Impact of Physical Retail Channels on Customers’ Online Purchase Behavior

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 estimate the causal treatment effect of reduction in affected 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, more diverse, and more expensive online purchases, and (3) higher net total purchases on all channels combined. We propose two mechanisms, information effect and return effect that can explain the effect of easier store access on customers’ online purchase behavior and provide empirical evidence for these mechanisms in our field data.