Consumer heterogeneity and online vs. offline retail spatial competition

Mingming Shi (), Jun Zhou () and Zhou Jiang ()
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Mingming Shi: Renmin University of China
Jun Zhou: Renmin University of China
Zhou Jiang: Renmin University of China

Frontiers of Business Research in China, 2019, vol. 13, issue 1, 1-19

Abstract: Abstract This paper develops a game-theoretic spatial model featuring consumer heterogeneity in online vs. offline retailers’ spatial competition. We find that consumers’ browse-and-switch behavior intensifies the competition because both offline and online retailers’ price and profit decline when the behavior occurs, but it is not necessarily a threat to offline retailers especially when the product relates more closely to experience. We consider six equilibrium scenarios for different combinations of consumer behaviors when considering a hybrid retailer. The analysis taking consumer heterogeneity into consideration shows that the hybrid retailer operating both online and offline is not always the winner. Particularly, the business opportunity for the offline retailer lies in consumers’ willingness to pay in store, and whether the retailer launches an online store depends on the type of products and services provided.

Keywords: Spatial competition; Online retailing; Browse-and-switch behavior; Consumer heterogeneity; Consumer behavior; China; Circular city model (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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DOI: 10.1186/s11782-019-0059-9

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