Free Riding and Conflict in Hybrid Shopping Environments: Implications for Retailers, Manufacturers, and Regulators

Abstract

Shoppers increasingly utilize multiple distribution channels. One variation of this behavior is hybrid shopping—jumping across channels in the path to a single purchase. Hybrid shopping can create coordination challenges for the distribution system. These include two types of free riding: using the presentation and services offered by a brick-and-mortar channel but maki ng the purchase in an online channel (recently termed “showrooming”) or, conversely, first obtaining information online before ultimately purchasing in a physical store. This article explores the implications of hybrid shopping for retailers and manufacturers, and their evolving responses to the prospective free riding. These include price matching, restrictions on product offerings that provide channels with some degree of exclusivity, service enhancements that leverage multichannel capabilities, and schemes that compensate channel members for contributing to the sale. For each of the developments considered, findings and responses provide implications for competition policy and antitrust.