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

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

See all articles by David Bell

David Bell

Idea Farm Ventures

Santiago Gallino

University of Pennsylvania - Operations, Information and Decisions Department

Antonio Moreno

Harvard University - Technology & Operations Management Unit

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 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 Bell

Idea Farm Ventures ( email )

18 W. 18th Street
5th Floor
New York, NY 10011
United States
3109264982 (Phone)

HOME PAGE: http://https://www.linkedin.com/in/david-bell-086820/

Santiago Gallino

University of Pennsylvania - Operations, Information and Decisions Department ( email )

3730 Walnut Street
558 & 559 Jon M. Huntsman Hall
Philadelphia, PA 19104-5340
United States

Antonio Moreno (Contact Author)

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=1029325

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