The purpose of this research is to take into consideration the country effect in online and offline environments and compares price levels and dispersion online v. offline across the two largest Continental European markets, thus adding a new dimension in price comparisons and multichannel pricing strategies.
Based on an empirical analysis of data collected in one product category (CDs), our findings for France and Germany show that price levels ‐including shipping costs – are always higher online than offline in each country and price dispersion is persistent across markets. Calculating mean prices for the two countries, ANOVA tests reveal significant differences among the two sets of data. Using standard deviation as the measurement for price dispersion, Levene statistics reveal a higher degree of online price dispersion than offline and statistically significant differences between the two sample countries.
Even if our approach need to be extended to more product categories and more countries, our article may be interesting for practitioners, policy makers and managers. It clearly shows that the “frictionless capitalism and cost transparency hypothesis” has proven to be wrong most of the time even if many retailers still believe they must sacrifice the possibility of pricing up when they go on the internet. As demonstrated by our findings, retailers can take advantage of online relative indifference to price to capture some margin premium and enjoy excellent results.
Our results also demonstrate that, even if results show some similarities and common trends, differences among France and Germany still remain important. As a consequence, marketers should continue to approach the European marketplace with full awareness of its diversity.
