Customer Supercharging in Experience-Centric Channels

David R. Bell (), Santiago Gallino () and Antonio Moreno ()
Additional contact information
David R. Bell: Idea Farm Ventures, New York, New York 10010
Santiago Gallino: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Antonio Moreno: Harvard Business School, Harvard University, Boston, Massachusetts 02163

Management Science, 2020, vol. 66, issue 9, 4096-4107

Abstract: We conjecture that for online retailers, experience-centric offline store formats do not simply expand market coverage, but rather, serve to significantly amplify future positive customer behaviors, both online and offline. We term this phenomenon “supercharging” and test our thesis using data from a digital-first men’s apparel retailer and a pioneer of the so-called zero inventory store (ZIS) format—a small-footprint, experience-centric retail location that carries no inventory for immediate fulfillment, but fulfils orders via e-commerce. Using a risk-set matching approach, we calibrate our estimates on customers who are “treated,” that is, have a ZIS experience, and matched with identical customers who shop online only. We find that after the ZIS experience, customers spend more, shop at a higher velocity, and are less likely to return items. The positive impact on returns is doubly virtuous as it is more pronounced for more tactile, higher-priced items, thus mitigating a key pain point of online retail. Furthermore, the ZIS shopping experience aids product discovery and brand attachment, causing sales to become more diffuse over a larger number of categories. Finally, we demonstrate that our results are robust to self-selection and potentially confounding effects of unobservable factors on the matched pairs of customers. Implications for retailing practice, including for legacy, offline-first retailers, are discussed.

Keywords: retail operations; marketing–operations interface; omnichannel retailing; experience attributes; quasi-experimental methods (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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