Économie et Statistique n° 355-356 Business - Trade - Population Forecasts
E-commerce in France: a test measurement of the CD market
E-commerce has boomed in France since 1999, albeit with still modest transaction volumes. Yet despite this relative success, the issue of selling on the Internet begs numerous questions. How does e-commerce differ from traditional trade? Are Internet markets more competitive than physical markets? In order to gain a better understanding of the strategies employed by on-line record dealers, the prices of a sample of CDs were collected from leading French on-line record dealers from May to October 2000. CD prices on the Internet were found to be more than 7% lower on average than shop prices. A greater difference was found for foreign CDs (12% deviation) than for French CDs (less than 2% deviation). The prices of each CD vary a great deal from one on-line record dealer to the next and high price volatility is found for the period studied. The most well-known sites (publicised by advertising campaigns) practise higher prices than the lesser known sites and also make greater price changes. The econometric analyses reveal cyclical phenomena in the pricing decisions (alternating price rises and cuts) and the existence of strategic interactions between on-line record dealers. Nevertheless, the age of the CDs reduces these two phenomena and results in price stability. Moreover, on-line record dealers make fewer price cuts on French CDs than foreign CDs.