Impact of COVID-19 pandemic on online consumption share: Evidence from China's mobile payment data

Abstract

This study investigates the impact of the COVID-19 pandemic on the online retail market in China and explores the mechanisms underlying this relationship. By developing a theoretical model based on utility theory and consumer risk perception theory and utilizing monthly mobile payment consumption data along with the number of people diagnosed with COVID-19 at the city level in 2020, this study finds that the COVID-19 pandemic has driven an increase in the share of online consumption, thereby changing the structure of the retail market. The primary mechanism is that the pandemic boosts e-commerce activity while concurrently reducing the service quality for consumers shopping offline. Furthermore, this study confirms that online consumption has mitigated the negative impact of the pandemic on overall consumption expenditure. Heterogeneity analyses suggest that the COVID-19 pandemic has significantly increased the online share of necessity and upgraded consumption. For city heterogeneity, the effects of the pandemic on online and offline consumption structures are more pronounced in regions with larger consumption scales and lower urbanization rates. Thus, the pandemic has accelerated the development of the online retail market and strengthened consumer inertia for online channels. According to consumer inertia theory, this trend may continue even as the pandemic gradually weakens. The applicability and effectiveness of this study's conclusions and methods provide a new perspective for future research on online retail and e-commerce markets.