Information provision under showrooming and webrooming

Abstract

Deviations between consumers’ information gathering and purchase channels may lead to showrooming and webrooming, where the former refers to obtaining product information in a brick-and-mortar (BM) store but purchasing online while the latter corresponds to the reverse. In this paper, we endogenize consumers’ information gathering and purchase decisions and characterize the optimal information provision decision for an online retailer in the presence of a rival BM store. For instances where showrooming can arise, we find that the optimal information level decreases with the fraction of consumers who consider showrooming. Despite the popular belief that showrooming is always detrimental to the BM store, our results suggest that showrooming may increase the profit of the BM store and decrease the profit of the online store. In instances with webrooming, we again find that the optimal information level decreases with the fraction of consumers who consider webrooming but that the profit of the online retailer always decreases with the fraction of consumers who consider webrooming. In addition, we consider the price matching strategy of the BM store and its interplay with the online retailer’s information decisions. Lastly, we briefly extend our work to study settings with return cost, heterogeneity in online shopping cost, all consumers evaluating the product online first, endogenized pricing decisions for retailers, and a retailer owning both online and offline channels.