Customer Channel Migration and Firm Choice: The Effects of Cross-Channel Competition

Abstract

Customers switch among multiple channels offered by multiple firms and this means that multichannel shopping behavior also depends on the channels offered by competitors. To what extent do competitions' channel offerings influence the use of a new online channel introduced by a firm? This important issue remains largely untapped by marketers and managers since it requires not only multichannel but also integrated multifirm data. This study investigates the impact of customers' past and current purchases from competitors' channels on channel choice with a focal firm that introduces a new online purchase channel. Furthermore, we examine the effect of new online channel adoption on customer purchases (firm choice and order size) from the focal firm and its competitors. The data contain eight-year individual transactions from ten competitive multichannel home decoration retailers. Our research reveals that customers' previous purchases from competitors' online channels increase the probability of online channel adoption from a focal firm that introduces its online channel later than its competitors. This effect is greater for existing customers than new customers who are acquired after the introduction of the new online channel. Customer adoption and use of this new online channel reduce purchase frequencies of competitors, but increase purchase frequencies of the focal firm, for both existing and new customers. Together these findings illustrate the role of competitors' channels in determining customers' channel choice of the focal firm. Retailers therefore should consider the effects of competitors' channel offerings and tailor their channel strategies to accommodate the various needs of new and existing customers, when they plan to introduce a new online channel.

Multichannel retailing and price competition

“…Further, we find that the first‐mover advantage in adopting a multichannel strategy in a competitive environment is reduced or lost when the rival also joins the online market. This is due to the fact that some of the incumbent's online customers migrate to the new online channel and increase their purchase frequencies of the product (Li et al., 2017). This migration of consumers from the incumbent's online channel to the new online channel offsets its negative effects on offline sales and retail prices.…”

“…Despite the multiple benefits of multichannel retailing, not all traditional offline retailers have expanded their operations online, suggesting that combining both offline and online selling may not serve well the interests of all retailers in a given period (Zhang, 2009; Li et al., 2017). For instance, Morrisons, a leading supermarket chain in the UK, did not launch online operations until 2013 despite almost a decade of online success by competitors such as Tesco and Sainsbury's.…”

“…In a market where multiple retailers compete offline, the adoption of a multichannel strategy by any retailer changes the dynamics of competition due to customer channel migration (e.g., Van Baal and Dach, 2005; Ansari et al., 2008; Valentini et al., 2011; Li et al., 2017). The firm's new online channel may cannibalize its own offline sales.…”

Multichannel Strategy in Perspective: The Consumer Experience at the Heart of Marketing Policy

“…The question raised by Heitz-Spahn and Filser's (2014) research refers to the cross-channel strategy as defined in Figure 1. The systematic search for coordination appears to be a main element in a successful crosschannel strategy because it makes it possible to better cope with the risk of consumer migration (Li et al, 2017). Most often, the consumer starts his/her purchase process on his/her smartphone (by looking for information on available products, prices and suppliers) and ends it on another channel (completion of the purchase in store or online).…”

“…Marketing studies on migration behavior in a multichannel context are a hot topic that occupies an important part of the literature on multichannel strategy, and one that several researchers have tried to understand and explain (Van Baal and Dach, 2005;Chiu et al, 2011;Pookulangara et al, 2011;Li et al, 2017;Barwitz and Maas, 2018). Consumer migration has been studied in its different forms, and refers to synonymous concepts, such as cross-channel behavior (Vanheems, 2015), channel migration (Ansari et al, 2008;Neslin and Shankar, 2009;Vanheems and Nicholson, 2011;Ackermann and Von Wangenheim, 2014), and channel alternation (Grewal et al, 2003;Easingwood and Coelho, 2003;Vanheems and Nicholson, 2011).…”