The impact of a new online channel: An empirical study

• We investigates the impact of the adoption of a direct online channel.
• A direct online channel reduces price premium charged by intermediaries.
• The impact varies across consumer segments and product markets.
• The price dispersion increase is higher for products sold by intermediaries.
• The intermediaries are not necessarily worse off.

This paper investigates the impact of adding a direct online channel on a firm and its intermediaries. We develop a set of testable hypotheses and then empirically test them on a longitudinal transaction dataset from the hospitality industry. Our results show that the introduction of a direct online channel significantly reduces the price premium charged by intermediaries, and the impact varies across consumer segments and product markets. More interestingly, we find that, after the adoption of a direct online channel: (1) the intermediaries are not necessarily worse off; (2) price dispersion increases for products sold through both intermediaries and direct channels; and (3) the price dispersion increase is higher for products sold by intermediaries.