Financial consequences of adding bricks to clicks |
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| Institution: | 1. HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany;2. IU Internationale Hochschule, Rosa-Luxemburg-Straße 27, 04103 Leipzig;1. Independent researcher, Canada;2. Carroll School of Management, Boston College, 140 Commonwealth Ave., Chestnut Hill, MA 02467, USA;3. Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6, Canada;1. Department of Marketing, College of. Business, City University of Hong Kong, Hong Kong;2. Department of Marketing, Carlson School of Business, University of Minnesota, United States;3. Department of Marketing, Marshall School of Business, University of Southern California, United States;1. ESCP Business School, France;2. University of Liverpool Management School, United Kingdom;3. Arison School of Business, Reichman University (IDC, Herzliya), Israel;4. Stern School of Business, New York University, United States;1. Department of Information Systems and Operations Management, College of Business, The University of Texas at Arlington, United States;2. Department of Marketing, Pamplin College of Business, Virginia Tech, United States;3. Department of Marketing, Pamplin College of Business, Virginia Tech, United States;1. Graduate School of Management, University of California at Davis, Davis, CA 95616, United States;2. Technion – Israel Institute of Technology, Faculty of Industrial Engineering and Management, Technion City, Haifa 32000, Israel;3. HEC Paris, Marketing Department, 1 rue de la Libération, 78351 Jouy-en-Josas Cedex, France;4. Università degli Studi di Palermo, Viale delle Scienze, 90128 Palermo, Italy;1. Kansas State University, 1301 Lovers Lane, Manhattan, KS 66506, USA;2. University of Michigan, 701 Tappan Street, Ann Arbor, MI 48109, USA |
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| Abstract: | Many e-commerce retailers are adding “bricks to clicks” – that is, opening an offline channel in addition to their digital sales channel(s). Taking the perspective of such an online pure player, this research assesses the effects of offline channel additions on the financial performance (e.g., sales, profits) and customer behavior (e.g., basket size, return rate) in the extended channel network as well as the initial online channel of the retailer. Across two studies, one at the zip code level and the other at the customer level, we find that the channel addition of a fashion and lifestyle retailer is synergistic in terms of increasing not only overall sales but also profits. At the same time, the new offline channel does not significantly cannibalize the existing online shop, as new customers are attracted through the channel addition. The effects of channel additions, however, are influenced by characteristics of customers gained before the channel addition and of the trade area around the newly opened stores: among existing customers, those who bought more in the online channel do not react as positively to the addition of an offline channel, and trade areas with socioeconomic characteristics that are often viewed as disadvantageous for digital retailing (e.g., an older population, lower average income) show a stronger positive sales effect of a brick-and-mortar addition. The attractiveness of the offline channel for these customer segments highlights that adding bricks to clicks might be most attractive for those customers who were previously unwilling to purchase from an online-only retailer. |
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| Keywords: | Offline channel addition Bricks to clicks Profits Omnichannel Omnichannel segment |
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