Adding Bricks to Clicks: Predicting the Patterns of Cross-Channel Elasticities over Time

Abstract

In this paper, we propose a conceptual framework to explain whether and when the introduction of a new retail store channel helps and hurts sales in existing direct channels. A conceptual framework separates short- and long-run effects by analyzing the capabilities of a channel that help consumers accomplish their shopping goals. To test the theory, we analyze a unique data set from a high-end retailer using matching methods. We study the introduction of a retail store and find evidence of cross-channel cannibalization and synergy. The presence of a retail store decreases sales in the catalog, but not Internet channel, in the short term, but increases sales in both direct channels over time. Following the opening of the store, more first-time customers begin purchasing in the direct channels. These results suggest that adding a retail store to direct channels yields different results from adding an Internet channel to a retail store channel as previously studied.

Keywords: multichannel retailing, channels of distribution, channel management, channel migration, direct marketing, e-commerce, retail stores

JEL Classification: C51, C93, L81, M31