Beyond Showrooming: Category Expansion from Offline Stores

Abstract

Many online-first retailers have adopted omnichannel strategies to expand their territories from online to offline. In this paper, we seek to understand the function of offline showroom for multi-category online retailing platforms, which is relatively understudied. Using detailed transaction-level data along with in-store product scanning information from a major online retailing platform in China that introduced its first offline showroom during the data period, we identify a positive category expansion effect for the existing customers who visit the offline showroom using difference-in-differences approach. That is, a customer tends to purchase products from new categories that otherwise not purchased in the online environment, after visiting the offline showroom. Furthermore, we find evidence that (1) in addition to the physical display of the products in the showroom, sales people working onsite contribute to half the category expansion effect; (2) the effect is not a mere frenzy of impulsive purchase, and the showroom helps to better match customer needs with products; (3) the effect is smaller among experienced customers. Practical implications are discussed.