Integration of Online and Offline Channels in Retail: The Impact of Sharing Reliable Inventory Availability Information
Dartmouth College - Tuck School of Business
Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS)
June 1, 2013
Increasingly, retailers are integrating their offline and online channels to reduce costs or to improve the value proposition they make to their customers. Using a proprietary dataset, we analyze the impact of the implementation of a buy-online-pickup-in-store (BOPS) project. The implementation of this project is associated with a reduction in online sales and an increase in store sales and traffic. These results can be explained from two simultaneous phenomena: 1) Additional store sales from customers that use the BOPS functionality and buy additional products in the stores (cross-selling effect); and 2) Shift of some customers from the online to the brick and mortar channel, and conversion of non-customers into store customers due to the more accurate store inventory information (channel shift effect). We interpret these results in light of recent operations management literature that analyzes the impact of sharing inventory availability information online. The implementation of a buy-online-pickup-in-store project provides an exogenous shock to the verifiability of the inventory information that the firm shows to their customers. The fact that inventory information becomes more credible reduces the risk that customers face when deciding whether to visit the store. We validate these theories with an analysis of the change of cart abandonment and conversion rates of the brick and mortar and online channels. Our analysis illustrates the limitations of drawing conclusions about complex interventions using single channel data.
Number of Pages in PDF File: 36
Keywords: retail operations, inventory availability, empirical operations management, business analytics, online retailworking papers series
Date posted: September 20, 2012 ; Last revised: June 3, 2013
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