sold in both locations, with significant heterogeneity across countries, sectors, and retailers. The similarity is highest in electronics and clothing and lowest in drugstores and office-supply retailers. There is no evidence of online prices varying with the location of the ip address or persistent browsing habits. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for National Statistical Offices and researchers using online data, as well as those interested in the effect of the Internet on retail prices.