Reducing buyer search costs: implications for electronic marketplaces
Management Science - Special issue: Frontier research on information systems and economics
Coordinating Channels Under Price and Nonprice Competition
Marketing Science
When and How is the Internet Likely to Decrease Price Competition?
Marketing Science
Marketing Science
Frictionless Commerce? A Comparison of Internet and Conventional Retailers
Management Science
Management Science
Note on Self-Restraint as an Online Entry-Deterrence Strategy
Management Science
The Option Value of Returns: Theory and Empirical Evidence
Marketing Science
Manufacturing & Service Operations Management
Optimal Reverse Channel Structure for Consumer Product Returns
Marketing Science
Managing Consumer Returns in a Competitive Environment
Management Science
Firm Strategies in the “Mid Tail” of Platform-Based Retailing
Marketing Science
Competition in Consumer Shopping Experience
Marketing Science
Consumer Fit Search, Retailer Shelf Layout, and Channel Interaction
Marketing Science
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The Internet has increased the flexibility of retailers, allowing them to operate an online arm in addition to their physical stores. The online channel offers potential benefits in selling to customer segments that value the convenience of online shopping, but it also raises new challenges. These include the higher likelihood of costly product returns when customers' ability to “touch and feel” products is important in determining fit. We study competing retailers that can operate dual channels (“bricks and clicks”) and examine how pricing strategies and physical store assistance levels change as a result of the additional Internet outlet. A central result we obtain is that when differentiation among competing retailers is not too high, having an online channel can actually increase investment in store assistance levels (e.g., greater shelf display, more-qualified sales staff, floor samples) and decrease profits. Consequently, when the decision to open an Internet channel is endogenized, there can exist an asymmetric equilibrium where only one retailer elects to operate an online arm but earns lower profits than its bricks-only rival. We also characterize equilibria where firms open an online channel, even though consumers only use it for research and learning purposes but buy in stores. A number of extensions are discussed, including retail settings where firms carry multiple product categories, shipping and handling costs, and the role of store assistance in impacting consumer perceived benefits.