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Keywords
Online operations, Retailing, Pricing, Electronic commerce
Abstract
This paper investigates prices of consumer electronics sold on the Web by both online-only retailers (Dotcoms) and the online branches of multi-channel retailers (MCRs). Surprisingly, it finds that Dotcoms charge higher price than MCRs, a conclusion contradictory to the results of most of empirical studies. Also finds that the electronics prices decreased over the period of study in general, dropping about 0.6 percent per week, and the prices of MCRs and Dotcoms went down with time at a similar speed. Further, the prices across MCRs are 35.3 percent more dispersed than the prices across the Dotcoms based on full prices, and 33.1 percent more dispersed based on percentage prices. However, results show that price dispersion moved up with time in general, with no significant difference in the speeds between MCRs and Dotcoms.
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1. Introduction
With the steady growth of electronic commerce, many traditional retailers find that the Internet is a new channel of selling their goods. More and more conventional retailers have started selling online. It is interesting to see how these conventional retailers compete with online-only retailers on the Web. Based on data from books, CDs, DVDs and videos, empirical studies involving pricing of online branches of multi-channel retailers (MCRs) and online-only retailers (Dotcoms) have shown that MCRs charge higher prices than Dotcoms (Tang and Ho, 2003; Tang and Lu, 2001; Tang and Xing, 2001, 2003). But retailers may have different pricing behavior for different product categories sold in the Internet.
In this paper, we investigate prices of consumer electronics sold on the Web by both Dotcoms and MCRs. Brand names and after-sale services make the electronics market significantly different from the markets for books, music, and movies. Ward and Lee (2000) examined whether consumers used brands as sources of information when shopping online. They found that recent adopters of the Internet would be less proficient at searching and would rely more on brands. Thus, online shoppers are more likely to buy goods from the online branches of the well-established traditional retailers even if they charge higher prices....