Entry of online presale of fresh produce: A competitive analysis

The fresh produce market is one of the last unexplored spaces for e-commerce and has attracted the entrance of many e-commerce firms in recent years; these firms are likely to influence the traditional fresh produce sales channels. The online presale of fresh produce can lower the circulation loss rate while traditional sales channels suffer from a huge waste in the circulation. In this paper, we study the online presale model of fresh produce from a competitive perspective. We examine the pricing and order decisions of one online grocery and one physical store. By examining the physical store with and without the online grocery, we investigate the impact of the entry of an online grocery on the physical store. We first identify two pricing strategies, penetration-pricing and skimming-pricing, for the physical store and two pricing strategies for the online grocery, and then identify the conditions under which pricing equilibrium will occur. We find that the store does not necessarily alter its pricing strategy after the online grocery enters the market. When the physical store uses the penetration-pricing strategy to compete with the online grocery for Internet shoppers, it may fail to achieve that goal if the online grocery's delivery cost is low and if the Internet shoppers account for a relatively low proportion of shoppers. Alternatively, the physical store may fail if the online grocery's delivery cost is not high and if the circulation loss rate of fresh produce is high.