Tuesday, July 09, 2013

Buy Online, Pick Up in Store - A Surprising Result for Retailers?

Many retailers now offer an option known as Buy Online, Pick Up in Store (BOPS).   What impact does that have on sales?  A new study by Kellogg's Antonio Moreno and Dartmouth's Santiago Gallino has uncovered a surprising result.    They studied one year of data from a housewares retailer with more than 80 locations in the US and Canada.   The scholars compared the behavior of individuals who had the BOPS option with those that did not (either because they lived far from one of the retailer's locations, or because they lived in Canada, where the retailer did not offer the BOPS option).  What did they find?  Online sales actually fell at the stores offering the BOPS option!  However, revenues overall rose for the retailer.  What happened and why? 

In this article on Kellogg Insight, Moreno explains, "We started thinking about what in the operations literature could possibly explain this behavior of people going more to the stores after this option was available, and that was when we came up with the idea of reliability of inventory information."  When customers shopped online, the BOPS system enabled them to see if items were in stock at that moment at a local store.  Knowing that, many of them simply went to the store to check out the item firsthand before committing to the purchase.  BOPS gave them a line of sight into inventory and item availability that they did not have in the past.   

As evidence of this effect, scholars found that many online shoppers were abandoning online shopping carts with items in them.  They had investigated, in other words, but not completed the purchase.  Yet, revenues at brick-and-mortar locations rose, suggesting that many shoppers then visited the stores and completed a purchase.  Moreno notes, "The most surprising thing to me was that online sales went down when the customers were given more options.  If you’re a customer and were planning to buy online, now you have even more reasons to [do so], because now you could buy online and pick up in the store.  We thought it would make the online channel more attractive, but what happened was that it led to this shift towards brick-and-mortar stores, which is a good thing for the company."  

7 comments:

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