Growth of Omnichannel Grocery Retailing and Food Prices

Abstract

This paper examines the effects of the growth of omnichannel grocery retailing on food prices. We first develop a conceptual model of consumer choice and retailer pricing that allows us to evaluate changes in equilibrium prices, quantities, and profits with online channel growth and alternative pricing strategies. Subsequently, we empirically analyze the relationship between the increasing prevalence of online grocery shopping and in-store prices. We find that increasing online grocery sales is positively associated with in-store food prices, indicating that the drastic shift in consumer preferences toward online grocery shopping in the last few years could be another factor contributing to high food prices.