Exploring the Competitive Dimension of Omnichannel Retailing

We use a proprietary data set from a national department store chain and evaluate the competitive impact of the launch of a buy-online-and-pick-up-in-store service by a major competitor. The transaction-level data set includes nearly 50 million transactions (purchase and return) across both online and brick-and-mortar channels. Although the strategy of buying online and picking up in a store is primarily designed to attract online shoppers into stores, our findings show that after the competitor’s launch, both online and store sales at the focal department store chain are negatively affected. Our results indicate a differential competitive threat that is predicated on the value proposition that the buy-online-and-pick-up-in-store service poses for customers in each channel. Online shoppers are drawn to the competitor through an additional level of shopping assurance, along with the free and fast delivery that the buy-online-and-pick-up-in-store service provides to customers. For store shoppers, the service facilitates research-online, buy-offline behavior, as well as product availability information that eliminates wasted trips to the store. Distance to market affects the intensity of impact. For the online channel, the estimated loss in sales averages 4.7% across the demographic market areas that are served and ranges between 0.4% and 18.5%. For stores, the average estimated loss in sales is 1.8% and ranges between 0.1% and 3.7%. This paper was accepted by Victor Martínez-de-Albéniz, operations management.