Skip to Content

The Internet Killed Distance. Mobile Computing Brought It Back.

Here’s why location matters again in e-commerce.
November 6, 2013

For retailing, the key change produced by the Internet is that shopping online spared consumers the economic costs (in time, grief, and gas money) of visiting a store and locating a product. This has been called the “death of distance.” When even isolated individuals can buy anything from a global marketplace, physical location does not confer any commercial advantage, and online merchants might be expected to win every battle.

But an emerging body of economic research shows that there is no independent “online world.” Physical context matters to e-commerce. It shapes our choices and tastes, and it strongly determines what we buy online. With the rise of mobile computing, these local effects matter even more.

Given how easy it is to find and buy books, electronics, and other items online, why do people continue to buy in stores at all? The reason is that online buying generates what economists call disutility: inspecting digital products is difficult, shipping can be slow or expensive, and returning products can be challenging.

Research shows that people weigh these disadvantages against the benefits of buying online. Along with colleagues Chris Forman and Anindya Ghose, I examined what happened to Amazon’s book sales at 1,497 U.S. locations when a Walmart or Barnes & Noble opened nearby. We found that customers who lived near the newly opened stores bought many fewer best-sellers from Amazon.

This means that for mainstream products, local retail options—the offline world—had large economic effects on online business. The physical environment shapes online behavior in other powerful ways. Neighbors tend to like the same music, books, and cars. Social networks are also local. Most e-mail a person receives comes from the same city, often the same building. So even though we speak of the Internet as a “place” where users “visit” websites, this metaphor falls flat when we consider actual behavior. All online behavior has an offline context.

Mobile computing strengthens the links between online and offline life. Before, online activity happened in a specific place, sitting at a desk. Now smartphones mean that wherever consumers happen to be, they can gather information online, compare prices, or buy something. Brick-and-mortar stores worry that customers might be browsing products in their aisles, but buying online (see “It’s All E-Commerce Now”).

Yet the offline environment is actually more important when consumers connect through a mobile device. With colleagues including Sang Pil Han of the City University of Hong Kong, we studied 260 users of a South Korean microblogging service similar to Twitter. What we found was that behavior on the small mobile screen was different from behavior on the PC. Searching became harder to do, meaning that people clicked on the top links more often. The local environment was also more important. Ads for stores in close proximity to a user’s home were more likely to be viewed. For every mile closer a store was, smartphone users were 23 percent more likely to click on an ad. When they were on a PC, they were only 12 percent more likely to click close-by stores.

Thus, the mobile Internet is less “Internet-like” than Web browsing on a PC: search costs are higher and distance matters more. We do not yet know how the growth of the mobile Internet will affect the balance between online and offline retailers. But it appears certain that real-world stores will do better if they can leverage the information available online, and that online retailers will need to understand their customers’ offline environment in order to succeed.

Avi Goldfarb is a professor of marketing at the University of Toronto’s Rotman School of Management.

Keep Reading

Most Popular

A Roomba recorded a woman on the toilet. How did screenshots end up on Facebook?

Robot vacuum companies say your images are safe, but a sprawling global supply chain for data from our devices creates risk.

A startup says it’s begun releasing particles into the atmosphere, in an effort to tweak the climate

Make Sunsets is already attempting to earn revenue for geoengineering, a move likely to provoke widespread criticism.

10 Breakthrough Technologies 2023

Every year, we pick the 10 technologies that matter the most right now. We look for advances that will have a big impact on our lives and break down why they matter.

These exclusive satellite images show that Saudi Arabia’s sci-fi megacity is well underway

Weirdly, any recent work on The Line doesn’t show up on Google Maps. But we got the images anyway.

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at with a list of newsletters you’d like to receive.