Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers
Online prices are increasingly being used for a variety of inflation measurement and research applications, yet little is know about their relation to prices collected offline, where most retail transactions take place. This paper presents the results of the first large-scale comparison of online and offline prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72% of the time for the products sold in both locations, with significant heterogeneity across countries, sectors, and retailers. The similarity is highest in electronics and clothing and lowest in drugstores and office-supply retailers. There is no evidence of online prices varying with the location of the ip address or persistent browsing habits. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for National Statistical Offices and researchers using online data, as well as those interested in the effect of the Internet on retail prices.
Financial support for this research was provided by the JFRAP at MIT Sloan and the NBER's Economics of Digitization and Copyright Initiative. I thank Maria Fazzolari for her outstanding work implementing and coordinating all the offline data collection. I also thank the MIT and Wellesley University students that collected some of the offline data: Vivian Xi, Maurizio Boano, Sibo Wang, Descartes Holland, Sabrina Lui, Suh Yoon, Holly Zhu, Sean Bingham, Elizabeth Krauthamer, Jeffrey Zhang, William Rodriguez, Wenxin Zhang, Jake Amereno, Ivy Jiang, Diya Mo, Qi Jin, Riley Quinn, Do Yeon Park, Jung Hyun Choi, Xiaoxi Wang, Aaroshi Sahgal, Isaiah Udotong, Giulio Capolino, Tanya Bakshi, Allison Davanzo, Karen Pulido, and Bailey Tregoning. I greatly benefited from the comments and suggestions by the Editor and anonymous referee, as well as seminar participants at the Ottawa Group, MIT Sloan, NBER/CIRW Summer Institute, and the UNECE/ILO Meeting of the Group of Experts on Consumer Price Indices. The Appendix that accompanies the paper can be found on the authors web page, together with the data and replication materials. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Alberto F. Cavallo
The author has an ownership stake in PriceStats LLC, a private company that uses scraped online data to compute inflation indices.
Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January. citation courtesy of