The Impact of Distance in Retail Markets

Abstract

We examine the demand-side implications of Amazon's distribution and logistics investments. Our results indicate that online demand–transactions at Amazon and its competitors–does not respond to the consumer's proximity to Amazon's upstream fulfillment distribution facilities, suggesting that their densification did not differentially improve local shipping times and on-time delivery. Instead, we find that investments in last-mile delivery facilities and services allow the company to improve shipping times more directly in the urban markets served by these facilities, simultaneously increasing demand through the rollout of same-day service options and reducing the visits to traditional brick-and-mortar retail.