Does the online direct channel cannibalize or synergize the retail Network? The moderating impact of retailer competitive strength

Michiel Van Crombrugge, Niels Holtrop, Kathleen Cleeren, Els Breugelmans*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

Manufacturers in the retailing sector extensively use online sales points of their own, known as online direct channels. This form of manufacturer encroachment offers consumers the possibility to purchase directly from the manufacturer and hence may cannibalize retailer sales. However, it may also create synergy effects by increasing brand awareness, which may create additional retailer sales. In this research, we investigate the cannibalistic versus synergetic nature of the relationship between an established online direct channel and the retail network and assess whether retailer characteristics related to competitive strength impact this relationship. Using unique sales data from the toy industry and vector autoregressive modeling, we find that the short-term cross-channel price elasticity of online direct channels on retailer sales is negative and significant, indicating a synergetic relationship on average. However, the impact is heterogenous across retailers. Our analysis reveals that acquisition utility components of competitive strength, such as price and innovativeness, especially for large items, can enhance synergetic effects and mitigate the risk of cannibalization. Transaction utility components, such as online presence or the number of physical stores, do not play a moderating role.
Original languageEnglish
JournalInternational Journal of Research in Marketing
DOIs
Publication statusE-pub ahead of print - 1 Jan 2024

Keywords

  • Cannibalization
  • Competitive Strength
  • Manufacturer Encroachment
  • Online Direct Channel
  • Synergy

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