Written by Lina Altenburg, Ph.D. candidate at KU Leuven (Belgium)
For years, online retailers have been threatening physical stores by stealing away customers. However, the physical stores are not dead. In contrast, online players themselves are now becoming increasingly interested in opening physical stores. And they are successful and profitable in doing so! This is what Erik Maier, Professor of the Chair for Marketing and Retailing at the HHL Leipzig Graduate School of Management (Germany), together with his co-authors Rico Bornschein, Rico Manss, and Damian Hesse, show in their recent IJRM publication. In their study “Financial consequences of adding bricks to clicks”, they examine the transformation of a purely online retailer into a multichannel retailer which opens its first physical stores.
“I knew that although many aspects of omni channel retailing were already answered, what was missing was the financial perspective in terms of profitability”
Erik Maier
The research in multichannel retailing, specifically concerning channel additions, is already extensive. However, Erik and his co-authors succeed in providing a richer picture of this phenomenon by not only focusing on the popular sales perspective but by also integrating financial factors into the equation. This allows them to also assess the effect of opening physical stores on the firm’s profit. Specifically, they show that the opening of a physical store can increase overall sales and profit. The authors attribute this to the physical store’s ability to attract new customers and a relatively low impact of existing customers switching behaviour from the retailer’s online channel to the new offline stores. This effect is specifically strong for markets that are less favourable for online sales, such as markets with an older population and lower average income. Furthermore, the channel addition increases the average product price as well as customers' basket size and reduces the average return rate. These are very relevant insights for managers. This unique analysis was only possible because Erik and his co-authors could collaborate with a European fashion and lifestyle retail company. I had the opportunity to discuss the topic of industry collaboration for this and other papers with Erik.
The value of university-industry research collaborations
Collaborating with the industry is a common practice for Erik. He often initiates such collaborations through the university’s alumni network, his own professional network from when he worked as a consultant for the university's regional activities. Being involved with industries helps him to be aware of current trends and challenges that companies face. This helps him to identify relevant research questions. However, during his previous research collaborations, he also learned that companies are perfectly able to analyze their own data. They might not always do so with the same level of rigor and detail as academics do, but it serves their purpose. So what is the additional value that companies can derive from a research collaboration with a university? Can universities provide more value to companies next to investigating a topic in more detail and more rigorously?
“Frankly, even if they know that a strategy had a positive overall effect, if they can say in their internal investor discussions that a university also finds these effects, that is even better for them!”
Erik Maier
This is a point that I didn’t think about before. Probably because I do not (yet) have a large network of industry contacts on which I can rely for research collaborations. But it was an eye-opener for me. As Erik explains: the general findings of this research project were not new to the company, but they were not aware of the moderators of the effect. It was also very valuable for them to have the confirmation and especially the scientific proof for their insights. I think I underestimated the latter aspect of our research quality. We all strive to do important, accurate, and rigorous research. And apparently, the credibility that our research provides is another way of how our research can be meaningful for companies.
Are there downsides to close-industry collaborations?
This interview got me thinking. Can a close collaboration with the industry also harm academia? Erik pointed out that many graduates of HHL Leipzig end up obtaining influential positions in the industry. What is more, even many of the PhD graduates leave academia to pursue a career in the industry. This IJRM paper was initiated by three PhD candidates who approached Erik for collaboration. During the review process, they graduated and left HHL Leipzig. At this point, none of these three former PhD co-authors are still actively involved in academic research. Could this be because of the high valuation of academic researchers by the industry? Does increasing the managerial relevance of our research also increase the industry’s interest in hiring candidates with an academic background? Does our research become so relevant that companies steal away the new generation of talented researchers? Is this the trade-off that we face if we collaborate with industry partners for academic research (more relevant research but fewer academic researchers)? I guess this would be an interesting research question to explore…
Read the paper
Interested in reading all the details about the financial consequences of opening physical stores? Read the full paper here.
Want to cite the paper?
Maier, Erik, Rico Bornschein, Rico Manss & Damian Hesse (2023), “Financial Consequences of Adding Bricks to Clicks”, International Journal of Research in Marketing, 40(3), 609-628.
Meet Erik
Professor at the Chair for Marketing and Retail, HHL Leipzig Graduate School of Management, Leipzig (Germany)
What drives you to do the research/work that you do?
I think what we all hope to do is to analyze relevant things. I, particularly after getting tenure, tried to shift and focus more on topics with societal relevance.
I started with a lot of omnichannel research. I still do that and I greatly enjoy it! I also found a research community there and that’s nice. But I am also focusing on other topics now. With a group of co-authors, I am analyzing how cities can prevent the death of the High Street. We investigate whether government interventions succeed in lowering store closure rates. Recently, I also looked at the closure of the Galeria department stores in Germany and how that impacts inner-city visitor frequencies. Next to that, I do research with PhD students on sustainable influencers. I am trying to do things that are a bit more societally relevant. These topics might not be as publishable as other research topics, but it's interesting to me and I think they matter to the community.
Next to that, and I think that holds for every researcher, I like to work on challenging topics with intellectually interesting people. In this regard, academia delivers very well. You can work with interesting research teams and this intellectual exchange enhances the experience. I also get to have this nice interview with you!
If you were not in academia, what would you be?
I guess I could have said I would be a chef or be doing something crazy like being a parachuter, but I'm just honest. I decided to quit my job in the industry, where I was working in the field of consulting and online marketing, and go into academia. It was a conscious choice for me. Hence, I think the most realistic alternative, if I hadn't done that, would be that I would be heading the marketing unit of a startup or scale up and doing something more in the field, and I would be approached by scientists asking for data...
This article was written by
Lina Altenburg
Ph.D. candidate at the KU Leuven (Belgium)
