The Value of Experience-Centric Stores in Omnichannel Retail

The Covid pandemic has accelerated a trend of store closures across many retail sectors such as consumer electronics and apparels. At the same time, online-first retailers, such as Amazon and Alibaba, and digital native brands, such as Warby Parker and Bonobos, continue to open more brick-and-mortar stores. This begs the question: What is the value of a store in an omnichannel context? Is it merely a showroom offering sensopathic experiences (touch, feel, hear) to boost conversion, or an expertise center that helps reduce product returns, or a billboard that aids in attracting new customers now that online customer acquisition costs are searing. Or all of the above? And to what degree does an omnichannel store still fulfill the traditional role as integrated sales channel and fulfillment center?

In this research we collaborate with a large European omnichannel retailer that sells a wide range of consumer electronics, online and via an increasing number of stores. Born online the focal retailer is rapidly opening up highly experiential stores. In our study we analyze the effect of three recent store openings of the focal retailer to assess the total net benefit of opening each store. We decompose the total effect into its underlying drivers. We have access to data on ~30 product categories that differ greatly in price level, required level of customer expertise, and presence of sensopathic attributes. We adopt a quasi-experimental design to estimate the contribution of the stores, using an innovative event-style differences-in-differences model that incorporates temporal (time since opening), spatial (distance to store), and category-level heterogeneity of all focal effects. Questions we will answer with our analyses include: “How much of the total effect is driven by cannibalization of the online channel?”, “To what extent does a store opening activate existing customers vs. acquire new ones?, and “How does the distance of a customer to the store affect the aforementioned results?”. 

Zoom link: https://eur-nl.zoom.us/j/95124643945?from=addon

Meeting ID: 951 2464 3945