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• Article | Management Science

  Offline Showrooms in Omni-channel Retail: Demand and Operational Benefits

  David R. Bell, Santiago Gallino and Antonio Moreno

  Omnichannel environments where customers shop online and offline at the same retailer are ubiquitous and are deployed by online-first and traditional retailers alike. We focus on the relatively understudied domain of online-first retailers and the engagement of a key omnichannel tactic; specifically, the introduction of showrooms (physical locations where customers can view and try products) in combination with online fulfillment that uses centralized inventory management. We ask whether, and if so, how, showrooms benefit the two most basic retail objectives: demand generation and operational efficiency. Using quasi-experimental data on showroom openings by WarbyParker.com, the leading and iconic online-first eyewear retailer, we find that showrooms (1) increase demand overall and in the online channel as well; (2) generate operational spillovers to the other channels by attracting customers who, on average, have a higher cost-to-serve; (3) improve overall operational efficiency by increasing conversion in a sampling channel and by decreasing returns; and (4) amplify these demand and operational benefits in dealing with customers who have the most acute need for the firm’s products. Moreover, the effects we document strengthen with time as showrooms contribute not only to brand awareness but also to what we term channel awareness as well. We conclude by elaborating the underlying customer dynamics driving our findings and by offering implications for how online-first retailers might deploy omnichannel tactics.

  Keywords: experience attributes; marketing–operations interface; omnichannel retailing; quasi-experimental methods; Retail operations; showrooms; Marketing Channels; Demand and Consumers; Performance Efficiency; Retail Industry;

  Citation:

  Bell, David R., Santiago Gallino, and Antonio Moreno. "Offline Showrooms in Omni-channel Retail: Demand and Operational Benefits." Management Science 64, no. 4 (April 2018): 1629–1651. (Winner of the 2014 POMS Applied Research Challenge. Workshop on Information Systems Economics Overall Best Paper Award 2014.)  View Details

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• Article | MIT Sloan Management Review

  The Store Is Dead—Long Live the Store

  David R. Bell, Santiago Gallino and Antonio Moreno

  In this article, we pursue two interconnected themes: the expansion of online-first retailers into offline stores that serve the purpose of “supercharging” customer value, and the transformation of the stores of offline-first retailers from fulfillment-dominant centers into experience-dominant centers, which simultaneously reduce store size and inventory while improving the customer experience. In doing so, we explain how offline-first retailers can benefit from mimicking the showroom concepts started by online-first retailers and why online-first retailers can benefit from opening more traditional stores.

  Keywords: customer experience; Inventory control; omnichannel retailing; online marketing; Marketing Channels; Trends; Transformation; Retail Industry;

  Citation:

  Bell, David R., Santiago Gallino, and Antonio Moreno. "The Store Is Dead—Long Live the Store." MIT Sloan Management Review 59, no. 3 (Spring 2018): 59–66.  View Details

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• Article | Management Science

  Channel Integration, Sales Dispersion, and Inventory Management

  Santiago Gallino, Antonio Moreno and Ioannis Stamatopoulos

  We study the effects of the introduction of cross-channel functionalities on the overall sales dispersion of retailers and the implications of these effects for inventory management. To do that, we analyze data from a leading U.S. retailer who introduced a “ship-to-store” (STS) functionality that allows customers to ship products to their local store free of charge when those products are not available in their local store. Based on the fact that stores prioritize carrying products for which local demand is high, we test the hypothesis that introducing the STS functionality increased the retailer’s overall sales dispersion. We find that, on average, the contribution of the 90% lowest-selling products to total sales increased by 0.75 percentage points, increasing sales dispersion. Calibrating conventional inventory-ordering models, we show that to respond optimally to the observed increase in dispersion, the retailer would need to increase its cycle and safety inventories by approximately 2.7%. Our paper points out the effect of an increasingly important retail phenomenon (channel integration) on a key factor for inventory management (sales dispersion).

  Keywords: Retail operations; online retail; channel integration; sales dispersion; long tail; empirical operations; Inventory management; omnichannel retail; Marketing Channels; Integration; Sales; Logistics; Operations; Management; Retail Industry;

  Citation:

  Gallino, Santiago, Antonio Moreno, and Ioannis Stamatopoulos. "Channel Integration, Sales Dispersion, and Inventory Management." Management Science 63, no. 9 (September 2017): 2813–2831.  View Details

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