The Role of Physical Stores in the Digital Age: Quasi-Experimental Evidence from Product Level Analysis

With increasing ecommerce penetration, it is believed that consumers are spending more shopping time online and away from physical stores. This brings to question the role of physical stores in an increasingly digitized landscape and whether they remain relevant. The measurement of the impact of physical stores has been characterized by the difficulty of attributing the increase in online sales to customers seeing and experiencing products showcased in physical stores, as this information is not typically observed and captured. Should physical stores remain valuable in the digital age, which products should be showcased in stores? In this study, we attempt to shed light on these questions using a quasi-experiment, taking place through a nationwide retailer that expanded its physical presence during the study period. This work distinguishes from past studies in that it studies purchasing behavior in the underexplored Chinese market. Through a ``triple-differences'' framework, we provide a more direct evidence on the effect of the physical channel on online sales outcomes. We find that online sales for products showcased in physical stores increase for both high and low involvement products, suggesting that two possible mechanisms are at work in driving the online sales of showcased products.