Ecommerce and market structure effects in the European retail industry
Fifteen or so years into what is said to be the game changer of our time there are many fields of science focusing their attention towards the online market in attempts to describe its implications for the traditional, offline markets. Where most of the literature on economics of ecommerce focus on pricing mechanisms and growth little attention has been directed towards more general market structure effects. This thesis adopts techniques, empirical and theoretical models from the search cost and market structure literature in order to examine the relationships between ecommerce and offline market structures in the retail industry through regional employment and establishment data. The literature reviewed and used focus only on the US market whereas this thesis shifts the attention to the European regions. The results are convincing and in general corresponding to previous research results. As ecommerce usage increase and the consumer search costs thereby gets lower inefficient firms drop out of the market resulting in a decline in local establishment counts. The opposite effect is seen for pure online retailing establishments that thrive in the presence of local ecommerce usage. The effect of ecommerce on traditional offline establishments seems to be aggregated phenomena whereas the effect on pure online firms seems to be of a more local nature. Focus of policymakers and company management therefore might consider looking at the two effects in their respective aggregation level to best sort out how to react in the presence of increased competition from ecommerce usage.