Pricing of delivery services in the e-commerce sector

Abstract

Electronic commerce (e-commerce) is an expanding activity, even though currently it still represents a rather small share of total retail commerce (4ñ7 percent according to the estimates in France, and around 4 percent in Europe). In 2012, in France, online sales reached Ä45 billion (Fevad, 2013), which represents a 19 percent increase in a single year. By comparison, overall retail and commercial craft sales grew by ëonlyí 3.1 percent in value in 2011. E-commerce poses many interesting questions for economists. The existing literature has concentrated on its drivers at a macro and a micro level (Javalgi and Ramsey, 2001; Brousseau, 2003), on its specificities compared with traditional brick-and-mortar commerce, on issues related to trust and sellersí reputation (Cabral and HortaÁsu, 2010), on the competition between these forms of commerce (Clay et al., 2002), on the price competitiveness of e-commerce (Brynjolfsson et al., 2003). However, the vertical relationships in the e-commerce sector between e-retailers and their inputsí providers, like the delivery services, and the optimal pricing strategies of the latter have received little attention so far. Related subjects, like the pricing of publicly produced inputs, have been dealt with (Feldstein, 1972; Spencer and Brander, 1983). A comprehensive model of the e-commerce sector would account for the competition between e-commerce firms while also including the market for delivery services that constitutes an important input into the production function of e-retailers.