E-retailing versus physical retailing - A theoretical model and empirical test of consumer choice

This paper integrates extant literature on retailing and consumer choice to develop an economic model of consumer choice in which a consumer self-selects between on-line and in-store shopping. Two important factors impacting consumer choice between on-line versus instore shopping are identified: (1) the retail context utility and (2) the consumers' perceived product and service risks. Our model postulates that consumers derive utility from the shopping experience and are more likely to shop on-line for products/services that are low in purchase risks. They are also more likely to shop on-line for products with well-known brands than lesser-known ones. However, they are less likely to shop on-line from lesser-known retailers who carry well-known brands than from reputable retailers, even if the latter carry lesser-known brands. Empirical verification of the model is carried out using an experimental design setting and the results gave support to the postulations based on our theoretical model. Strategic implications for in-store and on-line retailers are discussed. (C) 2002 Elsevier Science Inc. All rights reserved.