Amazon Effects in Canadian Online Retail Firm-Product-Level Data

I use firm-product-level data for Canadian online retailers to study how product scope (the average number of product categories per firm) evolved from 1999 to 2012. During this period, product scope dropped monotonically from 59 to 5 product categories. Using a theoretical model of multi-product firms, I show that this reduction can be rationalized by increased online competition. Consistent with the model, I find that the percentage of Canadian online retailers with revenues in a product category falls when Amazon.com expands its varieties in the category. Overall, Amazon.com’s expansion accounts for 37 percent of the observed reduction in product scope.