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Offline Showrooms in Omni-Channel Retail: Demand and Operational Benefits

43 Pages Posted: 22 Dec 2013 Last revised: 8 Mar 2017

David R. Bell

University of Pennsylvania - Marketing Department

Santiago Gallino

Dartmouth College - Tuck School of Business

Antonio Moreno

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS)

Date Written: December 24, 2016

Abstract

Omni-chanel environments where customers shop online and offline at the same retailer are ubiquitous, and are deployed by online-first and traditional retailers alike. We focus on the relatively understudied domain of online-first retailers, and the engagement of a key omni-channel tactic; specifically, introduction of showrooms (physical locations where customers can view and try products) in combination with online fulfillment that uses centralized inventory management. We ask whether, and if so, how, showrooms benefit the two most basic retail objectives: demand generation, and operational efficiency. Using quasi-experimental data on showroom openings by WarbyParker.com, the leading and iconic online-first eyewear retailer, we find that showrooms: (1) increase demand overall and in the online channel as well, (2) generate operational spillovers to the other channels by attracting customers who, on average, have a higher cost-to-serve, (3) improve overall operational efficiency by increasing conversion in a sampling channel and by decreasing returns, and (4) amplify these demand and operational benefits in dealing with customers who have the most acute need for the firm’s products. Moreover, the effects we document strengthen with time as showrooms contribute not only to brand awareness but also to what we term channel awareness as well. We conclude by elaborating the underlying customer dynamics driving our findings and by offering implications for how online-first retailers might deploy omni-channel tactics.

Keywords: Omni-Channel Retailing, Showrooms, Experience Attributes, Propensity Scoring, Quasi-Experimental Methods, Empirical Operations Management

Suggested Citation

Bell, David R. and Gallino, Santiago and Moreno, Antonio, Offline Showrooms in Omni-Channel Retail: Demand and Operational Benefits (December 24, 2016). Available at SSRN: https://ssrn.com/abstract=2370535 or http://dx.doi.org/10.2139/ssrn.2370535

David R. Bell

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Santiago Gallino

Dartmouth College - Tuck School of Business ( email )

100 Tuck Dr
Hanover, NH 03755
United States

Antonio Moreno (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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