In the last few years online stores have revolutionized retail shopping. There are two main reasons for this. First, the Internet is a storehouse of information for consumers, and second, comparison-shopping is just a few mouse clicks away. So goods that don't require "touch and feel", need substantial product information and are shipped easily are better purchased online. Given that many such online stores do not collect sales tax and offer significant price discounts, many shoppers are tempted to visit some big department store to get 'first hand' product information and then shop online. But in doing so, customers are free-riding on the sales efforts of offline stores. In other words, customers have threatened to transform sales efforts (a private good) into a commons good¹.

Manufacturers share this concern, as they do not want retailers (who provide sales effort) to drop their products. One strategy is to restrict distribution of some products to websites of select offline stores and exclusive manufacturer websites. Figures from a survey conducted on 1,100 types of fragrances show that as much as 21% of perfumes are available exclusively on manufacturers' websites, and 19% on websites of large department stores. And the more exclusive a perfume is, the more controlled is the online distribution.

Secondly, for products that are widely available both online and offline, manufacturers have sought to address the problem by selectively choosing authorized distributors and by reserving the right not to honor warranties or returns from unauthorized sales. This allows the authorized stores to charge a price higher than others to cover after-sale maintenance or pre-sale information. For example, much of the retailer effort for DVD players occurs after the sale, when consumers have problems with their machines. So unauthorized retailers cannot free ride off the sales efforts of authorized retailers, since their customers receive no after-sale support in return for the lower prices they pay.

Finally, as the need to experience a product prior to purchase is more critical for newer products, they are more prone to free riding. This tendency is further compounded by the lack of substantial product literature online. In this case too, the simple rule of thumb would be to restrict the availability of these products online. The survey finds that as much as 19% of new fragrances sold at large department store web sites - such as Bloomingdale's or Macy's - are not available elsewhere.