News • 28.06.2021

Benefits of investing in physical stores

The role of physical stores for selling "deep" products

Finger touches virtual icon with shopping cart
Source: PantherMedia/ra2studio

Researchers from Colorado State University, Amazon, and Dartmouth College published a new paper in the Journal of Marketing that examines the role of physical stores for selling "deep" products.

The study, forthcoming in the Journal of Marketing, is titled "How Physical Stores Enhance Customer Value: The Importance of Product Inspection Depth" and is authored by Jonathan Zhang, Chunwei Chang, and Scott Neslin.

While some traditional offline retailers are struggling and are closing stores (e.g., Macy's, Walgreens), online retailers are opening them (e.g., Amazon, Warby Parker). This conflicting trend raises the question, what is the physical store's role in today's multichannel environment?

The research team posits that products differ in the inspection depth - "deep" or "shallow" - customers require to purchase them. Deep products require ample inspection in order for the customer to make an informed decision. We propose that physical stores provide the physical engagement opportunity customers need to purchase deep products.

To test this thesis, the researchers conducted three studies. The first used transaction data from a national multichannel outdoor-product retailer. Two lab experiments demonstrated the same effect.

The large-scale transactional data involving 50,000 customers show that by using a "deep products in-store" promotional strategy to migrate new customers from a "low-value state" to a "high-value state," average spending per trip increases by 40%, long-term sales increases by 20%, and profitability increases by 22%.

The lab experiments show that:

  • By onboarding new customers to purchase a "deep product in-store" as their first purchase from a new retailer, their re-patronage intention for this retailer increases by 12% compared to all other product/channel combinations.
  • By directing new customers to purchase a "deep product in-store" as their first purchase from a new retailer, they are more likely to: 1) buy deep products in the future online, indicating that they generalize trust across channels; and 2) buy adjacent categories online, indicating that they generalize trust across categories.

The last decade has witnessed a marked increase in the opening of physical stores by online retailers, despite myriad changes in the retailing environment. This attests that these findings are not ephemeral. Zhang says "The general lesson of our research is for retailers to create a concrete, tangible, and multi-sensory experience for customers buying products that require this physical engagement. This sets the stage for favorable experiential learning and increased customer value." Retailers can do this in numerous ways:

First, when retailers find that a customer is buying deep products online but their spending is decreasing in value, they can provide a promotion for deep products in-store. This can increase customer value.

Second, retailers need to enhance physical engagement for deep products through merchandising and training sales personnel to walk customers through the engagement - e.g., by helping customers try and use deep products in-store.

Third, retailers cannot infer product inspection depth solely from predefined product categories because there is much variation in inspection depth within a particular category. Rather, management should infer inspection depth using the proposed measures, or expert, independent judges.

Fourth, retailers should use a deep/offline onboarding strategy for new customers. That is, they should use acquisition channels that encourage the first purchase to be deep/offline.


Source: American marketing association

related articles:

popular articles:

Thumbnail-Photo: EHI Payment-Kongress 2022
11.10.2021   #brick and mortar retail #mobile payment

EHI Payment-Kongress 2022

03.03.-04.05.2022 | Hybrid/Bonn, Germany

Welcome to the largest payment congress in the retail industryThe EHI Payment Congress as the leading event for payment processing at stationary checkouts and in online stores of the retail sector will go into the next round as a planned hybrid ...

Thumbnail-Photo: PromoTex Expo 2022 – International trade fair for promotion, sports...
13.10.2021   #retail #event

PromoTex Expo 2022 – International trade fair for promotion, sports and workwear

11.01. - 13.01.2022 | Düsseldorf

The trade show PromoTex Expo in Düsseldorf is an international trade fair for promotional, sports and workwear. More than 500 exhibitors, including international textile manufacturers, importers, textile traders and finishing service providers, ...

Thumbnail-Photo: DICKS Sporting Goods and NIKE create connected partnership...
08.11.2021   #app #omnichannel

DICK'S Sporting Goods and NIKE create connected partnership

Omnichannel app and event marketing for an enhanced shopping experience

DICK'S Sporting Goods and NIKE, Inc. have forged a transformative, connected partnership designed to enhance the shopping experience for DICK'S and NIKE customers. This first-of-its-kind collaboration will allow DICK'S and NIKE to each ...

Thumbnail-Photo: Fashion Tech Berlin 2022
28.09.2021   #online trading #e-commerce

Fashion Tech Berlin 2022

18.01. - 20.01.2022 | STATION Berlin, Germany

FASHIONTECH Berlin is a conference about the future of fashion and deals with topics around innovations and digitalization in the fashion industry. Global players, buyers, start-ups, influencers, marketing experts and journalists will come together ...

Thumbnail-Photo: WRC 2022 – World Retail Congress
28.09.2021   #online trading #e-commerce

WRC 2022 – World Retail Congress

05.04. - 07.04.2022 | Rome Cavalieri Hotel, Italy

The World Retail Congress on 05.04.-07.04.2022 brings together the leaders of today’s global retail industry – from multi-national powerhouses to game-changing start-ups and disruptors. They are united in their focus on understanding and ...

Thumbnail-Photo: nordstil Winter 2022 – Order platform for a wide range of consumer...
27.09.2021   #brick and mortar retail #retail

nordstil Winter 2022 – Order platform for a wide range of consumer goods

15.01. - 17.01.2022 | Hamburg Messe

The trade fair Nordstil Hamburg is the order fair (Regional Order Days Hamburg) for Northern Germany and Scandinavia and presents the trendiest products of the consumer goods industry on January 15 - 17, 2022. Nordstil Messe Hamburg offers clearly ...

Thumbnail-Photo: Digital Care Labels: Show eco-consumers you mean business...
02.08.2021   #digitization #sustainability

Digital Care Labels: Show eco-consumers you mean business

Why fashion should allow consumers to take part in their garment’s circularity story

Clothing brands are actively seeking ways to lighten their environmental impact. It’s shocking that, on average, 23 kilograms of greenhouse gases are produced per kilogram of fabric, and in North-West Europe alone, around 4.7 ...

Thumbnail-Photo: Product information management systems in furniture retailing...
27.09.2021   #online trading #e-commerce

Product information management systems in furniture retailing

Why investing in the quality of product information is worthwhile

“The wooden table with a square table top and four table legs.” Customers as well as furniture retailers and manufacturers know that it is not that simple. But it is precisely this specific product information that is important for all ...

Thumbnail-Photo: VM & Display Show 2022
12.10.2021   #brick and mortar retail #retail

VM & Display Show 2022

05.04.-06.04.2022 | London

World-changing thinkers and innovators all from April 5-6, 2022, under one roof. The VM and Display Show is the longest running exhibition for the industry.Whether you are a retailer, designer, in the leisure and entertainment industry or in ...

Thumbnail-Photo: Over 700 exhibitors confirmed for ISE 2022
12.11.2021   #digitization #event

Over 700 exhibitors confirmed for ISE 2022

ISE 2022 returns with a vibrant and inspiring edition, a redesigned show floor and new demonstration areas guaranteed to enable exhibitors to ‘Rise Up. Reimagine. Ignite the Future.

Exhibitors are signing up in significant numbers to take part in ISE 2022, the destination for world-class brands to showcase the latest technologies in pro AV. With over 700 exhibitors already committed, including bellwether brands Barco, Crestron, ...

Supplier

Delfi Technologies GmbH
Delfi Technologies GmbH
Landgraben 75
24232 Schönkirchen
APG Cash Drawer
APG Cash Drawer
4 The Drove
BN9 0LA Newhaven
Reflexis Systems GmbH
Reflexis Systems GmbH
Kokkolastr. 5-7
40882 Ratingen
POS TUNING Udo Voßhenrich GmbH & Co KG
POS TUNING Udo Voßhenrich GmbH & Co KG
Am Zubringer 8
32107 Bad Salzuflen
Citizen Systems Europe GmbH
Citizen Systems Europe GmbH
Otto-Hirsch-Brücken 17
70329 Stuttgart