Chinese Internet Retail Market And The Efficiency Of The Entity Of The Retail Market - The Book Retail Market, For Example

Price levels and price dispersion on the Internet have attracted a lot of research and managerial attention due to the theory that internet economy would lead to the emergence of a frictionless economy. Globally, there have been a few studies showing that the price of products sold through the internet is lower than those sold in physical retail outlets, and the online price dispersion is higher than offline price dispersion, but these yet to be confirmed in China. This paper addresses this through an empirical analysis of price levels and price dispersion in the book categories among the two types of retailers in China in early 2005. Based on an analysis of 1309 price quotes, the results show that the online price level is lower than offline price level. However, the distribution of online prices is wider than offline prices. Reasons for this kind of price behavior are discussed in this paper. These findings suggest that online markets are still inefficient and online pricing is complex, offering opportunities for internet retailers to differentiate themselves from one another.