Online versus In-Store: Price Differentiation for Multi-Channel Retailers

Pure-play online retailers have created pressure on traditional bricks-and-mortar retailers forcing many of them to move to a multi-channel business model to provide customers online storefronts in addition to local physical stores. Conventional wisdom suggests that online prices be lower than instore prices. This study investigates whether multi-channel retailers follow such clear-cut pricing strategies based on the sampling of both their online and in-store prices. The results from three national retailers of office supplies in the USA indicate that their online prices are not necessarily lower than in-store prices. In addition, they suggest that the retailers apply different pricing strategies across different product categories. The finding reveals that multi-channel retailers use differential strategies for online and in-store pricing. It calls for further investigation of the interaction between consumer behavior and pricing strategies in hybrid e-commerce environment.