Clickstream Data and Inventory Management: Model and Empirical Analysis

Abstract

We consider firms that feature their products on the Internet but take orders offline. Click and order data are disjoint on such non-transactional websites and their matching is error-prone. Yet, their time separation may allow the firm to react and improve its tactical planning. We introduce a dynamic decision support model that augments the classic inventory planning model with additional clickstream state variables. Using a novel data set of matched online clickstream and offline purchasing data, we identify statistically significant clickstream variables and empirically investigate the value of clickstream tracking on non-transactional websites to improve inventory management. We show that the noisy clickstream data is statistically significant to predict the propensity, amount, and timing of offline orders. A counterfactual analysis shows that using the demand information extracted from the clickstream data can reduce the inventory holding and backordering cost by 3% to 5% in our data set.

Keywords: Inventory Theory and Control, Dynamic Programming, Econometric Analysis, Structural Estimation,

JEL Classification: C70