Online grocery in China is on the rise. With large differences in brands' abilities to secure a portion of China's online pie, a key question is what drives these differences. The authors derive how a brand's total sales change as the online grocery share goes up, and they show that it depends on two indices: (1) the brand's online index (brand's online category share relative to its offline category share) and (2) the category's online index (category's grocery share online relative to its grocery share offline). The authors then identify brand and category factors that drive these indices. They estimate their model on 448 brands in 60 product categories in China using 2011-2015 data. Their analyses show that the brand online index mainly increases with higher levels of online availability, lower online-to-offline price ratios, and for "trusted," less "fun" brands. As for the category online index, expensive, less frequently bought categories benefit from the shift toward the online channel, whereas the opposite holds for perishable and heavy categories.
- digital sales channel
- CONSUMER CHOICE