Can Offline Stores Drive Online Sales?

We use evidence from store openings by a bricks-and-clicks retailer to examine the drivers of substitution and complementarity between online and offline retail channels. Our evidence supports the coexistence of substitution across channels and complementarity in demand. In places where the retailer has a strong presence, the opening of an offline store is associated with a decrease in online sales and search; however, in places where the retailer does not have a strong presence, the opening of an offline store is associated with an increase in online sales and search. Our evidence suggests that while online and offline may be substitutes in distribution, they are complements in marketing communications. Specifically, the type of marketing communication driving complementarity seems to be information about the existence of the brand. For example, we see a large increase in new customer acquisition and sales, and little difference between fit and feel products and other products. Thus, it is the presence of the store, rather than information about the attributes of the particular products in the store, that drives complementarity.