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Frontiers of Business Research in China

Front. Bus. Res. China    2019, Vol. 13 Issue (2) : 231-249     https://doi.org/10.1186/s11782-019-0059-9
RESEARCH
Consumer heterogeneity and online vs. offline retail spatial competition
Mingming Shi1(), Jun Zhou2, Zhou Jiang3
1. Business School, Renmin University of China, Rm 1015, Mingde Business Building, 59 Zhongguancun Street, Haidian District, Beijing 100872, China
2. Business School, Renmin University of China, Rm 1015, Mingde Business Building, 59 Zhongguancun Street, Haidian District, Beijing 100872, China
3. Business School, Renmin University of China, Rm 1015, Mingde Business Building, 59 Zhongguancun Street, Haidian District, Beijing 100872, China
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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     
Issue Date: 15 July 2019
 Cite this article:   
Mingming Shi,Jun Zhou,Zhou Jiang. Consumer heterogeneity and online vs. offline retail spatial competition[J]. Front. Bus. Res. China, 2019, 13(2): 231-249.
 URL:  
http://journal.hep.com.cn/fbr/EN/10.1186/s11782-019-0059-9
http://journal.hep.com.cn/fbr/EN/Y2019/V13/I2/231
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