Survey evidence on user multi-homing in online retail businesses

In this paper, John Davies, Sergey Khodjamirian, Felix Giallombardo, Pietro Aletti consider empirical evidence on multi-homing in online retailing in the context of the ‘gatekeeper’ concept. The team reviews independent survey evidence on multi-homing in online marketplaces and analyses results from two surveys of five countries in Europe, commissioned by Amazon and conducted by market research firm Alligator Digital with assistance from Compass Lexecon. The results show significant multi-homing on both the consumer and seller sides, suggesting that even large online marketplaces do not have meaningful ‘gatekeeping’ power.

Abstract

The ‘gatekeeper’ concept, which is at the heart of the European Union’s Digital Markets Act (“DMA”) and similar legislation proposed by various European countries, is intended to identify companies which can control access to users of digital services. Although draft legislation identifies gatekeepers primarily on size alone, even large digital intermediaries will only be able to control access if users ‘single-home’ rather than using alternative services. We review independent survey evidence on multi-homing in online marketplaces, both on the consumer and seller sides. This includes presenting results from two large surveys of five countries in Europe commissioned by Amazon, conducted by market research firm Alligator Digital with assistance from Compass Lexecon, including the authors of this piece. These surveys, together with others already in the public domain, show significant multi-homing on both the consumer and seller sides, suggesting that even large online marketplaces do not have meaningful ‘gatekeeping’ power.

Introduction and Summary

This paper considers empirical evidence on multi-homing in online retailing in the context of the ‘gatekeeper’ concept. The concept is at the heart of the European Union’s Digital Markets Act (‘DMA’) and similar legislation proposed by various European countries, such as Italy’s proposed reform of its law on economic dependence, the UK’s pending legislation for companies with ‘Strategic Market Status’ and Germany’s competition law reform of 2021.

There is no universally agreed definition of what constitutes a gatekeeper.2 Common to any notion of gatekeeping, however, is the importance of ‘single-homing’ users, who use no other service for the activity under investigation besides the alleged ‘gatekeeper', and to whom the alleged ‘gatekeeper’ therefore may control access. For many settings, the key question is whether users of an intermediation service (e.g., a marketplace that hosts sellers and consumers) can easily reach each other: sellers (on one side) reaching consumers (on the other), for example. If users on both sides of an intermediation service (a ‘platform’) use more than one service (‘multi-home’) the service operator is unlikely to be a gatekeeper. If consumers and sellers all multi-home, for example, then neither would be forced to go through any particular intermediary to conduct transactions.

Multi-homing therefore represents a significant constraint on an intermediary’s power. Despite this, the DMA and most of the other new legislation put little or no emphasis on multi-homing when designating large undertakings as gatekeepers (or similar labels identifying companies as subject to special rules), instead relying on quantitative thresholds based on the company’s size and other factors. In doing so, these legal instruments may identify as gatekeepers those digital intermediaries which are large but in fact have no meaningful gatekeeping ability, because their users multi-home. That could set an unfortunate precedent, if the gatekeeping concept becomes more widespread in the regulation of digital markets.

This paper reviews independent survey evidence on multi-homing in online marketplaces, both on the consumer and seller sides. This includes two large surveys of five countries in Europe commissioned by Amazon, conducted by market research firm Alligator Digital with assistance from Compass Lexecon, including the authors of this piece. One of the surveys focused on consumers active on online marketplaces, while the other focused on sellers active on at least one online marketplace. The results of these surveys show significant multi-homing on both the consumer and seller sides, thus showing that neither sellers nor consumers ‘depend’ on a single channel to purchase or sell their products. Results varied by country and product type to some extent, but overall and fairly consistently:

a) Half or more of consumers reported shopping around for a given purchase, before buying it on an online marketplace, by looking into other non-marketplace channels (such as a brand’s own webstore or brick-and-mortar stores) as well as other marketplaces. Similar proportions reported checking prices, for example on price comparison sites.

b) This reported browsing behaviour is confirmed by actual purchases: consumers who purchased a particular product on an online marketplace had used multiple channels and several marketplaces to buy similar products (within the same category) over the preceding year.

c) The majority of marketplace consumers use more than one marketplace for making online purchases.

d) About one third of consumers reported that they would look elsewhere if prices went up by a small amount (5%) on online marketplaces, which is evidence of substitution between channels by consumers.

e) Similarly, the great majority of sellers on online marketplaces, including a majority of ‘small’ sellers, were not dependent on a single marketplace for their sales but used other marketplaces, other e-commerce  channels (such as their own website) or bricks and mortar channels.

Read the full paper here

An Italian version of the paper is available here

This paper was originally published at SSRN here and in PDF format here. The views expressed are those of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees, or clients.