Research Note: And Then What Happened? A Longitudinal Study of the Temporal Effects of Adding an Online Channel in Grocery Retailing

Abstract

This study investigates the temporal effects of customer online adoption on customer spending when an online channel is added to an existing offline grocery offer. The purpose is to test whether customer spending initially increases, because customers can buy more with increased convenience, but later decreases, as customers plan their purchases more. Online adoption is hypothesized to cause long-term customers’ spending to be mainly positive (i.e., higher convenience than planning), negative (i.e., lower convenience than planning), or remain unchanged (i.e., channel cannibalization). Based on customer data from a Nordic grocery retailer, we identify 161 multichannel customers who are pairwise matched, using propensity scores, with counterfactual offline customers before the introduction of an online offer. Our comparisons show that customer spending is higher for multichannel customers than for offline customers in both the short and the long term. Our results suggest that the increased convenience of the online channel tilts customer spending positively in the short term, and the long-term increase in planning online does not lead to the cannibalization of channels within three years of making the first online purchase.

Keywords: Multichannel, Grocery Retailing, Propensity Score Matching, Customer Spending, Online Adoption

JEL Classification: L81, M