How does reducing customers’ store access costs affect the quantity and nature of their online purchase? We answer this question by designing a quasi-natural experiment around the event of store openings by a large US fashion apparel and accessories multichannel retailer. While the distance from the nearest store (store access costs) was significantly reduced for customers living in the vicinity of the opened store (affected customers), it remained unaffected for other customers (unaffected customers). We utilize both propensity score based inexact matching and coarsened exact matching methods to create matched samples of affected and unaffected customers based on their past purchase/return behaviors and demographics. The differences in purchase and return behaviors for the affected customers from that of the matched sample of unaffected customers provide treatment effect of reduction in customers’ store access costs on their purchase and return behaviors. Our estimates reveal that reduction in customers’ store access costs results in their (1) higher store purchases and returns, (2) higher and more diverse online purchase, (3) higher average product prices of online purchase, and (4) higher total net purchases on all channels. We find the effect of store opening only for the affected customers in the lowest quartile of post store opening distance from the nearest store, which suggests that observed store opening effect occurs due to reduction in customers’ store access costs. The observed effect on customers’ online purchase behavior can be explained due to their higher store visits after the store opening near them. Higher store visits may allow customers to evaluate wider variety of retailer’s products that may lead to a higher and more diverse product purchase on the online channel. Moreover, the ability to evaluate and return products in store may mitigate customers’ uncertainty about product fit in the online purchase and thus result in purchase of higher quantities and higher priced products on the online channel. We provide empirical validation of these mechanisms by showing that quantities, diversity, and average product price in online purchase increases only for those customers who make higher store purchase or return interactions with the retailer after the store opening.
Session 6B, paper 3