Toughening conditions of online stores' shopping will negatively affect the competition

2 february 2015

Experts of the Analytical Center prepared a bulletin on competition development "Regulation of e-commerce in Russia".

The development of e-commerce sector has a positive impact on competition, according to experts. This is mainly due to the lower-cost entry of new participants into commodity markets. In their view, lower costs can be achieved primarily due to the absence of expenses for the purchase or lease of retail space, and for staff. In turn lower costs may allow online stores to set lower prices. Thus, the increase in the number of online stores on a given market enhances the intensity of price competition.

According to the bulletin, in addition to cost advantages, the development of e-commerce brings substantial benefits to consumers in terms of expanding the range of products offered to them, as well as reducing information asymmetry and the costs for searching necessary goods while shopping. The diversification of goods in online shopping is possible in part due to the elimination of space limitations among the providers to showcase their products (for example, in traditional retail shops, space on shelves and display cases may be limited), consider experts.

"The ability to purchase goods not only in domestic but also in foreign shops can further intensify the competition by price, quality and range of products, including reinforcing the branded competition by increasing the number of sellers offering various kinds of products, as well as the equal goods", the experts note in their study.

Thus, experts believe that the toughening of conditions of shopping at online stores (both Russian and foreign) may adversely affect the competition in domestic commodity markets as well as lead to a deterioration of the ultimate consumers of retailers.