Customer demand concentration in online grocery retailing: Differences between online and physical store shopping baskets

The long-tail effect, in which online retailing has a relative advantage in selling less popular products, has been studied extensively with e-commerce growth. However, recent research has raised questions that are more nuanced than originally considered. E-commerce can lead to customer demand concentration under specific conditions such as recommendations of popular products and past-purchase shortcuts. This study explores customer demand concentration in multichannel grocery retailing, a product category that involves low search costs. We use multichannel and multichain purchase panel data, which are representative of a large portion of online supermarkets in Japan. Our analysis shows that, compared with demand in physical stores, demand online is more concentrated on popular products. Furthermore, online shopping experience has a moderating effect, resulting in greater demand concentration among more experienced customers. These results are robust when controlling for available assortments across channels. These findings help retailers to develop inventory and customer relationship management.

Automated summary

This study explores customer demand concentration in multichannel grocery retailing and finds that online demand is more concentrated on popular products compared to physical stores. The online shopping experience also moderates the level of demand concentration among customers.