How Offline Experience Changes Online Behavior of Member-Customer Segments

Abstract

Many digitally native brands have expanded into offline channels. A small literature has consistently documented mostly complementarity effects arising from these additions and linked these effects to channel service drivers. We extend this literature to considering these channel service-driven effects at the segment level, including the possibility that different customer segments might have opposite reactions. We investigate this issue with detailed member-customer data from a digitally native grocery retailer that added 4 physical stores. Working out of a quasi-experimental causal inference framework, our analysis finds an overall positive (complementarity) effect of the physical stores on non-store sales. However, we also uncover opposite causal effects for heavy volume customers (who decreased non-store purchases) versus light volume customers (who increased non-store purchases). We explore three important services that are likely to result in the opposite effects. We conclude that digitally native retailers adding physical stores are likely to benefit from overall complementarity, and their focus should be on the expected reactions to the channel services afforded by the physical stores at the segment level.