Customer Supercharging in Experience-Centric Channels

21 Pages Posted: 28 Oct 2018 Last revised: 31 Jul 2019

See all articles by David R. Bell

David R. Bell

University of Pennsylvania - Marketing Department

Santiago Gallino

University of Pennsylvania - Operations, Information and Decisions Department

Antonio Moreno

Harvard University - Technology & Operations Management Unit

Date Written: October 4, 2018

Abstract

We conjecture that for online retailers, experience-centric offline store formats do not simply expand market coverage, but rather, serve to significantly amplify future positive customer behaviors, both online and offline. We term this phenomenon “supercharging” and test our thesis using data from a digital-first men’s apparel retailer and a pioneer of the so-called “Zero Inventory Store” (ZIS) format — a small footprint, experience-centric retail location which carries no inventory for immediate fulfillment, but fullfils orders via e-commerce. Using a risk-set matching approach, we calibrate our estimates on customers who are “treated”, i.e., have a ZIS experience, and matched with identical customers who shop online only. We find that post the ZIS experience, customers spend more, shop at a higher velocity, and are less likely to return items. The positive impact on returns is doubly virtuous as it is more pronounced for more tactile, higher-priced items, thus mitigating a key pain point of online retail. Furthermore, the ZIS shopping experience aids product discovery and brand attachment, causing sales to become more diffuse over a larger number of categories. Finally, we demonstrate that our results are robust to self-selection and potentially confounding effects of unobservable factors on the matched pairs of customers. Implications for retailing practice, including for legacy, offline-first retailers, are discussed.

Keywords: Retail Operations, Marketing-Operations Interface, Omni-Channel Retailing, Experience Attributes, Quasi- Experimental Methods

Suggested Citation

Bell, David R. and Gallino, Santiago and Moreno, Antonio, Customer Supercharging in Experience-Centric Channels (October 4, 2018). Available at SSRN: https://ssrn.com/abstract=3260742 or http://dx.doi.org/10.2139/ssrn.3260742

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 (Contact Author)

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

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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