Showrooming vs. Competing: The Role of Product Assortment and Price

Abstract

We empirically examine consumer showrooming phenomenon in the footwear industry. Using transaction-level data from a large online footwear retailer and offline store entry data from four major footwear retail chains in the U.S., we quantify the effect of offline store entry on the competing online retailer. We provide evidence for the presence of both showrooming and competing effects, and find that the net effect depends on the type of new offline stores: (1) single-brand stores (e.g., Clarks) that solely carry the manufacturer brand and (2) multi-brand stores (e.g., Shoe Carnival) that feature a wide selection of brands and styles. The results show that the showrooming effect is dominant, leading to increased online purchases, when a single-brand store opens; meanwhile, the competing effect is dominant, resulting in decreased online purchases, when a multi-brand store opens. While both types of offline store entry can stimulate demand, multi-brand stores are more likely to meet consumer demand with wider selection and more competitive pricing, compared to single-brand stores. For single-brand store entry, we observe not only a within-brand showrooming effect, where online purchases for the brand of the respective offline store increase, but also a cross-brand showrooming effect, where online purchases of other brands also increase. We further analyze the effect of offline store entry on average price of items purchased online and examine the moderating effects of location characteristics. Our work contributes to the literature on online and offline markets by quantifying the cross-channel effects across retailers and explaining the underlying mechanisms.

Keywords: Electronic commerce, cross-channel effects, showrooming, natural experiment, propensity score matching