Customer channel migration and firm choice : the effects of cross-channel competition

Customers switch among multiple channels offered by multiple firms and this means multi-channel shopping behavior also depends on the channels offered by competitors. To what extent competitions’ channel offerings are influential on the use of a new online channel introduced by a firm? This important issue remains largely untapped by marketers and managers since it requires not only multi-channel, but also integrated multi-firm data. This study investigates the impact of customers’ past and current purchases from competitors’ channels on channel choice with a focal firm that introduces a new online purchase channel. Furthermore, we examine the effect of new online channel adoption on customer purchases (firm choice and order size) from the focal firm and its competitors. The data contains eight-year individual transactions from ten competitive multi-channel home decoration retailers. Our research reveals that customers’ previous purchases from competitors’ online channels increase the probability of online channel adoption from the focal firm which introduces its online channel later than its competitors. This effect is greater for existing customers than new customers who are acquired after the introduction of the new online channel. Customer adoption and use of this new online channel reduce purchase frequencies of competitors, but increase purchase frequencies of the focal firm, for both existing and new customers. Together these findings illustrate the role of competitors’ channels in determining customers’ channel choice of the focal firm. Retailers therefore should consider the effects of competitors’ channel offerings and tailor their channel strategies to accommodate the various needs of new and existing customers, when they plan to introduce a new online channel.