Here’s why location matters again in e-commerce.
By Avi Goldfarb on November 6, 2013Technology is blurring the difference between online and offline retail.For retailing, the key change produced by the Internet is that shopping online spared consumers the economic costs (in time, grief, and gas money) of visiting a store and locating a product. This has been called the “death of distance.” When even isolated individuals can buy anything from a global marketplace, physical location does not confer any commercial advantage, and online merchants might be expected to win every battle.
But an emerging body of economic research shows that there is no independent “online world.” Physical context matters to e-commerce. It shapes our choices and tastes, and it strongly determines what we buy online. With the rise of mobile computing, these local effects matter even more.
Given how easy it is to find and buy books, electronics, and other items online, why do people continue to buy in stores at all? The reason is that online buying generates what economists call disutility: inspecting digital products is difficult, shipping can be slow or expensive, and returning products can be challenging.