Can Offline Stores Drive Online Sales

Kitty Wang and Avi Goldfarb
Article Snapshot
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Can Offline Stores Drive Online Sales?
Key Takeaways

​What? When a store opens offline, online sales to local customer may rise or fall.

So What? Online sales will fall if the brand is already well-known locally, as people start buying at the offline store, instead of online.

Now What? Firms should position store placement in markets where their brands are not well known, or in areas with significant tourist traffic, as the store serves as a physical advertisement and may boost online sales.

 

Article Snapshot​s: Executive Summaries from the Journal of Marketing Research

Understand how a brand's online and offline stores interact: They are substitutes as distribution channels but complements as communication channels.


Research Question
We were interested in understanding the following puzzle: Industry often speaks of "synergies" between online and offline, while the academic literature has overwhelmingly found them to be substitutes. Our core hypothesis was whether new markets might provide an exception to the academic findings in which online and offline would be complements.

Methods
We looked at store openings by a major retail clothing chain that has both online and offline channels. We compared the change in online sales in an area after a store opened nearby to the changes in online sales in other areas that did not have a store open nearby.

Findings

In places where the brand already had a strong presence, opening offline stores hurt online sales. In contrast, in places where the brand did not have a strong presence, opening offline stores increased online sales. Our results suggest that this is due to a billboard effect: the offline store serves as a billboard, informing people about the brand.

Implications

Our findings help understand the consequences of offline store openings. As a brand expands offline, it is likely to affect online sales. If expansion takes place in locations with a strong presence, then online sales will fall. In contrast, if it takes place in locations without a strong presence, online sales will likely rise. The key managerial implication: While opening a store where you already have many eager customers is appealing, store openings can also be used to expand the reach of the brand. 

Questions for the Classroom

  • Which factors should we consider while choosing a location for physical stores?
  • What does a physical store do for the shopping experience?
  • How can firms create brand awareness and acquire new customers beside advertising?

Article Citation: Kitty Wang and Avi Goldfarb (2017) Can Offline Stores Drive Online Sales?. Journal of Marketing Research: October 2017, Vol. 54, No. 5, pp. 706-719

doi: http://dx.doi.org/10.1509/jmr.14.0518 


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Kitty Wang and Avi Goldfarb
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