Managing Impulsive Purchases in Multi-Channel Online Retailing: Product Categories and Organizational Choices

Abstract

Multiple online channels allow a retailer to cover a wider range of situational purchase settings but also expose it to a more complex spectrum of consumer purchase behavior. Compared with the conventional desktop computer-based Web channel, the mobile-based application channel enables retailers to understand consumers better and, also, makes them more vulnerable to impulse purchases. The unique features of consumer experience and purchase behavior in each online channel raise the question of whether these channels should be managed jointly or separately. This study seeks to identify retail settings that favor a particular organizational choice.

The extant literature on multi-channel retail has paid scant attention to differences between these primary online channels. Our study helps to fill this gap, and it aims to equip retailers with a simple tool for comparing the organization's choices with regard to managing sales across the two channels.

We build a parsimonious model that captures key aspects of consumers' impulsive purchase behavior across various product types and two different online channels. In this model, the consumer's utility from purchasing a product via a particular channel consists of two correlated components: a channel-independent "base'' component and a channel-specific "impulsive'' component. We use this model to examine retailer performance when pricing is delegated to managers under separate-channel and joint-channel management schemes.

We find that products which induce impulsive purchase behavior strongly correlated with the base product valuation, such as high-value hedonic products, favor the joint-channel setup. In contrast, products with strong negative correlation between the base and impulsive valuation components, such as high-end durables, do better under separate-channel management. Online retailers should carefully curate their delegation strategies to manage the interplay between channels' natural differences and the product characteristics that shape how consumers' impulsive purchase behavior is related to their base valuations.

Keywords: OM-marketing interface, product returns, promotions, demand management, online retailing