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Physical Stores in the Digital Age: How Store Closures Affect Consumer Churn

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  • Gonca Soysal
  • Alejandro Zentner
  • Zhiqiang (Eric) Zheng

Abstract

In this study, we investigate how consumers derive value from having the option to use physical stores for their transactions in the DVD rental market. We analyze data from consumers who subscribed to an online‐offline video rental service from a leading company that closed a large number of physical store locations during our study period. We quantify the extent to which offline store closures induced individuals to terminate their subscriptions with our focal company. We further examine how physical store closures affected customers’ churn decisions differently for individuals who either heavily or lightly used physical stores for their transactions. Our results show that the closure of a physical store in a zip code increased customer churn by approximately 50% for heavy users of physical stores compared to no increase for light users. Our findings suggest the presence of substantial heterogeneity across customers regarding how much utility they derived from having the option of using physical stores for their transactions.

Suggested Citation

  • Gonca Soysal & Alejandro Zentner & Zhiqiang (Eric) Zheng, 2019. "Physical Stores in the Digital Age: How Store Closures Affect Consumer Churn," Production and Operations Management, Production and Operations Management Society, vol. 28(11), pages 2778-2791, November.
    • Handle: RePEc:bla:popmgt:v:28:y:2019:i:11:p:2778-2791
    DOI: 10.1111/poms.13069
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    Cited by:

    1. M. Serkan Akturk & Michael Ketzenberg, 2022. "Impact of Competitor Store Closures on a Major Retailer," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 715-730, February.
    2. Han, Shuihua & Chen, Linlin & Su, Zhaopei & Gupta, Shivam & Sivarajah, Uthayasankar, 2024. "Identifying a good business location using prescriptive analytics: Restaurant location recommendation based on spatial data mining," Journal of Business Research, Elsevier, vol. 179(C).
    3. Timoumi, Ahmed & Gangwar, Manish & Mantrala, Murali K., 2022. "Cross-channel effects of omnichannel retail marketing strategies: A review of extant data-driven research," Journal of Retailing, Elsevier, vol. 98(1), pages 133-151.
    4. Yongwei Cheng, 2024. "Live-Streaming Commerce in the Supply Chain with Equity Cooperation: Independent or Cooperative?," Mathematics, MDPI, vol. 12(15), pages 1-17, July.
    5. Yuqian Xu & Anindya Ghose & Binqing Xiao, 2024. "Mobile Payment Adoption: An Empirical Investigation of Alipay," Information Systems Research, INFORMS, vol. 35(2), pages 807-828, June.

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