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The pricing strategies of online grocery retailers

Author

Listed:
  • Diego Aparicio

    (IESE Business School)

  • Zachary Metzman

    (MIT)

  • Roberto Rigobon

    (MIT & NBER)

Abstract

This paper documents the differences in pricing strategies between online and offline (brick-and-mortar) channels. We collect price data for identical products from leading online grocery retailers in the United States and complement it with offline data for the same products from scanner data. Our findings reveal a consistent pattern: online retailers exhibit higher price dispersion than their offline counterparts. More specifically, online grocers employ price algorithms that amplify price discrimination in three key dimensions: (1) over time (through frequent price changes), (2) across locations (by charging varying prices based on delivery zipcodes), and (3) across sellers (by setting dispersed prices for identical products across rival retailers).

Suggested Citation

  • Diego Aparicio & Zachary Metzman & Roberto Rigobon, 2024. "The pricing strategies of online grocery retailers," Quantitative Marketing and Economics (QME), Springer, vol. 22(1), pages 1-21, March.
    • Handle: RePEc:kap:qmktec:v:22:y:2024:i:1:d:10.1007_s11129-023-09273-w
    DOI: 10.1007/s11129-023-09273-w
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    More about this item

    Keywords

    Algorithmic pricing; Price dispersion; Price discrimination; Online groceries; Scanner data; Amazon; Walmart;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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