What Matters Most in Internet Retailing?

Principle 1

  • Customer Acceptance of Online Retail Depends on Offline Shopping Costs
  • Internet retailers can alter the cost-benefit trade-off shoppers by making things “closer” and more accessible, perhaps even at better prices.

Principle 2

  • Sales Evolution is Structured and Predictable
  • Social Contagion from communication and observation affects online demand evolution

Principle 3

  • Migrating from “Good” to “Great” Requires Expansion to Niche Locations
  • Spatial Structure follows a pattern of proximity and similarity (spatial “Long Tail”)

There are two ways to think about distance:

  • Geographic distance
  • Social or demographic distance (people live far apart from each other still might be similar in other ways)

Two important patterns

  • Gin the beginning, sales start out in larger cities and spread by proximity from person to person
  • Later on, sales pick up in smaller areas that are qute far apart, but that contain “similar” kinds of people


Source: Prof. David Bell