The Impact of Adding Online-to-Offline Service Platform Channels on Firms' Offline and Total Sales and Profits

Abstract

Online-to-offline service platform (O2OSP) channels offer innovative means for customers to order local, daily services online (via apps) and have them delivered almost instantly offline. By comparing the business models underlying O2OSP, traditional online and offline, and platform-based e-commerce channels, this article aims to identify the short- and long-term impacts of adding an O2OSP channel on firms' offline and total sales and profits. The analysis focuses primarily on a recent set of daily data gathered from a Chinese fast-food restaurant chain with 35 physical stores that also participates in four food delivery O2OSP channels. The panel data regressions with fixed effects reveal that adding O2OSP channels hurts offline and total profits in the short run but improves offline and total sales and profits in the long run. Specifically, offline and total sales increase by 23.28% and 33.94%, respectively. Thus, the O2OSP channel can serve as a complement to, rather than a substitute for, the offline channel. These results challenge previous research on the sales effects of adding (pure) online or offline channels and highlight the attractiveness of O2OSP channels for improving sales and profits. However, negative interaction effects among different O2OSP channels also signal that adding more O2OSP channels does not necessarily lead to profitable growth.