Bricks and Clicks

First, there was a leak that Amazon might be planning to open 300+ physical stores. Then, the leak was retracted. Then, more news that Amazon might be planning for more than bookstores. Let’s just say that things are exciting!

But even before this phenomenon hit radio waves and newspaper headlines, four prescient researchers picked up the idea and investigated the effect of adding bricks to clicks, that is, adding physical stores to previously-purely online e-commerce sites.

Without digging deeper, it is not at all clear which way the research would go. Would physical stores hurt other channels (online + catalog)? Are they complementary?

It turns out in the cases that the researchers examined, physical stores had a negative short term impact on catalog sales (no short-term impact on internet sales), and positive complementary effects on both online and catalog sales in the long run.

So, is Amazon’s decision wise? Research says probably. We will see what happens when a store actually opens.

Here is the academic version of the paper.

Disclaimer: The researchers: Jill Avery, Mary Caravella, John Deighton, and Tom Steenburgh all have connections to HBS, and one of them (Tom) was my dissertation committee member.