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Multichannel Spillovers from a Factory Store

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  • Yi Qian
  • Eric Anderson
  • Duncan Simester

Abstract

We study how the opening of a factory store impacts a retailer's demand in its other channels. It is possible that a factory store may damage a retailer's brand image and lead to substitution away from its higher quality core channels. Alternatively, the opening of a factory store may have positive effects as it may attract new buyers and serve as a form of brand advertising. In this paper, we use a natural experiment that arises from a retailer introducing a factory store in 2002. We analyze data that spans all customers and all channels from 1995 to 2007. This allows for careful pre and post analysis of the factory store opening. We find that the introduction of the factory store led to substantial positive spillovers to the core channels that lasted for multiple years. Customers purchase more items from the higher priced, higher quality channels after the factory store is opened. These positive spillovers represent approximately 17% of all of the incremental sales that result from the factory store opening (the other 83% are contributed by sales in the factory store itself).

Suggested Citation

  • Yi Qian & Eric Anderson & Duncan Simester, 2013. "Multichannel Spillovers from a Factory Store," NBER Working Papers 19176, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19176
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    1. Mortimer, Julie Holland & Nosko, Chris & Sorensen, Alan, 2012. "Supply responses to digital distribution: Recorded music and live performances," Information Economics and Policy, Elsevier, vol. 24(1), pages 3-14.
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    1. repec:eee:jouret:v:92:y:2016:i:3:p:373-382 is not listed on IDEAS

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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