Adding Bricks To Clicks: The Effects Of Store Openings On Sales Through Direct Channels

We assess the effect of opening physical retail stores on direct channel sales. Our data come from a leading U.S. retailer which opened four new stores; two openings occurred in retail trading areas which had been previously served by direct channels alone and two openings occurred in retail trading areas which had been served by both direct channels and existing physical stores. We hypothesize two effects, cannibalization and complementarity, and conjecture that the magnitude of these effects may change over time. We find that retail store openings cannibalize direct channel sales in the short term if physical stores do not already exist in the retail trading area, but produce complementary effects which overcome the losses from cannibalization in the long run.