Online Internet shopping is now an important phenomenon in the market. What makes people use the Internet for shopping? Why do people buy products using the Internet? Is Internet shopping always cheaper than offline shopping? Or is it mainly convenience?
As a student, I always buy things through the Internet. Why? The reason is simple: it is very easy to compare prices and get information. In other words, I reduce my market search When I go to a department store or market for shopping, I have to walk over many shelves and stores to find the correct product, quantity and price before I decide to buy.
Going to a shop or store requires time, as well as effort. This is very inconvenient for people whose time is very limited such as students who need to study, go to class, and do other social activities. Thus, when I found out about Internet shopping, I got hooked since it saved my time, effort and even money since I could compare prices immediately and make a decision.
There is actually logic and a rational reason based in economics for Internet shopping. When people such as myself decide to use the Internet to buy something, we spend more time and effort to search for the best combination of cost effective services. We compare such things as price, prompt delivery, service, and reputation of the seller. There is lower search cost for online, compared to offline shopping. In the Internet, there are so many sellers that we can easily compare price and non-price factors. Given the same quality of a product and services, suppliers tend to sell at lower prices than others in order to sell more and be competitive. The market actually works in Internet shopping, since price competition is the norm among sellers. If this logic goes on, all sellers in Internet shopping will sell at marginal cost, lowering prices drastically. This market rationality is called “Bertrand’s model” in consumer theory, and the best example of which is Internet shopping
(Modern Industrial Organization by Carlton and Perloff)
While consumers and producers have a variety of reasons to use the Internet buy and sell products or services, efficiency in the market, through better quality and lower prices drives the competition. Both price, quality and convenience will make sure that Internet shopping therefore is here to stay, to benefit both consumers and producers.