Cross-Channel Effects of Failure in a Retailer's Mobile App

Failures in omnichannel retailers’ mobile apps can significantly impact shoppers’ purchases. The authors leverage a natural experiment involving an exogenous failure in a large omnichannel retailer's app that made the app unavailable. They examine the impact of the app failure on purchases in both online (website, mobile app) and offline (store) channels using a difference-in-differences approach. The findings show a substantial adverse effect of the app failure on shoppers’ frequency, quantity, and monetary value of purchases, leading to short-term revenue losses of up to $1.08 million, with an additional $1.89 million in potential long-term revenue erosion. The effects are heterogeneous across channels and shoppers. The decline in purchases across channels stems from reduced purchases in stores (vs. online). The decline in store purchases is predominantly explained by the search discontinuation mechanism, wherein shoppers who use the app for search but complete their purchases in stores curtail their offline purchases following the app failure. The effect on purchases in the retailer's online channel is insignificant, aligning with the channel-switching mechanism, wherein shoppers who use the app primarily to purchase simply pivot to another online channel. Furthermore, shoppers with a lower monetary value of past purchases and more recent purchases are more sensitive to an app failure than others.