Brand competition in fashion e-commerce

Application of regression analysis to examine substitution effects in fashion e-commerce.Unexpectedly small extent of brand competition present in fashion e-commerce.Patterns and magnitude of cross-price effects are very distinct.Asymmetric competition between private and national brands is present. When developing pricing strategies, it is highly important for managers to understand brand competition resulting from price promotions within a store. To the knowledge of the authors the present study is the first to examine this topic in the fashion e-commerce space. Using a unique data-set with more than 3.3 million observations which was provided by a leading European e-commerce company, we empirically estimate cross-price elasticities in two independent product categories. Regression results show unexpectedly low levels of cross-brand competition due to the distinctiveness of fashion merchandise prohibiting customers to take advantage of increased market transparency in e-commerce. In addition, patterns of brand competition are very distinct as there is only a small share of significant but highly pronounced effects. Moreover, the results show that asymmetric competition exists between private and national brands. Lastly, we also discuss implications for markdown pricing strategies in the context of fashion e-commerce.

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