Socio-Spatial Studies

Socio-Spatial Studies

The Economy of Digital Retail: Costs, Platforms, and Market Power in Online Commerce

Document Type : Original Article

Author
Mujeeb Rahman Ziarmal
Department of Public Relation Faculty of Communication and Journalism Kabul University, Kabul, Afghanistan
10.22034/soc.2026.604401.1018
Abstract
Digital retail has grown from a marginal curiosity into one of the central institutions of contemporary commerce, and its rise has reorganized not merely where goods are bought but the underlying economics of how retail markets function. This article offers a critical, literature-based analysis of the economy of digital retail, arguing that online commerce is not conventional retail relocated to the internet but a distinct economic formation whose logic follows from the reduction of five fundamental costs — of search, replication, transportation, tracking, and verification — that digital technology has made possible. The article takes that framework seriously as an organizing device, devoting a section to each cost and stating candidly where the evidence supports the framework and where it does not. It traces the microfoundations of digital retail in lowered search costs and expanded variety; the reputation and feedback systems through which lowered verification costs make trade among strangers viable; the platform marketplaces governed by network effects and the economics of two-sided markets; the exploitation of consumer data for personalization, recommendation, and algorithmic pricing, where recent evidence has begun to substantiate longstanding theoretical concerns about tacit coordination among pricing algorithms; the distinctive cost structure of fulfillment that has replaced the economics of the storefront; and the consequences for market structure, competition policy, and the distribution of gains across consumers, workers, and firms. The article contends that digital retail has delivered substantial and well-documented benefits to consumers, but that these gains have been accompanied by a pronounced concentration of market power, by new forms of dependence and surveillance, and by uneven consequences for labor and for displaced firms and communities. It concludes that the economy of digital retail is a domain in which efficiency and market power have advanced together, and in which the central questions are increasingly less about the technology of selling than about the governance of the powerful intermediaries that the technology has produced — a question that has moved, in the years since the field’s foundational contributions, from academic argument into enacted law and active litigation.
Keywords
digital retail
e-commerce
platform economics
two-sided markets
search costs
reputation systems
algorithmic pricing
market concentration
consumer welfare
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Socio-Spatial Studies
Volume 10, Issue 4
Autumn 2026
Pages 1-14