AI and Analytics for Business
Research Paper Series
Measuring E-Commerce Concentration Effects When Product Popularity is Channel-Specific
This paper uses household-level panel data from three large apparel retailers to examine how e-commerce affects the concentration of sales across products. In our data there are remarkable differences between the products that are popular in online versus offline channels. When the relative popularity of products differs by channel, as in our data, we demonstrate that the traditional long tail metrics used in the literature provide biased results regarding changes to the concentration of sales caused by the growth in online sales. We propose an alternative metric that allows us to measure concentration effects when product popularity varies by channel. Our results demonstrate that ignoring differences in product popularity across channels can lead to erroneous conclusions regarding whether e-commerce increases or decreases the concentration of sales across products. Examining how the migration of consumers from brick and mortar to online channels affects the anatomy of their purchases is important for guiding managerial practice.
Keywords: E-commerce, long-tail