Navigating the Digital Wave: My Take on Broadband’s Impact on Retail

Posted on January 22, 2024

As broadband internet spread, so did fears of a “Retail Apocalypse” predicting the fall of brick-and-mortar stores. In response, my working paper investigates broadband’s true effects on consumer behavior, particularly regarding consumer packaged goods (CPGs) in the U.S. from 2006 to 2016.

This research, covering a significant part of U.S. retail, analyzes changes in shopping habits amid the digital surge. I looked into brand diversity, shopping frequency, spending habits, and the offline-to-online shift.

Contrary to common beliefs, my findings highlight a minimal impact of broadband on consumer patterns. Slight declines in brand diversity and retailer variety occurred, yet overall spending and physical store visits remained stable.

Crucially, broadband’s influence on pricing strategies was minimal. An in-depth analysis of price dispersion and demand elasticity across numerous brands and categories showed little to no effect, challenging assumptions about broadband’s disruptive power.

While broadband did encourage some online shopping, it mainly increased the number of online shoppers, not the amount spent online. This indicates e-commerce’s growth is less disruptive than presumed.

Moreover, broadband’s impact differed more within than between product categories, underscoring product-specific traits in consumer behavior changes.

In sum, my research offers a nuanced view of the retail landscape in the broadband era. It contradicts the bleak retail apocalypse narrative by showing that digital connectivity, while altering some shopping behaviors, has not dramatically reshaped traditional retail, especially for CPGs. These insights are vital for retailers, marketers, and policymakers navigating digital transformation and consumer dynamics.