Adoption and Disadoption of Internet-Based Services: Failure of an Internet Grocer

Relatively little is known about adoption, use, and disadoption of new internet-based services. Using data from an Internet grocer in a market where it was the monopoly provider of this service, we examine customer adoption, use, and disadoption of online grocery shopping. We find that adoption was significant. In zip codes where the service was offered, 1-3 percent of households signed-up for this service. The firm used a menu of three two -part tariffs to differentiate customers by expected usage. While the pricing structure separated customers by household size, employment, and income; between 38 and 50 percent of new customers quit within three months. Results are consistent with greater rates of disadoption for consumers with greater uncertainty about the future benefits of the service and greater dissatisfaction with the service.