IDEAS home Printed from https://ideas.repec.org/a/eee/jouret/v92y2016i3p373-382.html
   My bibliography  Save this article

Does Greater Online Assortment Pay? An Empirical Study Using Matched Online and Catalog Shoppers

Author

Listed:
  • Ma, Junzhao

Abstract

Most multichannel retailers offer larger assortment in their online channel than in the offline channels. Conventional belief holds that larger assortment leads to more sales. However, offering more products could also cannibalize the sales of the retailer's main product offerings, hence reducing efficiency in assortment management and increasing cost. Recent behavioral research suggests that excessive assortment can lead to customer cognitive overload and deter them from purchasing. In this paper, we investigate the effect of large online assortment on customer spending. We empirically estimate the effect of large online assortment by exploiting the natural experiment of channel migration, which allows us to compare the spending of customers who migrated to the retailer's online channel with that of a holdout group of pure catalog shoppers. We find that online customers outspend those catalog shoppers by 10.7 percent on the retailer's mainline products. We provide evidence that the increased spending by online customers is due to lower product search cost in the online channel. Lastly, our research suggests that the online sales of low-volume niche products can be an important source of revenue for the retailer.

Suggested Citation

  • Ma, Junzhao, 2016. "Does Greater Online Assortment Pay? An Empirical Study Using Matched Online and Catalog Shoppers," Journal of Retailing, Elsevier, vol. 92(3), pages 373-382.
    • Handle: RePEc:eee:jouret:v:92:y:2016:i:3:p:373-382
    DOI: 10.1016/j.jretai.2016.05.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022435916300185
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jretai.2016.05.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2003. "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers," Management Science, INFORMS, vol. 49(11), pages 1580-1596, November.
    2. William J. Baumol & Edward A. Ide, 1956. "Variety in Retailing," Management Science, INFORMS, vol. 3(1), pages 93-101, October.
    3. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    4. Noble, Stephanie M. & Griffith, David A. & Weinberger, Marc G., 2005. "Consumer derived utilitarian value and channel utilization in a multi-channel retail context," Journal of Business Research, Elsevier, vol. 58(12), pages 1643-1651, December.
    5. Yi Qian & Eric Anderson & Duncan Simester, 2013. "Multichannel Spillovers from a Factory Store," NBER Working Papers 19176, National Bureau of Economic Research, Inc.
    6. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    7. Erik Brynjolfsson & Yu (Jeffrey) Hu & Mohammad S. Rahman, 2009. "Battle of the Retail Channels: How Product Selection and Geography Drive Cross-Channel Competition," Management Science, INFORMS, vol. 55(11), pages 1755-1765, November.
    8. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September.
    9. Sharad Borle & Peter Boatwright & Joseph B. Kadane & Joseph C. Nunes & Shmueli Galit, 2005. "The Effect of Product Assortment Changes on Customer Retention," Marketing Science, INFORMS, vol. 24(4), pages 616-622, July.
    10. Boyd, D. Eric & Bahn, Kenneth D., 2009. "When Do Large Product Assortments Benefit Consumers? An Information-Processing Perspective," Journal of Retailing, Elsevier, vol. 85(3), pages 288-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simone T. Peinkofer & Yao Henry Jin, 2023. "The impact of order fulfillment information disclosure on consequences of deceptive counterfeits," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 237-260, January.
    2. Radka Bauerová & Veronika Braciníková, 2021. "Customer’s Choice of Purchasing Channel: Do Channel Characteristic, Brand, and Loyalty Matter When Shopping in Hybrid Retailers?," Sustainability, MDPI, vol. 13(5), pages 1-18, February.
    3. Neslin, Scott A., 2022. "The omnichannel continuum: Integrating online and offline channels along the customer journey," Journal of Retailing, Elsevier, vol. 98(1), pages 111-132.
    4. Ketron, Seth, 2018. "Perceived Product Sizes in Visually Complex Environments," Journal of Retailing, Elsevier, vol. 94(2), pages 154-166.
    5. Visentin, Marco & Tuan, Annamaria, 2021. "Book belly band as a visual cue: Assessing its impact on consumers’ in-store responses," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    6. Muthaffar, Aisha & Vilches-Montero, Sonia, 2023. "Empowering retailers: A bounded rationality perspective to enhancing omnichannel journey satisfaction," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    7. Juan Ramón López Soler & Panayotis Christidis & José Manuel Vassallo, 2021. "Teleworking and Online Shopping: Socio-Economic Factors Affecting Their Impact on Transport Demand," Sustainability, MDPI, vol. 13(13), pages 1-24, June.
    8. Ketron, Seth & Spears, Nancy, 2019. "Sounds like a heuristic! Investigating the effect of sound-symbolic correspondences between store names and sizes on consumer willingness-to-pay," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 285-292.
    9. Sarah Zafar & Saeed Badghish & Rana Muhammad Shahid Yaqub & Muhammad Zafar Yaqub, 2023. "The Agency of Consumer Value and Behavioral Reasoning Patterns in Shaping Webrooming Behaviors in Omnichannel Retail Environments," Sustainability, MDPI, vol. 15(20), pages 1-21, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erik Brynjolfsson & Yu (Jeffrey) Hu & Duncan Simester, 2011. "Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales," Management Science, INFORMS, vol. 57(8), pages 1373-1386, August.
    2. Hoskins, Jake D., 2020. "The evolving role of hit and niche products in brick-and-mortar retail category assortment planning: A large-scale empirical investigation of U.S. consumer packaged goods," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    3. Singh, Sonika & Jang, Sungha, 2022. "Search, purchase, and satisfaction in a multiple-channel environment: How have mobile devices changed consumer behaviors?," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    4. Brynjolfsson, Erik & Dick, Astrid Andrea & Smith, Michael D., 2004. "Search and Product Differentiation at an Internet Shopbot," Working papers 4441-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Ratchford, Brian & Soysal, Gonca & Zentner, Alejandro & Gauri, Dinesh K., 2022. "Online and offline retailing: What we know and directions for future research," Journal of Retailing, Elsevier, vol. 98(1), pages 152-177.
    6. Tang, Zhulei & Smith, Michael D. & Montgomery, Alan, 2010. "The impact of shopbot use on prices and price dispersion: Evidence from online book retailing," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 579-590, November.
    7. Erik Brynjolfsson & Astrid Dick & Michael Smith, 2010. "A nearly perfect market?," Quantitative Marketing and Economics (QME), Springer, vol. 8(1), pages 1-33, March.
    8. Nelson Granados & Alok Gupta & Robert J. Kauffman, 2012. "Online and Offline Demand and Price Elasticities: Evidence from the Air Travel Industry," Information Systems Research, INFORMS, vol. 23(1), pages 164-181, March.
    9. Liane Nagengast & Christina Heidemann & Thomas Rudolph, 2013. "Der kombinierte Einsatz von Sortimentsreduktion und Regalkategorisierung zur Sortimentsoptimierung–," Schmalenbach Journal of Business Research, Springer, vol. 65(7), pages 666-687, December.
    10. Anindya Ghose & Avi Goldfarb & Sang Pil Han, 2013. "How Is the Mobile Internet Different? Search Costs and Local Activities," Information Systems Research, INFORMS, vol. 24(3), pages 613-631, September.
    11. Oliver Hinz & Jochen Eckert, 2010. "The Impact of Search and Recommendation Systems on Sales in Electronic Commerce," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 2(2), pages 67-77, April.
    12. Ting Li & Robert J. Kauffman & Eric van Heck & Peter Vervest & Benedict G. C. Dellaert, 2014. "Consumer Informedness and Firm Information Strategy," Information Systems Research, INFORMS, vol. 25(2), pages 345-363, June.
    13. Timothy J. Richards & Elliot Rabinovich, 2018. "The long‐tail of online grocery shopping," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 509-523, June.
    14. Meghan R. Busse & Ayelet Israeli & Florian Zettelmeyer, 2013. "Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes," NBER Working Papers 19154, National Bureau of Economic Research, Inc.
    15. Ya-Ling Chiu & Jiangze Du & Jying-Nan Wang, 2022. "The Effects of Price Dispersion on Sales in the Automobile Industry: A Dynamic Panel Analysis," SAGE Open, , vol. 12(3), pages 21582440221, August.
    16. Aparajita Goyal, 2010. "Information, Direct Access to Farmers, and Rural Market Performance in Central India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 22-45, July.
    17. Dinlersoz, Emin M. & Pereira, Pedro, 2007. "On the diffusion of electronic commerce," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 541-574, June.
    18. Randy A. Nelson & Richard Cohen & Frederik Roy Rasmussen, 2007. "An Analysis of Pricing Strategy and Price Dispersion on the Internet," Eastern Economic Journal, Eastern Economic Association, vol. 33(1), pages 95-110, Winter.
    19. Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2010. "Research Commentary --- Long Tails vs. Superstars: The Effect of Information Technology on Product Variety and Sales Concentration Patterns," Information Systems Research, INFORMS, vol. 21(4), pages 736-747, December.
    20. Stephen McDonald & Colin Wren, 2017. "Consumer Search Ability, Price Dispersion and the Digital Divide," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(2), pages 234-250, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jouret:v:92:y:2016:i:3:p:373-382. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-retailing .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.