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Problem 1: Online shopping is in some ways a perfectly competitive market: there are many suppliers,...

Problem 1: Online shopping is in some ways a perfectly competitive market: there are many suppliers, multiple websites have the same products, consumers can quickly know prices across multiple firms and there is little entry or exit costs. One of the exceptions is shipping. How has shipping impacted the competitive nature of online shopping? How has amazon tried to address this to make shopping through Amazon more competitive?

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Answer #1

Shipping adds to the price the consumers have to pay. The farther the seller, the more the shipping cost. Different platforms offer different schemes to attract consumers. Amazon has come out with offers like

(i) free shipping above certain amount (increases sale too, as consumers will buy more to reach that minimum amount of purchase rather than paying shipping costs); or

(ii) free and fast shipping for consumers who purchase/ have purchased Amazon *prime (they are selling more home brand). Thus Amazon has a better footing in the otherwise competitive market of online shopping.

Amaon is therefore more competitive.

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