Impact of COVID-19 on Omnichannel Retail: Drivers of Online Sales during Pandemic

21 Pages Posted: 25 Jul 2020

See all articles by Elina H. Hwang

Elina H. Hwang

University of Washington - Michael G. Foster School of Business

Leela Nageswaran

University of Washington - Michael G. Foster School of Business

Soo-Haeng Cho

Carnegie Mellon University - Tepper School of Business

Date Written: July 21, 2020

Abstract

Measures to limit the spread of COVID-19 have impacted retailers greatly. While many retailers temporarily closed their physical stores – due to stay-at-home orders and mandatory non-essential business closures – some online-only retailers witnessed higher sales. An omnichannel retailer is exposed to both of these effects, and in addition, may be affected by the channel-shift of its existing customers from stores to online. Using a proprietary dataset, we provide the first empirical evidence of the impact of COVID-19, particularly government interventions, on an omnichannel retailer’s performance. We find that online sales increase, driven both by the acquisition of new customers and by online purchases from existing customers who previously purchased items primarily at physical stores. In contrast to the latter effect, online purchases from existing customers who used to purchase primarily online did not change. The retailer also benefits significantly from introducing an essential product (e.g., hand sanitizer) into its portfolio, even though it is not part of its core assortment: the essential product helps the retailer acquire new customers and induces previously offline-leaning customers to shop online. Our study reiterates how being omnichannel can help the retailer adapt during a pandemic, and offers useful tactical suggestions for managers; for example, targeted advertising of the retailer’s online channel could be combined with new customer promotions in high-income areas.

Keywords: COVID-19, e-commerce, omnichannel, pandemic, retail operations

Suggested Citation

Hwang, Elina H. and Nageswaran, Leela and Cho, Soo-Haeng, Impact of COVID-19 on Omnichannel Retail: Drivers of Online Sales during Pandemic (July 21, 2020). Available at SSRN: https://ssrn.com/abstract=3657827 or http://dx.doi.org/10.2139/ssrn.3657827

Elina H. Hwang

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Leela Nageswaran

University of Washington - Michael G. Foster School of Business

Seattle, WA 98195-3226
United States

Soo-Haeng Cho (Contact Author)

Carnegie Mellon University - Tepper School of Business ( email )

Pittsburgh, PA 15213-3890
United States

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