Abstract and Keywords
This article describes the nature of competition between online and offline retailing. It first introduces some basic empirical facts that reflect the present state of online and offline competition, and then discusses the interplay of online and offline markets. Internet users are higher income, more educated, and younger than non-Internet users. Education is a sizeable determinant of who is online, even controlling for income. E-commerce enables new distribution technologies that can decrease supply chain costs, improve service, or both. The Internet has influenced the catalog of products available to consumers. The changes in demand- and supply-side fundamentals that e-commerce brings can foment substantial shifts in market outcomes from their offline-only equilibrium. These include prices, market shares, profitability, and the types of firm operating in the market. Online channels have yet to fully establish themselves in some markets and are typically growing faster than bricks-and-mortar channels.
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