The effect of online channel addition on store performance: empirical evidence from chinese chain retailers

Abstract

With the rapid development of e-Commerce and takeaway platforms, retailers have grad-ually developed multi-channel operations. However, limited empirical studies explored the effects of an online channel offered by takeaway platforms on the store performance. Does an online channel addition have a synergy effect or a cannibalization effect on store performance? We empirically investigate these effects by analyzing a large dataset including diverse samples collected from multiple retailers across various regions. The dataset includes 2115 stores across 25 retailers for 10 months that includes two types of retail formats and covers 16 provinces and 21 cities of China. We study the impacts of the newly introduced online channel on the incumbent offline channel and the overall store performance. The empirical results reveal that the online channel addition mainly has a synergy effect. Specifically, for the overall store, it has a positive effect on the sales and product variety, whereas it has a negative effect on the basket size. Surprisingly, an online channel addition also has a positive effect on the offline sales. Our study adds novel values to multi-channel retailing literature by empirically researching the cannibalization and synergy effect of a new type of online channel, offered by takeaway platforms. It can provide insights for retail enterprises who are interested in introducing O2O model.