The Effect of Search Channel Elimination on Purchase Incidence, Order Size and Channel Choice

Abstract

This study investigates the impact of eliminating a search channel on purchase incidence, order size, channel choice and, ultimately, sales and profits. We analyze customer panel data from a large retailer over a five-year period. The retailer conducted a randomized field test in which the firm eliminated its catalog for half of the panel. We find that channel elimination decreases purchase incidence, especially for customers who, before the test, were heavy users of the telephone purchase channel that aligns with the catalog search channel. As expected, channel choice for purchases is shifted toward the Internet and away from the telephone channel. Interestingly, order size per purchase increases. We investigate the impact of channel elimination on profits across different customer segments. We calculate a net positive impact because the savings from eliminating the catalog compensate for lower sales revenues.

Keywords: multichannel, customer relationship management, Internet, catalog shopping, retailing, panel data analysis

JEL Classification: M10, M31