The Impact of Technology on the Buying Behaviour in an Online Retail Environment in India

Among the BRIC Nations, India has been the fastest growing online market adding over 18 million internet users growing at an annual rate of 41%. India is also among the top 3 fastest growing markets worldwide in the last 12 months. A study [37] by The Associated Chamber of Commerce and Industry of India (ASSOCHAM) and ComScore has suggested online retail has grown 43% and has a 60% market penetration. With increasing competition, the Indian online book industry has been witnessing an intense price war. There has been no empirical study done, to the best of our knowledge, in the Indian market, of the effect of these price wars on the company's image, price sensitivity and the basket size. In this paper we analyse how price wars affected a leading online retailer's performance in terms of the basket size and the number of orders. We also analyse the effect of the reduced price on the overall market share of the retailer. We found strong empirical evidence suggesting an increased frequency of purchase and increased basket size with the reduction in price in certain groups of customers. There is also strong empirical evidence suggesting an increase in market share with the price drop. We also found strong empirical evidence suggesting that high frequency buyers had a bigger basket post the price drop as compared to low frequency buyers while no such evidence exists in the period before the price drop.