M-Commerce, Sales Concentration, and Inventory Management

40 Pages Posted: 13 Jan 2021

See all articles by Nitish Jain

Nitish Jain

London Business School

Tom Tan

Southern Methodist University (SMU) - Information Technology and Operations Management Department (ITOM)

Date Written: January 11, 2021

Abstract

The mobile commerce (m-commerce) channel is poised to be the future of online markets. It offers search features distinct from conventional personal-computer-based (PC) e-commerce channels. Its easy accessibility extends the time available for customers to search, although its shopping environment constraints (e.g., small screen size, single-tab browsing) may inflate search costs. Collectively, these competing features cause ambiguity about the mobile channel's true effect on sales concentration – a key criterion in managing retail operations. The focus of this study is to understand the net impact of the mobile channel on driving sales concentration. Our study extends the empirical literature focusing on online retailers' channel strategies and their implication on operations practice. It examines differences in primary online channels – mobile and PC – on shaping sales concentration across products and the cost of ignoring such a difference on inventory management, a core decision for operations managers. We collaborate with a large online apparel retailer to access customer-level transactional data. We identify the mobile channel's effect on sales concentration using a difference-in-differences strategy that leverages a quasi-experiment stemming from the retailer's decision to discontinue its PC sales channel. We find that the mobile channel increases the share of popular products by 6.4% as compared with the PC channel. We also identify scenarios where ignoring this significant sales concentration difference will yield suboptimal inventory stocking by 4.2% to 12.9%. Our paper highlights that the mobile and PC channels have different sales concentrations because of different search features. Ignoring this difference affects inventory decisions, such as safety and cycle inventory levels. Therefore, it is imperative for managers to revise their status quo strategies, such as on inventory procurement, assortment planning, and product display, when integrating m-commerce with e-commerce.

Keywords: online retail, m-commerce, e-commerce, mobile channel, sales concentration, inventory management, empirical operations

Suggested Citation

Jain, Nitish and Tan, Tom, M-Commerce, Sales Concentration, and Inventory Management (January 11, 2021). SMU Cox School of Business Research Paper No. 21-01, Available at SSRN: https://ssrn.com/abstract=3763707 or http://dx.doi.org/10.2139/ssrn.3763707

Nitish Jain (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Tom Tan

Southern Methodist University (SMU) - Information Technology and Operations Management Department (ITOM) ( email )

Dallas, TX 75275
United States

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