The Rise of Broadband and the Retail Landscape: Evidence from Consumer Packaged Goods

Abstract

The proliferation of broadband internet has sparked concerns about the future of brick-and-mortar retail. This article explores consumer behavior in the U.S. consumer packaged goods sector during broadband's proliferation from 2004 to 2019. Using household panel and retail scanner data covering more than 40,000 brands in 900 categories, the author analyzes nine household and retailer outcomes: brands purchased, trips taken, retailers visited, offline spending, any online spending, online spending share, prices, price dispersion, and demand elasticities. The author combines U.S. Census and Federal Communications Commission data to track the rollout of broadband. In contrast to established notions that broadband adoption would rapidly transform shopping behaviors in this period, the findings reveal a more nuanced and gradual pattern of change. Exploiting geographic variation in broadband growth, the author finds economically modest average effects with significant heterogeneity by age and household income. The analysis reveals generational differences: sharp declines in brick-and-mortar shopping among younger consumers counterbalanced by relative stability in larger older cohorts. In short, this article finds that broadband access drove a gradual evolution in consumer behavior, rather than a dramatic upheaval.