© 2016, American Marketing Association

Journal of Marketing Research

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permission of the American Marketing Association.

Can offline stores drive online sales?

Kitty Wang and Avi Goldfarb *

September 2016

Abstract
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.

*
Wang: Bauer Collage of Business, University of Houston. Goldfarb: Rotman School of Management, University of
Toronto. Anna Shen provided excellent research assistance. We thank WCAI for providing the data. The paper
benefited from helpful comments from the review team, seminar participants at Marketing Science 2014, the
University of Toronto, McGill University, Temple University, George Washington University, Boston University, the
University of Houston, and UC Riverside, and Elea Feit, Bryan Bollinger, Scott Shriver, and Catherine Tucker.
1. Introduction

An increasing fraction of consumers shop both online and offline. We often see marketing

practitioners claim “multichannel marketing is a perfect storm of synergies” (Beck 2013), and

firms believe that online and offline channels complement one another:

“…the online channel is not an alternative to the offline distribution channel, but is

complementary. Even as online buying increases over time, the offline channels of

distribution currently in vogue will also grow.” (Agarwal, 2012).

However, much of the existing literature has focused on online and offline competitors. By

focusing on competitors, this literature has emphasized that online retailers and their offline

competitors are substitutes (e.g., Brynjolfsson, Hu, and Rahman 2009, Forman, Ghose, and

Goldfarb 2009, Choi and Bell 2011, Sinai and Waldfogel 2004), with the degree of consumer

substitution depending on local demographic characteristics, product type, and proximity to

physical store locations. 1

One possibility is that the practitioners are wrong. They misinterpret demand shocks that hit

both online and offline channels as evidence of complementarity. Another possibility is that the

academics are wrong. The studies mentioned above do not capture the relevant attributes of

complementarity between online and offline because they look across, rather than within, firms.

Furthermore, those few academic studies that look within firms (e.g. Chintagunta, Chu, and

Cebollada 2012) may not capture the benefits properly.

Recent work by Avery et al (2012) provides a framework to reconcile these approaches.

Drawing on the conceptual work of Alba et al. (1997), Balasubramanian, Raghunathan, and

1
Consistent with prior literature, we define substitution to mean that when an offline store opens, online sales decrease.
Hence, the offline channel takes sales away from the online channel. We define complementarity as the opposite:
When an offline store opens, it causes online sales to increase.

1
Mahajan (2005), and Ansari, Mela, and Neslin (2008), they argue that whether substitution or

complementarity dominates depends on whether conspicuous or experiential capabilities have a

larger effect on the purchase process. In particular, “conspicuous capabilities” (such as immediate

gratification and no shipping fees) should lead substitution to dominate as the offline store will

dominate the online store in these dimensions for many consumers. In contrast, “experiential

capabilities” (such as a pleasurable shopping experience and building a relationship) provide a

“living billboard” that should lead complementarity to dominate over the long run. The idea is that

the in-store experience enhances the brand equity across both channels. They find evidence

consistent with their framework: substitution in the short run (particularly in the catalog channel)

and complementarity in the long run (particularly in the internet channel).

Like Avery et al. (2012), in this paper we look within a single firm and provide evidence of

both substitution and complementarity. Our primary contribution is to provide quasi-experimental

evidence of the existence of a particular mechanism under which marketing communications drive

complementarity: A straight billboard effect of offline stores leading to an increase in online sales.

By “straight billboard effect”, we mean that the store serves as informative advertising about the

existence (rather than the attributes) of the brand. In identifying this particular mechanism, we aim

to help understand a source of the “synergies” claimed by practitioners.

In particular, we use data from July 2010 to June 2012 on purchases by 42,000 customers of

three different bricks-and-clicks retailers owned by the same firm. We first use this data set to

examine what happens to online activities when the company opens a store locally. On average,

we find that when a store opens offline, online sales increase (with marginal significance). This

provides weak support for complementarity, on balance. However, after splitting locations by prior

brand presence, we observe stronger evidence for both substitution and complementarity in

2
demand. In locations where the brand has a prior presence before a store opens nearby, the opening

of an offline store is associated with a decrease in local online sales and browsing. In locations

where the brand does not have a strong prior presence, the opening of an offline store is associated

with an increase in online sales and browsing. We measure presence by the pre-existing sales of a

brand in a narrowly defined location (the census tract), and show substitution only occurs when

presence is high. 2

We then explore the reasons why sales might increase online in response to an offline store

opening. We provide four types of evidence to support a straight awareness-driven billboard effect,

rather than a living billboard that is complementary to existing brand equity. First, we show that

the opening of a new offline store leads to an increase in the number of first-time customers from

the surrounding areas. This suggests that the offline store provides information about the retailer.

Second, we demonstrate that the increase in online sales in an area after store opening is driven by

these new customers and this increase persists for several months after the store opening. At the

same time, the online sales from existing customers acquired before a local store opening do not

appear to change after the store opens. This is true regardless of whether the customer resides in

an area with a prior brand presence or not. Again, this suggests that the store provides information

to these new customers. Third, we explore whether the complementarity is generated through the

provision of information about the fit and feel of the products. We find no qualitative difference

between apparel and other products. In this way, we do not find evidence to support the idea that

the offline stores provide this important type of product attribute information. Fourth, while online

product returns do fall after a store opens, we find no difference between places with a brand

2
In contrast to our results, Avery et al find complementarity to be stronger when the retailer already has stores
operating locally. Below, we hypothesize that the difference is driven by the increased size of the internet channel
between the time of their study (1997 to 2006) and our study (2010 to 2012).

3
presence and places without such a presence, again suggesting that product attribute information

does not drive the results.

Therefore, we argue that the marketing communication impact of the offline store we

identified in areas without a brand presence is more likely to be information about the existence of

the brand in general rather than information about product attributes. This analysis allows us to

reframe the structure of Avery et al. in the familiar language of the core marketing framework: As

distribution channels, online and offline stores appear to be substitutes, but the offline store

generates a particular complementarity in marketing communications.

The retail brands in our data conducted almost no TV or print advertising. There was some

online search and display advertising, as well as direct email and catalog campaigns to existing

customers. Unlike the more established brand in Avery et al., this means that the dominant offline

marketing communications channel may be the store itself. The benefit we propose therefore

relates more directly to awareness: When an offline store opens locally, some consumers become

more aware of the brand and its products. Consumers who were previously unfamiliar with the

retailer become more likely to purchase through both channels.

Bell, Gallino, and Moreno-Garcia (2014) also identify an information-based mechanism.

They document that offline showrooms increase sales for a previously online-only retailer by

providing product information through sampling. Our results suggest that the communication

happens through increasing brand awareness whereas they find evidence that for their product

category (eyeglasses), offline stores do communicate information about product attributes

Nevertheless, building on the framework of Avery et al., the two papers use different data and

retail settings to come to similar conclusions: The offline channel serves as an informative

marketing communications tool for the online channel.

4
 More generally, a rich literature examines the informative role of advertising. We emphasize

the role of stores in providing information about a brand’s existence. This advertising mechanism

is identified in Telser (1964), and is consistent with results on high effectiveness of search

advertising for less-known brands (Narayanan and Kalyanam 2015, Simonov, Nosko, and Rao

2015). Advertising can also provide information about product attributes (e.g. Narayannan,

Manchanda, and Chintagunta 2005; Ching and Ishihara 2012), which is similar to the experiential

learning emphasized in Avery et al., and to the product sampling emphasized in Bell, Gallino, and

Moreno-Garcia. Recent work on “showrooming” emphasizes the informative role that stores play

in communicating product attributes (e.g. Rapp et al 2015, Wu, Wang, and Zhu 2015).

The role of physical stores in enhancing brand image is well-established in the ethnographic

marketing literature and in the popular press. Kozinets et al (2002, p. 17) discuss the role of

flagship retail stores that are “operated with the intention of building or reinforcing the impact of

the brand rather than operating to sell product at a profit.” Walter Isaacson (2011), in his biography

of Steve Jobs, emphasizes the brand building role of the Apple Stores. Similarly, when Microsoft

stores started opening, the press often emphasized that the stores were showrooms (e.g. Manjoo

2012). In our study, we argue that local offline stores help create brand awareness, and

consequently, help with acquisition of new customers from the area. The newly acquired customers

then in turn buy more, online and offline. Prior literature has also explored how information in one

channel leads to purchases in another channel (e.g. Joo et al 2014; Wiesel, Pauwels, and Arts 2011;

Ansari, Mela, and Neslin 2008), and how store redesigns are particularly effective for attracting

and retaining profitable new customers (Dagger and Danaher 2014). Other literature has also

explored channel substitution across retail store type (e.g. Qian, Anderson, and Simester 2013) and

5
the channels of integrating online and offline channel experiences (as summarized in Verhoef,

Kannan, and Inman 2015).

We conclude our introduction by emphasizing that we interpret the estimated correlations

between the store opening and changes in online sales and other activity as likely to be causal. We

show that the timing of the change in online sales is closely tied to the store openings. Our key

identification assumption is that store openings are not correlated with unobservable changes in

demand that are differentially trending in locations where the retailer has a presence and locations

where the retailer has no presence. While it is possible that a retailer might open offline stores in

locations with anticipated increased demand, our results show that opening an offline store

sometimes precedes higher online sales and sometimes precedes lower online sales, depending on

the degree of prior brand presence. We next describe the data and setting for our study.

2. Data on Offline Store Openings and Customer Behavior

We use data provided by a U.S. based specialty retailer to the Wharton Customer Analytics

Initiative to investigate the effect of offline store openings on customers’ online purchases, offline

purchases, and online search behavior. 3 The company owns three sub-brands operating in the same

industry. The firm is vertically integrated: the products are designed by the brands’ in-house team,

and are sold in their own retail stores. The retailers sell a variety of products including clothes,

shoes, housewares, and accessories. Some of the products sold by the company have non-digital

attributes (such as fit and feel), which suggests that consumers may have a tendency to prefer

browsing and purchasing through the offline store rather than through the online channel. We

3
Bollinger and Shriver (2013) use the same data set in their structural model of cross-channel revenue effects. Danaher
and van Heerde (2014) use the same data set in their study of the impact of direct marketing on online and offline
sales. Soysal and Zentner (2014) use the same data set to study differences in product popularity across channels.

6
investigate what happens to local online sales, offline sales, web browsing, and new customer

acquisition when the company opens an offline store nearby.

The data set contains purchases made by 42,000 randomly sampled US customers between

July 2010 and June 2012. We use the first three months as a pre-period to measure brand presence,

and they are subsequently dropped in the main analysis. Our analysis is therefore on data from the

21 months from October 2010 to June 2012. All three brands had established both online and

offline stores far before the beginning of the data period. For these 42,000 customers, we have

information on where they are located (tracked by credit card and shipping address), where each

of the purchases are made (if from an offline store, where this store is located), and the quantity

purchased in dollars. In addition to purchase history, the data contain customers’ online browsing

behavior on the company’s own websites. 4 We use data from all three brands. Table 1 provides

descriptive statistics.

We aggregate our data to the brand-census tract-month level. Although we have data on each

sale by each individual customer over the two-year period, we aggregate to monthly sales by

census tract. Because the key covariate of interest (offline store entry) varies by location (not by

customer), we aggregate to the relevant level of observation. Aggregating to the location level does

not lead to a loss of information relevant to the analysis. This is not to say that we ignore

heterogeneities in sales across customers. In contrast, analysis at the tract level enables

measurement of the arrival of new customers from that area, hence we are able to study how

customers acquired after a physical store first enters a local market purchase differently from

4
For two of the three brands, it was possible to order via mail or phone from the catalog. A company representative
said that catalog sales are so small that they do not consider it a meaningful sales channel. Therefore, they did not
provide us with such data and we do not think this missing data will affect our results in a meaningful way.

7
existing customers from the same area. This is a parsimonious way to control for location-specific

differences between new and old customers.

This aggregation means that, while we define our variables at the location level, our

measures are all based on the random sample of 42,000 customers that we observe. Sales in a

location are therefore a randomly sampled measure of sales from that location. Our interpretation

relies on having a large number of customers and a large number of tracts. The analysis will be

consistent, but not as precisely measured as it would be if we had all customers. When measuring

a location’s brand presence, we focus on splitting locations into two types: “no brand presence”

and “with prior brand presence”. “No brand presence” means no customers from our random

sample purchased in that location, either online or offline, in the first three months of the data.

However, our results do not rely on this particular discretization of brand presence, and in the

online appendix, we show robustness to several alternatives.

We measure a variety of outcomes that we use as dependent variables. Specifically, for each

brand-census tract-month, we measure online sales revenue, total sales revenue, number of

sessions on the website, number of customers browsing the website, and number of new customers.

These measurements are the totals for all customers in our sample with a home address in that

tract. 5 We measure new customers using the company’s identifier for “first purchase”. While this

would not include some cash purchases, it does not depend on the time span of our data set.

The census tract is a geographically small unit of analysis: the 42,000 customers in the

sample are located in a total of 19,076 tracts, resulting in an average of 2.20 customers in each

tract. This yields 1,201,596 observations at the brand-tract-month level. In much of our analysis,

5
Offline sales are aggregations of purchases made by customers living in each tract. For instance, if a customer who
lives in Chicago shops once in a store in New York City, this purchase would count towards total sales in the tract in
Chicago, not New York City.

8
we use fixed effect Poisson regression, which drops any brand-tracts with only zero values of the

dependent variable, reducing the total number of observations.

Our core covariate of interest is whether there is an offline store within 25 miles. We

sometimes refer to this variable as “store opening” because our identification comes off the

addition of new stores. At the beginning of the data period, there were a total of 403 physical stores

in the U.S. for three brands (166, 165, and 72 respectively from brands A, B, and C). During the

21-month period (after dropping the 3-month training period), there were 88 store openings (25,

27 and 36 respectively). There were just 3 store closings (2, 1, and 0 respectively) and so we do

not use store closings in our analysis. We use physical proximity of each tract to stores to measure

offline accessibility. To do so, we first use the address of each store to determine its latitude and

longitude. We then use these geographic coordinates to measure the straight line distance between

the center of each census tract and each retail store. This calculation is updated every month. As a

result, when a store opens, it can affect the distance measures of all tracts. For each census tract,

we then use the distance measures to construct the dummy variables that indicate if this is the first

store from a particular brand within 25 miles. We report results using the 25-mile measure, though

results are robust if we use 10 miles or a continuous measure of distance instead.

After these calculations, we define the store opening variable as equal to one for all months

after the first time a tract is within 25 miles of a store by that brand. It is equal to zero otherwise.

Therefore it is zero before the store opens and for tracts in which no stores open during the data

period. If more than one store opens, only the first store opening is registered.

In several specifications, we include a number of controls. First, and perhaps most

importantly, we control for direct marketing communications sent out by the firm to customers in

the sample. We measure direct marketing effort by counting the total number of both online and

9
offline direct mail sent out by each brand to customers in a tract each month. The offline direct

mail includes catalogs sent by the company. 6 Second, we collected the store opening data on six

major competitors to control for the competition effect. The six major competitor brands were

identified by the firm as “brands that share a common customer base”. These competitors have

broad clothing lines that compete with all three brands. The openings were collected directly from

the competitor websites and from press releases mentioning store openings. We use competitor

store within 10 and 25 miles as controls. We do not model the three brands owned by the firm in

our data as competitors with each other. 7 Third, we interact the census tract population with

monthly time dummies to control for the impact of population size over time. We obtain the

population data from the 2010 U.S. census. Fourth and finally, time and brand-tract fixed effects

are also included in our analysis.

3. Empirical Strategy and Results

3.1 Empirical Strategy

We explore how the opening of an offline store affects local online sales, local total sales,

local online browsing, and local new customer acquisition. In this section, we first discuss the main

effects when all census tracts are treated homogenously. Because stores open gradually over the

21-month period in different locations, we are able to use a fixed effects difference-in-difference

identification strategy to estimate the average effect of store openings. Specifically, when the first

new store opens within 25 miles of a census tract, the covariate defining store openings changes

from value 0 to 1. When examining the average effect, the control group includes census tracts

6
In the online appendix, we show that the main results are robust to separating the effects of email and catalog mailings.
These email and catalog campaigns were rarely about store openings. As shown at the bottom of Table 1, of 11,600,454
emails sent, just 1,198 contained content about store openings.
7
In the online appendix, we show robustness of the main results to including store openings from the company’s other
brands.

10
that either never had a store opening within 25 miles during the sample period or already had a

store within 25 miles at the beginning of the sample period. The treatment group includes tracts

that had a first-store opening within 25 miles during the sample period.

We then split the census tracts into groups based on local brand presence in the months prior

to the beginning of the estimation sample, and examine if the opening of a local store has the same

impact in areas with versus without brand presence. In this set of regressions, we employ a

difference-in-difference-in-difference identification strategy. For the last “difference” we compare

the impact of store opening between tracts without a prior brand presence and those with a prior

brand presence. In order to measure brand presence, we use the first 3 months as a pre-period, and

they are subsequently dropped. Therefore a total of 21 months in the data are used in the analysis.

The unit of observation of our analysis is the brand-tract-month level. We present results

using a conditional quasi-maximum likelihood fixed effects Poisson regression specification

developed by Hausman, Hall, and Griliches (1984), showing robustness to a wide variety of other

specifications in the online appendix. The regressions are implemented using Stata’s xtpoisson, fe

function.

We emphasize fixed effects Poisson because it is particularly useful for non-negative but

skewed data (Azoulay, Zaff-Griven, and Wang 2010). This has made it one of the core models in

research on innovation, where distributions of outcomes are highly skewed. In particular, the

Poisson model is in the linear exponential family, meaning that the coefficient estimates remain

consistent as long as the mean of the dependent variable is correctly specified (Gourieroux,

Monfort, and Trognon 1984). In other words, as Wooldridge (2002, p. 675) notes, the estimates of

the parameters for the conditional mean are consistent even if the mean and variance do not have

the same value and “there can be overdispersion or underdispersion in the latent variable model”.

11
This estimator can be used for any non-negative dependent variables, whether continuous or whole

number (Santos Silva and Tenreyro 2006). Furthermore, the quasi-maximum likelihood (robust)

standard errors are consistent even if the underlying data-generating process is not Poisson.

The fixed effects Poisson model has several other advantages for our context, relative to

other non-linear models. As in a linear panel model with many fixed effects, the brand-tract fixed

effects are conditioned out rather than estimated (Wooldridge 2002, p. 675), overcoming the

incidental parameters problem that appears in many other non-linear fixed effects models

(Lancaster 2000). The quasi-maximum likelihood standard errors are robust to arbitrary patterns

of serial correlation (Wooldridge 1997) and hence do not require clustering as recommended for

difference-in-difference estimation in linear models by Bertrand, Duflo, and Mullainathan (2004).

Wooldridge (2002) contains a lengthy discussion of this method.

The main cost of using the fixed effects Poisson model is efficiency. For example, a negative

binomial regression may be more efficient under some assumptions. It might also be possible to

add power by using Seemingly Unrelated Regression (Wooldridge 2002, p. 163), though this is

not straightforward in the fixed effects Poisson context. We view the choice of consistency over

potential efficiency as the more conservative option. Moreover, given that we find statistical

significance, this choice seems to have little impact in terms of statistical inference.

We proceed by first examining the relationship between store openings and online sales,

total sales, and online browsing activity. We then compare places with and without prior brand

presence. In section 3.4, we present our core contribution exploring the underlying mechanism and

documenting the marketing communication role of the offline store.

3.2 Main effects

We identify the main effect of local store openings by comparing the change in outcomes in

12
the same location before and after a store opens locally to the change in outcomes in the same time

period in other locations that did not have local store openings. Therefore, in this subsection, the

main identifying assumption is that there was no location-level differential trend in locations with

stores opening relative to locations without stores opening. Clearly, this is a strong assumption.

We add controls to partially alleviate this concern, and to demonstrate that the most obvious

controls do not change the estimated coefficients much. 8 Specifically, we estimate the impact on

sales and online browsing using the following fixed effect Poisson model: 9

(1) 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑏𝑏𝑏𝑏𝑏𝑏 ~𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃(𝜇𝜇𝑏𝑏𝑏𝑏 exp(𝛼𝛼𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆25𝑏𝑏𝑏𝑏𝑏𝑏 + 𝑋𝑋𝑏𝑏𝑏𝑏𝑏𝑏 𝜃𝜃 + 𝜏𝜏𝑡𝑡 ))

𝑏𝑏 = 𝐴𝐴, 𝐵𝐵, 𝐶𝐶, 𝑙𝑙 = 1 … , 𝐿𝐿, 𝑡𝑡 = 1,2, … ,21,

The outcome variables, for each brand (b)-location (l)-month (t) include online sales, total sales,

the number of sessions on the website, and the number of unique visitors to the website. Store25blt

captures whether there is a store within 25 miles and so α is the main coefficient of interest; 𝑋𝑋𝑏𝑏𝑏𝑏𝑏𝑏

is a vector of controls, including direct marketing communications, store openings by competitors,

and interactions between tract population and each month of the data; 𝜏𝜏𝑡𝑡 captures the month fixed

effects for each of the 21 months in the data (excluding a base month); and 𝜇𝜇𝑏𝑏𝑏𝑏 captures brand-

tract fixed effects.

Table 2 presents the results for separately regressing online sales, total sales, number of

website sessions, and number of customers browsing the website on store openings and the

controls. In the online appendix, we show robustness to a propensity score matching specification,

a specification without the marketing message and competition controls, and a fixed effects linear

8
Our core results in section 3.2 below, however, rely on the weaker assumption of different trends when store openings
occur in places with a brand presence relative to when store openings occur in places without such a presence.
Furthermore, in the online appendix, we show that email and catalog marketing do not significantly change in the
aftermath of a store opening.
9
We show robustness to a number of other models including linear, log linear, and tobit models.

13
specification. Column (1) shows that online sales (weakly) rise when a store opens. This suggests

that there might be complementarity between the online and offline stores. The opening of the

offline store seems to generate online sales.

Column (2) shows that there is a sharp increase in total sales when a store opens. This is not

surprising since sales from the new store are counted toward total sales. As shown by Pauwels and

Neslin (2015), when more people have access to a product, it sells more. Furthermore, back-of-

the-envelope calculation suggests that our estimated magnitude is similar to their estimate of a net

increase in revenues of 20%.

Columns (3) and (4) look at whether new offline stores are correlated with increased traffic

to the website, even if sales do not rise much. Column (3) measures the effect on website traffic

with the number of distinct online sessions by sampled customers. Column (4) measures the effect

on website traffic with the number of unique customers in the sample to the website. The

consistently positive and statistically significant coefficients suggest that traffic does increase. 10

Table 2 suggests neither strong substitution nor strong complementarity between the two

channels, though overall there does seem to be more complementarity than substitution. Thus, on

average, in this data set, the practitioner’s emphasis on complementarities seems to dominate. Next,

we conduct further analysis to attempt to reconcile the practitioner and academic literatures on

complementarities and substitution, building on the framework of Avery et al. (2012). Finally, we

present our core contribution which is careful identification of the mechanism underlying the

evidence of complementarities.

10
Compared to the results without controls in the online appendix, the coefficient magnitudes are similar. This
suggests that including two additional types of controls as covariates does not have a substantial impact on the results.
Thus the impact of unobservables would have to be relatively large relative to the impact of these observables for
omitted variables to generate a substantial change in our qualitative results (Altonji, Elder, and Taber 2005; Oster
2014).

14
 3.3 Complementarity vs. substitution moderated by brand presence

Table 2 documents that, when treating all census tracts homogeneously, we observe

something that looks more like complementarity than substitution, though the effects are not

particularly strong. Next, we investigate how prior brand presence changes the way these two

channels interact and how they affect customers’ purchase and browsing behavior. We show

evidence of substitution in places where the brand already had a strong presence and

complementarity in other places. We argue that this is suggestive of a marketing communications

role for offline stores. Below, in section 3.3, we provide further evidence to support this argument.

We define a brand to have a presence in a census tract when there are positive sales either

online or offline in this tract in the three months before the data period of the analysis. Otherwise,

a brand has no presence in a census tract. We determine the brand presence for each brand

separately. For example, if brand A has a presence in tract number 109, it does not mean brand B

also has a brand presence in this area. We then create a dummy variable 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝑏𝑏𝑏𝑏 that

takes the value of 1 if the brand 𝑏𝑏 has a presence in tract 𝑙𝑙, and 0 if the brand has no presence in

tract 𝑙𝑙. The presence is therefore defined by the small number of observed customers in the tract

and relates directly to the customers in our sample.

We therefore add the interaction of brand presence and store openings to our estimating

equation. Because 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑏𝑏𝑏𝑏 is defined at the beginning of the sample and does not change over

time, the main effect of 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑏𝑏𝑏𝑏 drops out due to the brand-tract fixed effects:

(2) 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑏𝑏𝑏𝑏𝑏𝑏 ~𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃(𝜇𝜇𝑏𝑏𝑏𝑏 exp(𝛼𝛼𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆25𝑏𝑏𝑏𝑏𝑏𝑏 + 𝛽𝛽𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆25𝑏𝑏𝑏𝑏𝑏𝑏 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑏𝑏𝑏𝑏 + 𝑋𝑋𝑏𝑏𝑏𝑏𝑏𝑏 𝜃𝜃 + 𝜏𝜏𝑡𝑡 ))

In interpreting the coefficient on the interaction term in the Poisson model, we checked the

marginal effects at the median values yielded similar qualitative results to the signs of the

coefficients (Ai and Norton 2003).

15
 Compared to section 3.2, the main identifying assumption we use here is weaker. To accept

the estimation results in the remainder of the paper, we assume that there is no differential trend

in sales and online search between locations with and without a prior brand presence. Similar to

the estimation of equation (1), we address this concern in the online appendix by adding and taking

away control covariates, and show that the magnitudes and significance are comparable with and

without controls.

Table 3 shows estimation results, mirroring the structure of table 2. 11 Column (1) shows a

stark difference in online sales after a store opens offline between places with and without a brand

presence. In places where the brand did not have strong sales prior to the offline store opening, the

first row shows that sales rose substantially. The linear specification in the online appendix

suggests a back-of-the-envelope marginal impact of 96.6% (2.825/2.925). Thus, in places where

the brand did not have a presence at the beginning of the sample, offline store openings seem to

help the online channel, suggesting some kind of complementarity.

In contrast, adding the first and second rows together suggests that adding the offline channel

reduces online sales in places that had a brand presence prior to a store opening. The sum of the

coefficients is significantly negative and large in magnitude: -35.6% ((2.825-9.907)/19.915) in the

linear specification. This is consistent with substitution.

Thus, in terms of the effect of offline stores on online sales, the results suggest the presence

of both complementarity and substitution: It depends on the pre-existing presence of the brand in

that location.

11
In the online appendix, we show robustness of table 2, and especially of the main result in column (1), to a variety
of alternative specifications including propensity score, linear regression, dropping outliers, dropping the controls for
marketing variables and competition, separating email and catalog marketing messages, a state-by-state Tobit
specification, various log-linear specifications, different brand presence definitions including by Metropolitan
Statistical Area rather than by distance, adding a lag between the time of the brand presence definition and the start of
the data analysis, and brand-by-brand results.

16
 Column (2) suggests a large increase in total sales in places without a brand presence, and a

positive but smaller effect in places with a brand presence. 12 Similarly, Columns (3) and (4) show

a sharp increase in both browsing sessions and unique customers for places without a strong brand

presence at the beginning of the sample. The second row suggests that the positive effect goes

away for places with a strong presence. Overall, we interpret Table 3 as to suggest the possibility

that two different forces are at play and we see both substitution and complementarity, depending

on the prior presence of the brand.

Figure 1a repeats the analysis of Table 3 column (1) on online sales, but at a finer level of

detail over time. Specifically, it splits the key covariates into a sequence of dummy variables for

the months before and after a store opens (also interacted with prior brand presence). The base is

more than four months before a store opens. We graph the coefficients associated with these

dummy variables to show how activities change in accordance to the timing of the store opening.

The solid line shows the coefficients on the effect of store openings in locations without a prior

brand presence. It shows online sales are higher after the store opens than before, with a big

increase between the month before and after opening. Prior to the store opening, the estimated

coefficients are near zero and generally flat, suggesting no substantive increase in the four months

prior to opening. There is a small and insignificant increase between two and one months before

opening, meaning that we cannot reject the possibility that information about the forthcoming

opening led to online sales. Still, we interpret this figure to suggest that it is unlikely that the results

are driven by reverse causality: expected increase in demand causing store openings.

12
The estimation result on total sales likely serves as a lower bound for the true effect because cash transactions made
in store are not included because they cannot be mapped to a particular customer and census tract. Therefore, the
results will underestimate the overall revenue impact of store openings. Partly for this reason, we do not emphasize
the offline sales data nor do we interpret the results to be informative about the profitability of opening new stores.

17
 The dashed line shows the estimates for store openings in locations with a prior brand

presence (the equivalent of the sum of the first two rows of table 3). Here, it is hard to identify any

clear change at the time of the store opening, though there is a slight decrease in the coefficient

size for the first few months and a sharp decrease four or more months after opening. Below, we

will provide evidence of sharper effects on browsing for locations with a prior brand presence.

Figure 1b repeats the analysis of Table 3 column (2) on total sales, again splitting the key

covariates into a sequence of month dummies with interactions. The solid line shows that,

unsurprisingly, total sales sharply rose in places without a prior brand presence and the dashed line

shows that total sales also rose in locations with a prior brand presence, but only weakly.

Overall, these results provide evidence for both channel substitution and complementarity.

They also suggest the circumstances under which each of these scenarios happen: When the brand

is already known locally, the online and offline channels serve as substitutes. In these areas they

are simply two alternative distribution channels. In contrast, when the brand is not known locally,

the online and offline channels seem to serve as complements.

It is important to recognize that the results in this subsection differ from the results of Avery

et al (2014). In particular, Avery et al find that a prior presence led to an even larger increase in

online sales. Given the anonymity of the retailer in Avery et al, any discussion of the reason for

the difference is necessarily speculative. Still, we believe the most likely explanation has to do

with the time period rather than the retailer. Avery et al studies a period from the late 1990s to

2006. During this period, the online channel was relatively small and so drawing in new customers

to the store might draw people into the nascent online channel. In contrast, our data studies a period

where the online channel is more mature (2010-2012), and so the cannibalization effect dominated

when a second store opened. In other words, we speculate that there were not enough online sales

18
to cannibalize in the Avery et al time period. Consistent with this hypothesis, Avery et al find

cannibalization in the catalog channel, at least over several years. 13 Because of their different

results, Avery et al emphasize experiential learning through store openings. We believe an

alternative mechanism is at play in our setting: A billboard effect as defined above.

Next we explore whether this is driven by the potential for offline stores to act as marketing

communications channels that inform consumers of the brand.

3.4 Mechanism: A marketing communications role for the offline store

The existence of both positive and negative effects of offline store openings on online sales

suggests that two different forces are at play. We argue that the positive effect is due to a marketing

communications role and the negative effect is driven by online and offline as competing

distribution channels.

As communications channels, information gathered offline can positively affect the online

channel. Offline stores can enhance the brand perception (Kozinets et al. 2002; Avery et al. 2012)

or act as a billboard for the existence of the brand (Avery et al. 2012). Offline stores can also

provide information about the products offered, and the literature has emphasized that uncertainties

about fit and feel are much more easily resolved in the store (e.g. Ward and Morganosky 2002;

Lieber and Syverson 2012; Bakos 2001). Generally, a core challenge in online retail is information

asymmetry: The customer does not have as much information about that particular product as in

the offline environment. This matters more for non-digital attribute products (Bakos 2001;

Borenstein and Saloner 2001; Waldfogel and Chen 2006). Thus there are two distinct marketing

13
An alternative explanation relates to the definition of brand and brand presence; however we believe the evidence
is not consistent with this explanation. In particular, they use a 60 minute drive to define pre-existing stores and we
emphasize a 25 mile radius. In addition, their stores are primarily in malls and ours are a mix of malls and
neighborhoods. We do not believe this explanation is likely because our results hold for defining presence by city (or
even state).

19
communications roles that offline stores may serve: Brand awareness and resolving product

information uncertainty.

As distribution channels, the online and offline channels substitute for one another. Models

by Balasubramanian (1998) and Zhang (2009) emphasize that the online channel provides a

substitute for the offline channel, and the empirical literature has largely supported this perspective,

albeit with a focus on substitution between competitors (Forman, Ghose, and Goldfarb 2009;

Brynjolfsson, Hu, and Rahman 2009). Our result of a negative effect of offline openings on online

sales in places with brand presence is consistent with this emphasis: When the new store provides

little new information, we see online sales fall.

In the remainder of this section, we explore which type of marketing communication

mechanism is behind the increase in online sales when stores open in places without a brand

presence. We argue that it is driven by the store serving as a billboard that provides information

about the existence of the brand. We first demonstrate that offline store openings led to an increase

in new customers from that location. Then we show that the new customers had a lasting effect on

sales beyond the first few months after a store opening, even online. Third, we show that the effect

does not seem to be about fitting or trying on clothes offline before buying online. Together, we

argue that this suggests a billboard-like informative marketing communications role for the offline

store.

The first evidence appears in Figure 2. It examines what happens to the number of new

customers acquired before and after a store opens locally, in areas with and without prior brand

presence. As mentioned above, new customers are defined using a “first purchase” flag in the

company’s dataset. As in Figure 1, we regress the number of newly acquired customers on month-

by-month dummies for whether or not there is a store within 25 miles and the interaction of store

20
openings with brand presence, and the control covariates. Newly acquired customers in each

brand-tract-month are those whose first ever purchase with a brand are made in that particular

month. The figure shows that the number of new customers acquired increases after a local store

opens, and this increase in new customers is particularly prominent in areas without prior brand

presence. There is a sharp increase in new customers after opening. The increase in new customers

is largest the first month after a store opening for places with a brand presence and weakens

substantially over time. In places without a brand presence, the effect persists beyond three months.

This suggests that offline store openings led to a persistent increase in new customers. These results

do not separate whether this increase is due to increased brand awareness or increased product

information. However, before we show our evidence on separating these effects below, we first

show that the overall increase in online sales is driven by these new customers.

Specifically, Table 4 examines whether the persistent increase in online sales is driven by

customers acquired before a local store opens (“old customers”) or customers acquired after a local

store opens (“new customers”). We use Table 4 to further investigate whether offline stores act as

a communication device (either through brand awareness or product information) rather than

through another mechanism. The intuition is that if offline stores complement the online channel

through enhancing brand awareness, then it should be the customers who are not previously

familiar with the brand that will be affected the most after a local store opening, compared to the

customers who are already aware of the brand and its attributes.

Table 4 replicates the analysis in the first column of Table 3 but splits the sales into those

acquired before the store opened and those acquired after opening. Column (1) uses online sales

21
by old customers as the dependent variable and column (2) uses online sales by new customers as

the dependent variable. 14

Table 4 shows that after a store opens nearby, we see no increase in purchases made by old

customers. In other words, regardless of whether the customers are in locations with high or low

brand presence, we see no increase in sales from customers who were acquired prior to the opening

of the local store. In contrast, we see an increase in sales made by new customers. The increase in

new customers’ sales is not surprising given that, by definition, they generate zero sales prior to

opening. Still, we include the new customer results in column (2) because we think they provide a

useful contrast to the results on old customers in column (1).

Overall, we interpret the results of Figure 2 and Table 4 to suggest that opening the offline

store generates sales by new customers to the online store. Although this is what we would expect

if the role of the offline store is to communicate the existence of the brand to potential customers,

it is also what we would expect if the role of the offline store is to provide information about

product attributes such as fit and feel. It suggests informative marketing communication, but does

not identify the particular type of informative marketing communication, whether about the

existence of the brand or about the product attributes.

Therefore, we next examine whether the increase in online sales attributed to offline stores

in places without a brand presence is driven by attribute information about the fit and feel of

products. If so, this is a marketing communications role related to communicating specific

information about the match of the product with a particular customer, rather than communicating

general information about the existence of the brand. We explore this hypothesis by comparing

14
In the online appendix, we show robustness to a propensity score method, to a linear specification, and to dropping
the marketing and competition controls.

22
products for which fit and feel are likely to be important with products for which they are less

likely to be important.

Table 5 examines the role of product fit. Columns (1) to (6) show that the result identified in

Table 3 above holds for fit and feel products and for other products. We used three external coders

to code each of the 76 product categories provided by the company into fit and feel, and non fit

and feel products. Out of the three coders, two were Ph.D students, and one was an undergraduate

student. Two coders first coded the product categories, then the third coder served as a tie-breaker

in the few situations for which the first two coders disagreed. For robustness, we then estimate the

same equation using two alternative definitions of fit and feel and non fit and feel products

(columns (3) to (6)). 15 Without a prior brand presence, online sales of both types of products rise.

With a brand presence, they (weakly) fall. We interpret this to reject the hypothesis that the impact

of opening offline stores is primarily about telling potential customers how the products fit. The

strong impact on non-fit and feel products suggests product attribute information is not the primary

driver of the results. Therefore, we emphasize a general brand awareness effect. 16

Related to information about the match of the product to the customer, Table 5 column (7)

looks at how returns on online purchases are affected by store openings. We find that the

percentage of returns to total online sales revenue decreases post store opening. The decrease of

proportion of returns is consistent with findings in Bell, Gallino, and Moreno-Garcia (2014);

however, this decrease is true in locations with and without prior brand presence, and therefore

does not explain the differences in the impact of store openings on online sales across locations.

15
In these definitions, we did the assignment to fit and feel ourselves. We assigned categories defined by bottoms,
tops, apparel, and dresses to fit and feel and categories defined by housewares, accessories, gifts, furniture, intimates,
bed/bath, holiday, and plants to not fit and feel. Under definition 1, shoes are fit and feel. Under definition 2, shoes
are not fit and feel.
16
In the online appendix, we show robustness to a variety of alternative specifications including propensity score, log
linear, and dropping outliers.

23
 In other words, while we do not have direct measures of brand awareness, we interpret Tables

4 and 6 to suggest that increased brand awareness drives the increase in online sales after a store

opens in areas without a strong prior brand presence. As in much other work on branding (e.g.

Simon and Sullivan 1993; Kamakura and Russell (1993)), we do not observe brand awareness and

generate our interpretation by eliminating other explanations and by looking for suggestive

evidence. We are comfortable with this interpretation because it is consistent with our collective

results: (1) offline stores (weakly) increase online activity controlling for marketing activities

(Table 2), (2) this effect is driven by locations without a prior brand presence and the sign often

reverses in other locations (Table 3; Figure 1), (3) this effect is driven by new customers (Table 4;

Figure 2), (4) this effect is not stronger for fit and feel products relative to non-fit and feel products

(Table 5), and (5) there is no difference in changes in product returns for places with and without

a brand presence (Table 5).

4. Conclusions

In this paper, we use data of store openings from three different bricks-and-clicks retailers

owned by the same firm to reconcile the industry perception of complementarity with academic

research findings of substitution between online and offline retail channels. We build on the

framework of Avery et al. (2012) and investigate what happens to online and offline activities

when a company opens an offline store locally. We find that when treating all areas equally, our

data suggest neither strong substitution nor complementarity, though on balance the evidence

suggests online sales likely rose. However, splitting areas by brand presence, we find that online

sales and online browsing increase only in areas without a prior brand presence after the company

opens a store locally, and decrease in areas that already had a brand presence prior to a store

opening.

24
 We interpret our findings to suggest that when viewed as retail channels, online and offline

are likely substitutes; however, we argue that the complementarities between online and offline

channels are created through informative marketing communications generated by the mere

presence of offline stores. 17 We then show evidence consistent with the store serving as a billboard

that provides information about the existence of the brand being the most likely marketing

communications role of the offline stores in our setting.

Our findings are in many ways consistent with Avery et al. (2012) and Bell, Gallino, and

Moreno-Garcia (2014). Together, we believe these three papers provide compelling evidence of

complementarity between online and offline retail channels, perhaps reducing doubt of the validity

of the empirical finding in any one of the papers (Meyer 2015). In each paper, the mechanism is

related to marketing communications. We emphasize an awareness-focused billboard effect, while

Bell, Gallino, and Moreno-Garcia (2014) emphasize quality and fit information and Avery et al.

(2012), though generally more agnostic about the mechanism, emphasize a brand-building

billboard effect. Future work (both theoretical and empirical) could look across a variety of retail

settings to further unpack these mechanisms and provide a unifying framework for these three

related papers.

There are several limitations to this research. First, it is important to note that several of the

hypotheses we test have been speculated previously. Our contribution is in providing new quasi-

experimental evidence supporting these hypotheses rather than hypothesis generation per se.

Second, we only have sales and online browsing data from one company, therefore we are not able

to examine online and offline substitution across many different firms. Third, we lack data on

17
This hypothesized mechanism is different from the “mere exposure effect” in which familiarity generates fluency
(e.g. Fang, Singh, and Ahluwalia 2007). We emphasize informative, rather than persuasive, marketing
communications.

25
competitors’ marketing activities that can affect the sales and online search from the company we

examine. Fourth, as with all treatment effects analysis, our results only measure the local average

treatment effect for places that experienced store openings. Thus, our results are most informative

about places that are similar to the places in our data that experienced store openings during our

sample. Fifth, while we believe our evidence points to a billboard effect (new customers, not fit

and feel, etc.), we cannot directly observe whether customers showroomed: visiting the offline

store and then buying online. Sixth, we have a sample of customers rather than the full set of

customers. This means that our measures of “brand presence” and our use of the language

“locations with brand presence” are specific to our sample. It is possible that there are other

consumers who buy in that location. This does not change our interpretation in terms of the relevant

margin for our analysis: purchasers of our sample. It does mean that we cannot infer social effects

or local spillovers from our results. In addition, we do not have direct measures of brand awareness.

Instead, we infer brand awareness based on sales, browsing, the lack of difference between fit and

feel products and other products, and the lack of difference in returns between places with and

without a brand presence.

Nonetheless, we believe our results show evidence for both substitution and

complementarity between online and offline channels. In particular, in addition to providing an

additional distribution channel, opening a store serves a marketing communication purpose

through what appears to be enhanced brand awareness.

26
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30
 Table 1: Summary statistics by brand-tract-month

Observations Mean Std. Dev. Min Max

Dependent Variables
Online sales ($) 462,922 26.04 127.67 0 11,419.9
Total sales ($) 748,312 50.48 172.02 0 11,419.9
# of sessions 525,943 3.699 12.44 0 649
# of customers browse 525,943 0.413 0.58 0 7
Number of new customers 380,477 0.058 0.236 0 3
For tracts with a first store opening in 25 miles during the data period, inclusive of tracts with all zero outcomes
Online ($) before store opening 36,999 4.607 47.441 0 3,366
Online ($) after store opening 52,482 7.534 74.806 0 5,199.45
Online ($) before store opening – Without brand presence 33,336 2.925 41.218 0 3,366
Online ($) after store opening – Without brand presence 46,212 5.143 68.460 0 5,199.45
Online ($) before store opening – With brand presence 3,663 19.915 83.746 0 1,632
Online ($) after store opening – With brand presence 6,270 25.160 109.299 0 2369.8
Total ($) before store opening 36,999 7.646 57.193 0 3,366
Total ($) after store opening 52,482 22.848 117.810 0 5,244.5
# of sessions before store opening 36,999 .965 6.105 0 207
# of sessions after store opening 52,482 1.309 8.077 0 271
# of customers browse before store opening 36,999 0.117 0.349 0 4
# of customers browse after store opening 52,482 0.141 0.383 0 4
Online ($) by customers acquired before store opening 317,539 30.468 138.489 0 11,419.9
Online ($) by customers acquired after store opening 127,974 12.814 86.608 0 9,918
Fit and feel online sales – type 1 340,174 61.439 18.205 0 5,203.34
Other online sales – type 1 379,361 15.455 91.912 0 10,659.9
Fit and feel online sales – type 2 299,623 15.551 73.81 0 4,722
Other online sales – type 2 409,580 18.058 98.491 0 10,937.9
Covariates
# of direct marketing activities 1,201,596 6.460 11.068 0 225
Store within 25 miles 1,201,596 0.644 0.479 0 1
Census tract population 1,201,596 4783.426 2139.535 0 37,452
Competitor store open in 10 miles 1,201,596 0.238 0.690 0 6
Competitor store open in 10 - 25 miles 1,201,596 0.453 0.963 0 7
Online sales ($): Brand A 152,922 37.927 176.501 0 11,420
Online sales ($): Brand B 106,470 23.885 124.725 0 5614.96
Online sales ($): Brand C 203,530 18.244 73.229 0 8731
Per-head online ($) by customers acquired before store open 316,065 20.810 103.973 0 11419.9
Per-head online ($) by customers acquired after store open 79,328 17.945 99.564 0 9918
Campaign content
# of catalog campaigns 7,275
# of email campaigns 24,652
# of email campaigns about store openings 54
# of emails sent 11,600,454
# of email sent about store openings 1,198

31
 Table 2: Store openings and customer actions

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.202* 0.807*** 0.257*** 0.126***
(0.107) (0.068) (0.073) (0.031)
# of direct marketing messages 0.042*** 0.017*** 0.020*** 0.019***
(0.001) (0.001) (0.001) (0.0004)
Competition store open within 10 miles -0.023 -0.016 -0.043** -0.030***
(0.026) (0.012) (0.022) (0.008)
Competition store open within 10-25 -0.023 -0.011 -0.008 -0.014**
miles (0.022) (0.009) (0.015) (0.006)

# of observations 462,922 748,312 525,943 525,943

# of tracts 22,044 35,634 25,045 25,045
Log pseudolikelihood -19,170,413 -37,985,207 -1,474,750 -291,499
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Robustness to various linear and non-linear
specifications shown in the online appendix. Regressions include brand-location fixed effects, monthly fixed effects, and interactions between
population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

32
 Table 3: Store openings, brand presence, and customer activity

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.486*** 1.187*** 0.546*** 0.309***
(0.141) (0.093) (0.094) (0.042)
Store open within 25 miles x prior brand -0.731*** -0.921*** -0.609*** -0.487***
presence (0.194) (0.123) (0.142) (0.060)
# of direct marketing messages 0.042*** 0.017*** 0.020*** 0.019***
(0.001) (0.0007) (0.001) (0.0004)
Competition store open within 10 miles -0.023 -0.015 -0.044** -0.034***
(0.026) (0.012) (0.022) (0.008)
Competition store open within 10-25 -0.022 -0.010 -0.007 -0.014**
miles (0.022) (0.009) (0.015) (0.006)

# of observations 462,922 748,312 525,943 525,943

# of tracts 22,044 35,634 25,045 25,045
Log pseudolikelihood -18,496,230 -37,605,611 -1,474,018 -291,447
Sum of first two rows is significant with Yes-Negative Yes-Positive No Yes-Negative
95% confidence
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Robustness to various linear and non-linear
specifications shown in the online appendix. Regressions include brand-location fixed effects, monthly fixed effects, and interactions between
population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

33
 Table 4: Customers acquired after local store opening drive online sales increase

(1) (2)
Dependent variable  Online sales by (old) Online sales by (new)
customers acquired before customers acquired after
store opening store opening
Store open within 25 miles -0.047 23.639***
(0.161) (0.180)
Store open within 25 miles x prior -0.139 -0.454
brand presence (0.210) (0.305)
# of direct marketing messages 0.037*** 0.052***
(0.001) (0.003)
Competition store open within -0.023 -0.010
10 miles (0.028) (0.051)
Competition store open within -0.031 0.052
10-25 miles (0.024) (0.044)
# of Observations 317,539 127,974
# of tracts 15,121 6,094
Log pseudolikelihood -14,144,186 -3,273,943
Sum of first two rows is significant No Yes –
with 95% confidence Positive
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown. Robustness in the
online appendix. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors in parentheses. *** p<0.01, ** p<0.05, *
p<0.1

34
 Table 5: In-store behavior does not seem to drive the observed changes in online behavior

Fit and feel vs. other products Fit and feel definition 2 Fit and feel definition 3 Returns
(1) (2) (3) (4) (5) (6) (7)
Dependent variable  Fit and feel Other sales Fit and feel Other sales Fit and Other sales Return ($) /
sales sales feel sales Online
sales($)
Store open within 25 miles 0.507*** 0.432*** 0.435** 0.539*** 0.331* 0.587*** -0.377**
(0.158) (0.149) (0.169) (0.144) (0.186) (0.138) (0.171)
Store open within 25 miles -0.726*** -0.729*** -0.606*** -0.870*** -0.670*** -0.760*** 0.032
x prior brand presence (0.217) (0.224) (0.225) (0.215) (0.258) (0.199) (0.236)
# of direct marketing 0.043*** 0.040*** 0.042*** 0.041*** 0.044*** 0.040*** 0.004***
messages (0.002) (0.002) (0.001) (0.002) (0.002) (0.001) (0.001)
Competition store open -0.044* 0.016 -0.053** 0.008 -0.066** 0.003 0.073***
within 10 miles (0.025) (0.044) (0.026) (0.035) (0.028) (0.031) (0.027)
Competition store open -0.021 -0.028 -0.017 -0.029 -0.018 -0.026 -0.015
within 10-25 miles (0.023) (0.031) (0.023) (0.026) (0.024) (0.024) (0.019)
# of Observations 387,129 309,662 340,174 379,361 299,623 409,580 38,795
# of tracts 18,435 14,746 16,199 18,065 14,268 19,504 7,839
Log pseudolikelihood -12,478,966 -8,272,775 -10,230,634 -10,570,793 -7,822,124 -12,841,255 -12,200.5
Sum of first two rows is Yes – Yes – No No Yes – No Yes –
significant with 95% Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Robustness of fit and feel results to various
linear and non-linear specifications shown in the online appendix. Regressions include brand-location fixed effects, monthly fixed effects, and
interactions between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

35
 Figure 1a: Online Sales Before and After Local Store Opening within 25 Miles
1

0.8

0.6

0.4 Without prior

brand
Coefficient

0.2
presence
0
With prior
-0.2 brand
-0.4 presence
-0.6

-0.8

-1

4 months 3 months 2 months 1 month 1 month 2 months 3 months 4 or more

before before before leading up after after after months
local store local store local store to local local store local store local store after
opening opening opening store opening opening opening local store
opening opening

Figure 1b: Total Sales Before and After Local Store Opening within 25 Miles
2

1.5

1
Coefficient

Without
0.5
prior brand
presence
0

With prior
-0.5 brand
presence
-1

4 months 3 months 2 months 1 month 1 month 2 months 3 months 4 or more

before before before leading up after after after months
local store local store local store to local local store local store local store after
opening opening opening store opening opening opening local store
opening opening

36
 Figure 2: Newly Acquired Customers Before and After Local Store Opening within 25 Miles
2.5

1.5

1 Without
Coefficient

prior brand
0.5 presence
With prior
0
brand
-0.5
presence

-1

-1.5

4 months 3 months 2 months 1 month 1 month 2 months 3 months 4 or more

before before before leading up after after after months
local store local store local store to local local store local store local store after
opening opening opening store opening opening opening local store
opening opening

37
 ONLINE APPENDIX TO

Can offline stores drive online sales?

Kitty Wang and Avi Goldfarb

September 2016

A. Robustness for Table 2 (Tables A1-A3)

B. Robustness for Table 3 (Tables A4-A14)
C. Robustness for Table 4 (Tables A15-A16)
D. Robustness for Table 5 (Tables A17-A22)
E. Other analysis (Tables A23-A24)
F. Details on Propensity Score Matching (Discussion and Table A25)

38
 A. Robustness for Table 2

Table A1: Table 2 robust to Propensity Score Matching

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.085 0.771*** 0.100 0.013
(0.118) (0.079) (0.093) (0.036)
# of direct marketing messages 0.076*** 0.032*** 0.030*** 0.029***
(0.008) (0.004) (0.005) (0.003)
Competition store open within 10 miles -0.110 -0.064 -0.084 -0.014
(0.181) (0.105) (0.126) (0.053)
Competition store open within 10-25 -0.075 -0.044 -0.118 0.0005
miles (0.097) (0.070) (0.106) (0.039)

# of observations 25,641 44,016 33,411 33,411

# of tracts 1,221 2,096 1,591 1,591
Log pseudolikelihood -897966 -1833413 -85074 -16797
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Regressions include brand-location fixed
effects, monthly fixed effects, and interactions between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01,
** p<0.05, * p<0.1
Note: Matching variables for each census tract include: log population, log medium income, log working population, the population with less than
high school degree/high school degree/associate degree/some college degree/bachelor degree and above, population of workers in 5 different
industries specified by census code. With and without prior brand presence. The results after matching with and without prior brand presences are
exactly the same, suggesting that prior brand presence is not a variable that systematically differentiates various locations.

39
 Table A2: Table 2 Robust to Poisson without competition or marketing controls

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.176 0.791*** 0.259*** 0.128***
(0.125) (0.071) (0.073) (0.031)

# of observations 462,922 748,312 525,943 525,943

# of tracts 22,044 35,634 25,045 25,045
Log pseudolikelihood -19,170,413 -37,985,207 -1,500,654 -292,548
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

40
 Table A3: Table 2 Robust to Linear regression

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 1.770** 11.43*** 0.432*** 0.023***
(0.774) (1.065) (0.082) (0.004)
# of direct marketing messages 1.308** 1.886*** 0.088*** 0.0101***
(0.035) (0.051) (0.004) (0.0001)
Competition store open within 10 miles -0.236 -0.680 -0.097* -0.007***
(0.303) (0.480) (0.042) (0.002)
Competition store open within 10-25 miles -0.271 -0.469 -0.0316 -0.003***
(0.259) (0.354) (0.028)) (0.001)

# of observations 1,201,596 1,201,596 1,201,596 1,201,596

# of tracts 57,219 57,219 57,219 57,219
R2 0.0094 0.0108 0.0071 0.0320
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors clustered by brand-tract in parentheses *** p<0.01, ** p<0.05, * p<0.1

41
 B. Robustness for Table 3

Table A4: Table 3 robust to Propensity Score Matching

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.326** 1.148*** 0.400*** 0.196***
(0.146) (0.101) (0.115) (0.045)
Store open within 25 miles x prior brand -0.620*** -0.907*** -0.643*** -.491***
presence (0.195) (0.121) (0.141) (0.063)
# of direct marketing messages 0.075*** 0.032*** 0.031*** 0.030***
(0.008) (0.004) (0.005) (0.003)
Competition store open within 10 miles -0.112 -0.054 -0.094 -0.006
(0.173) (0.101) (0.120) (0.051)
Competition store open within 10-25 -0.057 -0.024 -0.099 0.007
miles (0.092) (0.061) (0.100) (0.038)

# of observations 25,641 44,016 33,411 33,411

# of tracts 1,221 2,096 1,591 1,591
Log pseudolikelihood -894513 -1817109 -84282 -16744
Sum of first two rows is significant with Yes-Negative Yes-Positive Yes-Negative Yes-Negative
95% confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions between
population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
Note: Matching variables for each census tract include: log population, log medium income, log working population, the population with less than
high school degree/high school degree/associate degree/some college degree/bachelor degree and above, population of workers in 5 different
industries specified by census code. With and without prior brand presence. The results after matching with and without prior brand presences are
exactly the same, suggesting that prior brand presence is not a variable that systematically differentiates various locations.

42
 Table A5: Table 3 Robust to Poisson without competition or marketing controls

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 0.481*** 1.162*** 0.539*** 0.294***
(0.163) (0.098) (0.097) (0.042)
Store open within 25 miles x brand presence -0.809*** -0.907*** -0.591*** -0.478***
(0.208) (0.128) (0.141) (0.060)

# of observations 462,922 748,312 525,943 525,943

# of tracts 22,044 35,634 25,045 25,045
Log pseudolikelihood -19,164,006 -37,968,697 -1,499,959 -294,029
Sum of first two rows is significant with 95% Yes-Negative Yes-Positive No Yes-Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

43
 Table A6: Table 3 Robust to Linear regression

(1) (2) (3) (4)

Dependent variable  Online sales Total sales # of sessions # of customers
browse website
Store open within 25 miles 2.825*** 11.385*** 0.588*** 0.037***
(0.796) (1.087) (0.066) (0.004)
Store open within 25 miles x brand presence -9.907*** 0.392 -1.473*** -0.137***
(2.928) (4.164) (0.523) (0.019)
# of direct marketing messages 1.308*** 1.886*** 0.089*** 0.010***
(0 .035) (0.051) (0.003) (0.0001)
Competition store open within 10 miles -0.236 -0.680 -0.097** -0.007***
(0 .303) (0.480) (0.041) (0.002)
Competition store open within 10-25 miles -0.270 -0.469 -0.031 -0.003***
(0.259) (0.354) (0.028) (0.001)

# of observations 1,201,596 1,201,596 1,201,596 1,201,596

# of tracts 57,219 57,219 57,219 57,219
R2 0.0094 0.0108 0.0071 0.0323
Sum of first two rows is significant with 95% Yes-Negative Yes-Positive Yes-Negative Yes-Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors clustered by brand-tract in parentheses *** p<0.01, ** p<0.05, * p<0.1

44
 Figure A7: Table 3 Robustness to Tobit Estimation
Results Plot by State – Online sales as Dependent Variable

Error bars are 95% confidence intervals on estimated coefficients. If no error bar is shown, the standard
error could not be estimated (typically due to small sample size).

45
 Table A8: Table 3 robustness to linear regression using log(sales+x) as dependent variable

Log (sales+0.01) Log (sales+0.1) Log (sales+1)

Dependent variable (1) (2) (3) (4) (5) (6)
Online Total sales Online Total sales Online Total sales
sales sales sales
Store open within 25 miles 0.385*** 1.183*** 0.291*** 0.889*** 0.196*** 0.117***
(0.056) (0.053) (0.043) (0.040) (0.029) (0.016)
Store open within 25 miles x -0.769*** -0.751*** -0.577*** -0.558*** -0.386*** -0.290***
prior brand presence (0.115) (0.127) (0.088) (0.096) (0.060) (0.047)
# of direct marketing messages 0.064*** 0.054*** 0.049*** 0.041*** 0.033*** 0.028***
(0.001) (0.001) (0.001) (0.001) (0.001) (0.0004)
Competition store open within -0.021 -0.017 -0.016 -0.013 -0.011 -0.005
10 miles (0.016) (0.016) (0.012) (0.012) (0.008) (0.005)
Competition store open within 0.0002 -0.007 0.0001 -0.006 0.00002 0.001
10-25 miles (0.011) (0.012) (0.009) (0.009) (0.006) (0.004)

# of Observations 488,416 774,330 488,416 774,330 488,416 774,330

# of tracts 23,258 36,873 23,258 36,873 23,258 36,873
Adj R^2 0.0282 0.0191 0.0284 0.0195 0.0285 0.0237
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Positive Negative Positive Negative Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors clustered by brand-tract in parentheses *** p<0.01, ** p<0.05, * p<0.1

46
 Table A9: Table 3 robustness to dropping the top x% of the sales distribution

Drop top 0.1% Drop top 0.5% Drop top 1%

Dependent variable (1) (2) (3) (4) (5) (6)
Online Total Online Total Online Total
sales sales sales sales sales sales
Store open within 25 miles 0.860*** 1.514*** 0.798*** 1.518*** 0.809*** 1.501***
(0.105) (0.078) (0.070) (0.074) (0.082) (0.052)
Store open within 25 miles x -1.358*** -1.463*** -1.260*** -1.424*** -1.311*** -1.416***
prior brand presence (0.141) (0.105) (0.119) (0.097) (0.115) (0.091)

# of direct marketing messages 0.038*** 0.016*** 0.035*** 0.015*** 0.035*** 0.0152***

(0.001) (0.0005) (0.001) (0.001) (0.001) (0.001)
Competition store open within -0.038** -0.015 -0.27* -0.019** -0.016 -0.015*
10 miles (0.017) (0.009) (0.016) (0.008) (0.015) (0.008)
Competition store open within 0.007 -0.0004 0.008 0.0004 0.002 0.005
10-25 miles (0.013) (0.007) (0.011) (0.006) (0.010) (0.006)

# of Observations 557,219 884,287 546,827 878,067 517,189 878,067

# of tracts 23,240 36,869 22,975 36,851 22,038 36,824
Adj R^2 N/A N/A N/A N/A N/A N/A
Log pseudolikelihood -19884430 -42214486 -15663894 -39569556 -11203764 -37208349
Sum of first two rows is Yes- No Yes- No Yes- No
significant with 95% Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and
interactions between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

47
 Table A10: Table 3 robustness to defining nearby store by Metropolitan Statistical Area

(1) (2) (3) (4)

DEPENDENT VARIABLES Online Sales Total Sales # of sessions # of customers
browse site
Store open in MSA 0.484*** 1.036*** 0.519 *** 0.307***
(0.141) (0.110) (0.110) (0.050)
Store open in MSA x prior brand -0.729*** -0.775*** -0.543*** -0.493***
presence (0.194) (0.137) (0.151) (0.066)
# of direct marketing messages 0.041*** 0.018*** 0.020*** 0.018***
(0.001) (0.001) (0.001) (0.0004)
Competition store open within 10 -0.023 -0.019 -0.049** -0.037***
miles (0.026) (0.013) (0.022) (0.009)
Competition store open within 10-25 -0.022 -0.016 -0.003 -0.014**
miles (0.022) (0.010) (0.015) (0.006)

# of Observations 462,922 477,958 438,436 438,436

# of tracts 22,044 22,760 20,878 20,878
Log pseudolikelihood -18501065 -29455193 -1336107 -254530
Sum of first two rows is significant Yes- Yes- No Yes-
with 95% confidence Negative Positive Negative
Unit of observation is the census tract-month. Regressions include location fixed effects, monthly fixed effects, and interactions between
population and the month fixed effects. Estimated by fixed effects Poisson. Robust standard errors clustered by tract in parentheses. *** p<0.01,
** p<0.05, * p<0.1

48
 Table A11: Table 3 robustness to separating the results by brand

Brand A Brand B Brand C

Dependent Variable  (1) (2) (3) (4) (5) (6) (7) (8) (9)
Online Total sales Browsing Online Total Browsing Online Total Browsing
sales sessions sales sales sessions sales sales sessions
Store open within 25 miles 0.336 1.368*** 0.645** 0.309 1.045*** 0.665*** 0.211 0.922*** 0.329***
(0.312) (0.221) (0.321) (0.191) (0.131) (0.158) (0.166) (0.122) (0.116)
Store open within 25 miles -0.804** -0.938*** -0.323 -0.614*** -0.860*** -0.796*** -0.335 -0.710*** -0.511***
x prior brand presence (0.397) (0.279) (0.406) (0.232) (0.155) (0.227) (0.272) (0.194) (0.181)
# direct marketing 0.049*** 0.015*** 0.022*** 0.030*** 0.015*** 0.019*** 0.102*** 0.064*** 0.039***
message (0.003) (0.001) (0.002) (0.001) (0.001) (0.001) (0.004) (0.003) (0.003)
Brand A store open within -0.148 -0.055 0.365** 0.392* 0.373* 0.490*
25 miles (0.168) (0.106) (0.150) (0.235) (0 .204) (0.271)
Brand B store open within 0.003 0.011 0.074 -0.041 -0.071 0.145
25 miles (0.153) (0.073) (0.117) (0.179) (0 .129) (0.137)
Brand C store open within -0.091 0.013 -0.0005 -0.021 0.017 0.103*
25 miles (0.087) (0.033) (0.065) (0.071) (0.037) (0.062)
Competition store open -0.005 -0.010 -0.056 -0.033 -0.016 -0.044 -0.021 -0.045 0.001
within 10 miles (0.043) (0.016) (0.038) (0.032) (0.016) (0.029) (0.059) (0.038) (0.051)
Competition store open -0.015 0.002 0.005 -0.024 -0.022 -0.006 -0.025 -0.037 0.007
within 10 - 25miles (0.036) (0.013) (0.025) (0.032) (0.015) (0.022) (0.038) (0.026) (0.030)
# of Observations 152,922 281,358 158,949 203,530 306,850 216,382 106,470 160,104 150,612
# of tracts 7,282 13,398 7,569 9,692 14,612 10,304 5,070 7,624 7,172
Log pseudolikelihood -8112263 -19363373 -435204 -6030984 -11309832 -670109 -4068476 -6681848 -359242
Sum of first two rows is Yes- Yes- Yes- Yes- Yes- Yes- No Yes- Yes-
significant with 95% Negative Positive Positive Negative Positive Negative Positive Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

49
 Table A12: Table 3 robustness to separating email and catalog marketing

Dependent Variable  Online sales

(1) (2) (3) (4) (5)
Total direct Email and Email Catalog Email and
marketing catalogue interactions interactions catalog
interactions
Store open within 25 miles 0.486*** 0.478*** 0.472*** 0.490*** 0.482***
(0.141) (0.126) (0.165) (0.160) (0.162)
Store open within 25 miles x -0.731*** -0.807*** -0.806*** -0.809*** -0.802***
brand presence (0.194) (0.207) (0.210) (0.207) (0.210)
# direct marketing message 0.042***
(0.001)
# email sent 0.0001 -0.003 -0.003
(0.001) (0.003) (0.003)
# catalog sent -0.00006 0.013 0.017
(0.014) (0.029) (0.031)
# email x brand presence 0.003 0.003
(0.004) (0.004)
# email x store open within 25 0.002 0.002
miles (0.004) (0.004)
# catalog x brand presence 0.006 0.004
(0.026) (0.026)
# catalog x store open within 25 -0.023 -0.026
miles (0.034) (0.035)
Store open 25 x brand presence -0.001 -0.001
x #email (0.005) (0.005)
Store open 25 x brand presence 0.001 (dropped due
x #catalog (0.002) to collinearity)
Competition store open within -0.023 -0.003 -0.003 -0.003 -0.003
10 miles (0.026) (0.025) (0.025) (0.025) (0.025)
Competition store open within -0.022 -0.005 -0.005 -0.007 -0.005
10 – 25 miles (0.022) (0.022) (0.022) (0.022) (0.022)
# of Observations 462,922 462,922 462,922 462,922 462,922
# of tracts 22,044 22,044 22,044 22,044 22,044
Log pseudolikelihood -18496230 -19163953 -19163736 -19163681 -19163511
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly
fixed effects, and interactions between population and the month fixed effects. Robust standard errors in
parentheses *** p<0.01, ** p<0.05, * p<0.1

50
 Table A13: Table 3 robustness to brand presence categorization

Dependent variable=Online sales

(1) (2) (3) (4)
VARIABLES Without first 7 Without first 10 By marketing By existing store in
months of data months of data communication the same state
Store open within 25 miles 0.651*** 0.513** 0.979*** 0.349
(0.157) (0.199) (0.193) (0.167)
Store open within 25 miles x prior -0.781*** -0.477* -1.050*** -0.250
brand presence (0.220) (0.272) (0.224) (0.218)
# of direct marketing messages 0.043*** 0.042*** 0.041*** 0.042***
(0.001) (0.002) (0.002) (0.001)
Competition store open within 10 -0.043 -0.038 -0.023 -0.023
miles (0.028) (0.028) (0.026) (0.026)
Competition store open within 10-25 -0.024 -0.018 -0.023 -0.023
miles (0.024) (0.021) (0.022) (0.022)

# of Observations 332,178 252,348 462,922 462,922

# of tracts 19,540 18,025 22,044 22,044
Log pseudolikelihood -13,981,825 -11,184,672 -18,493,197 -18,500,662
Sum of first two rows is significant No No No No
with 95% confidence
Unit of observation is the census tract-month. Regressions include location fixed effects, monthly fixed effects, and interactions between
population and the month fixed effects. Estimated by fixed effects Poisson. Robust standard errors clustered by tract in parentheses. *** p<0.01,
** p<0.05, * p<0.1

51
 Figure A14: Table 3 robustness to changes-in-changes specification as in Athey-Imbens (2006)

Treatment group is brand-tracts that had a store opening. Control group is brand-tracts with no stores. Propensity score pairwise matching at the tract level by brand so
that treatment and control group have same number of tracts for each brand.

52
 C. Robustness for Table 4

Appendix Table A15: Table 4 robustness to propensity score

(1) (2)
Dependent variable  Online sales by (old) Online sales by (new)
customers acquired before customers acquired after
store opening store opening
Store open within 25 miles -0.163 22.847***
(0.178) (0.222)
Store open within 25 miles x prior -0.075 -0.4889
brand presence (0.214) (0.366)
# of direct marketing messages 0.066*** 0.099***
(0.008) (0.009)
Competition store open within -0.252 0.248
10 miles (0.221) (0.051)
Competition store open within -0.001 0.046
10-25 miles (0.103) (0.155)
# of Observations 17,808 8,946
# of tracts 848 426
Log pseudolikelihood -693897 -171190
Sum of first two rows is significant No Yes –
with 95% confidence Positive
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown. Regressions
include brand-location fixed effects, monthly fixed effects, and interactions between population and the
month fixed effects. Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
Note: Matching variables for each census tract include: log population, log medium income, log working
population, the population with less than high school degree/high school degree/associate degree/some
college degree/bachelor degree and above, population of workers in 5 different industries specified by
census code; with and without prior brand presence. The results after matching with and without prior
brand presences are exactly the same, suggesting that prior brand presence is not a variable that
systematically differentiates various locations.

53
 Table A16: Robustness of table 4 to no controls and to linear regression

Dependent variable=Online Dependent variable=Online

sales by (old) customers sales by (new) customers
acquired before store opening acquired after store opening
(1) (2) (3) (4)
VARIABLES FE Poisson FE Linear FE Poisson FE Linear
1-2 months after store open within -0.208 -0.125 0.348 0.313
25 miles (0.154) (0.387) (0.244) (0.488)
3-4 months after store open within -0.231 -0.249 0.835*** 1.718*
25 miles (0.185) (0.423) (0.317) (1.043)
5+ months after store open within -0.184 0.270 0.475*** 1.350**
25 miles (0.136) (0.364) (0.179) (0.676)
1-2 months after store open within 0.113 -2.025 -0.300 -0.379
25 miles x prior brand (0.203) (3.723) (0.489) (0.828)
presence
3-4 months after store open within -0.059 -7.204*** -0.671 -1.527
25 miles x prior brand (0.217) (2.812) (0.486) (1.213)
presence
5+ months after store open within -0.102 -9.141*** -0.086 -0.960
25 miles x prior brand presence (0.165) (2.287) (0.338) (0.836)
# of direct marketing messages 0.952*** 0.266***
(0.030) (0.017)
Competition store open within -0.300 0.211**
10 miles (0.280) (0.107)
Competition store open within -0.356 0.244**
10-25 miles (0.228) (0.118)

# of Observations 317,539 1,201,596 127,974 1,201,596

# of tracts 15,121 57,219 6,094 57,219
R2 N/A 0.0066 N/A 0.0030
Log pseudolikelihood -14,589,976 N/A -3,427,170 N/A
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects,
monthly fixed effects, and interactions between population and the month fixed effects. Robust standard
errors (clustered by brand-tract in columns (2) and (4)) in parentheses. *** p<0.01, ** p<0.05, * p<0.1

54
 D. Robustness for Table 5

Table A17: Table 5 robustness to propensity score matching

Fit and feel vs. other products Fit and feel definition 2 Fit and feel definition 3 Returns
(1) (2) (3) (4) (5) (6) (7)
Dependent variable  Fit and feel Other sales Fit and feel Other sales Fit and Other sales Return ($) /
sales sales feel sales Online
sales($)
Store open within 25 miles 0.249 0.414*** 0.084 0.481*** 0.332** 0.316* -0.377*
(0.187) (0.146) (0.209) (0.139) (0.169) (0.162) (0.199)
Store open within 25 miles -0.499** -0.757*** -0.585** -0.632*** -0.619*** -0.610*** 0.062
x prior brand presence (0.233) (0.210) (0.269) (0.196) (0.222) (0.221) (0.238)
# of direct marketing 0.075*** 0.075*** 0.073*** 0.076*** 0.078*** 0.070*** 0.002
messages (0.009) (0.008) (0.009) (0.008) (0.008) (0.008) (0.005)
Competition store open -0.139 -0.077 -0.238 -0.017 -0.165 0.017 -0.053
within 10 miles (0.192) (0.204) (0.221) (0.194) (0.177) (0.255) (0.273)
Competition store open 0.010 -0.135 0.025 -0.119 0.020 -0.231 -0.088
within 10-25 miles (0.095) (0.105) (0.091) (0.109) (0.092) (0.124) (0.119)
# of Observations 18,333 19,971 16,065 21,777 21,357 15,750 1,718
# of tracts 873 951 765 1,037 1,017 750 382
Log pseudolikelihood -507304 -480137 -387772 -595798 -634398 -344607 -534
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Regressions include brand-location fixed
effects, monthly fixed effects, and interactions between population and the month fixed effects. Robust standard errors clustered by brand-tract in
parentheses *** p<0.01, ** p<0.05, * p<0.1
Note: Matching variables for each census tract include: log population, log medium income, log working population, the population with less than
high school degree/high school degree/associate degree/some college degree/bachelor degree and above, population of workers in 5 different
industries specified by census code. With and without prior brand presence. The results after matching with and without prior brand presences are
exactly the same, suggesting that prior brand presence is not a variable that systematically differentiates various locations.

55
 Table A18: Table 5 robustness to linear regression using log(sales+x) as dependent variable, including tracts with zero sales

Log (online sales+0.01) Log (online sales+0.1) Log (online sales+1)

Dependent variable (1) (2) (3) (4) (5) (6)
Fit and Other sales Fit and Other Fit and Other
feel sales feel sales sales feel sales sales
Store open within 25 miles 0.115*** 0.106*** 0.086*** 0.079*** 0.057*** 0.052***
(0.010) (0.010) (0.008) (0.008) (0.005) (0.005)
Store open within 25 miles x -0.657*** -0.578*** -0.492*** -0.428*** -0.326*** -0.280***
prior brand presence (0.068) (0.065) (0.052) (0.049) (0.035) (0.033)
# of direct marketing messages 0.034*** 0.034*** 0.026*** 0.026*** 0.017*** 0.017***
(0.001) (0.001) (0.001) (0.001) (0.0003) (0.0003)
Competition store open within -0.007 -0.010** -0.005 -0.008* -0.004 -0.005*
10 miles (0.005) (0.005) (0.004) (0.0045) (0.003) (0.003)
Competition store open within 0.003 -0.003 0.002 -0.003 0.002 -0.002
10-25 miles (0.003) (0.003) (0.003) (0.003) (0.002) (0.002)

# of Observations 1,373,253 1,373,253 1,373,253 1,373,253 1,373,253 1,373,253

# of tracts 57,219 57,219 57,219 57,219 57,219 57,219
Adj R^2 0.0139 0.0149 0.0140 0.0149 0.0141 0.0147
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors clustered by brand-tract in parentheses *** p<0.01, ** p<0.05, * p<0.1

56
 Table A19: Table 5 robustness to linear regression using log(sales+x) as dependent variable, not including tracts with zero sales

Log (online sales+0.01) Log (online sales+0.1) Log (online sales+1)

Dependent variable (1) (2) (3) (4) (5) (6)
Fit and Other sales Fit and Other Fit and Other
feel sales feel sales sales feel sales sales
Store open within 25 miles 0.391*** 0.283*** 0.292*** 0.213*** 0.194*** 0.142***
(0.065) (0.061) (0.049) (0.046) (0.033) (0.031)
Store open within 25 miles x -0.678*** -0.618*** -0.503*** -0.458*** -0.330*** -0.300***
prior brand presence (0.116) (0.109) (0.087) (0.082) (0.059) (0.055)
# of direct marketing messages 0.052*** 0.051*** 0.039*** 0.038*** 0.027*** 0.025***
(0.001) (0.001) (0.001) (0.001) (0.001) (0.0004)
Competition store open within -0.027 -0.026 -0.022 -0.019 -0.015* -0.012
10 miles (0.018) (0.016) (0.013) (0.012) (0.009) (0.008)
Competition store open within 0.004 -0.018 0.004 -0.014 0.002 -0.009
10-25 miles (0.013) (0.012) (0.010) (0.009) (0.002) (0.006)

# of Observations 362,056 402,335 362,056 402,335 362,056 402,335

# of tracts 17,241 19,159 17,241 19,159 17,241 19,159
Adj R^2 0.0232 0.0242 0.0233 0.0241 0.0235 0.0237
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors clustered by brand-tract in parentheses *** p<0.01, ** p<0.05, * p<0.1

57
 Table A20: Table 5 robustness to dropping the top x% of the sales distribution

Drop top 0.1% Drop top 0.5% Drop top 1%

Dependent variable (1) (2) (3) (4) (5) (6)
Fit and feel Other Fit and feel Other Fit and Other
sales sales sales sales feel sales sales
Store open within 25 miles 0.949*** 0.823*** 0.830 *** 0.799*** 0.851*** 0.845***
(0.124) (0.128) (0.112) (0.108) (0.100) (0.103)
Store open within 25 miles x -1.487*** -1.315 *** -1.276*** -1.312*** -1.285*** -1.328***
prior brand presence (0.162) (0.151) (0.119) (0.149) (0.143) (0.140)
# of direct marketing messages 0.038*** 0.037*** 0.037*** 0.035*** 0.036*** 0.034***
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
Competition store open within -0.041** -0.037* -0.038* -0.047** -0.029 -0.041**
10 miles (0.020) (0.022) (0.019) (0.019) (0.019) (0.019)
Competition store open within -0.021 -0.020 0.027 0.012 0.023* 0.021
10-25 miles (0.015) (0.015) (0.014)* (0.014) (0.013) (0.013)

# of Observations 413,112 458,769 409,960 452,517 401,581 442,591

# of tracts 17,227 19,131 17,142 18,939 16,885 18,602
Log pseudolikelihood -11325256 -11022221 -10183085 -9178997 -8628231 -7822020
Sum of first two rows is Yes- Yes- Yes- Yes- Yes- Yes-
significant with 95% Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and
interactions between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

58
 Table A21: Table 5 robustness to linear specification

Fit and feel vs. other products Fit and feel definition 2 Fit and feel definition 3 Returns
(1) (2) (3) (4) (5) (6) (7)
Dependent variable  Fit and feel Other sales Fit and feel Other sales Fit and Other sales Return ($) /
sales sales feel sales Online
sales($)
Store open within 25 miles 1.450*** 1.374*** 0.896*** 1.928*** 2.029*** 0.795*** -0.068**
(0.429) (0.418) (0.340) (0.511) (0.563) (0.278) (0.033)
Store open within 25 miles -5.052*** -4.855*** -4.877*** -5.030*** -7.140*** -2.766*** 0.008
x prior brand presence (1.830) (1.573) (1.668) (1.800) (2.342) (1.044) (0.045)
# of direct marketing 0.682*** 0.625*** 0.529*** 0.779*** 0.867*** 0.441*** 0.001***
messages (0.020) (0.020) (0.017) (0.022) (0.025) (0.016) (0.0001)
Competition store open -0.333* 0.096 -0.308** 0.071 -0.375 0.138 0.013***
within 10 miles (0.170) (0.197) (0.134) (0.220) (0.202) (0.179) (0.005)
Competition store open -0.078 -0.192 -0.046 -0.224 -0.146* -0.124 -0.004
within 10-25 miles (0.143) (0.152) (0.108) (0.179) (0.177) (0.126) (0.004)
# of Observations 1,201,592 1,201,592 1,201,592 1,201,592 1,201,592 1,201,592 61,950
# of tracts 57,219 57,219 57,219 57,219 57,219 57,219 22,044
Adj R^2 0.008 0.005 0.007 0.006 0.009 0.003 0.028
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Fixed effects Linear regressions shown here. Regressions include brand-location fixed effects,
monthly fixed effects, and interactions between population and the month fixed effects. Robust standard errors clustered by brand-tract in
parentheses *** p<0.01, ** p<0.05, * p<0.1

59
 Table A22: Table 5 robustness to no controls for marketing messages or competition

Fit and feel vs. other products Fit and feel definition 2 Fit and feel definition 3 Returns
(1) (2) (3) (4) (5) (6) (7)
Dependent variable  Fit and feel Other sales Fit and feel Other sales Fit and Other sales Return ($) /
sales sales feel sales Online
sales($)
Store open within 25 miles 0.435** 0.529*** 0.337* 0.575*** 0.506*** 0.423** -0.383**
(0.184) (0.167) (0.197) (0.162) (0.178) (0.169) (0.173)
Store open within 25 miles -0.699*** -0.929*** -0.757*** -0.831*** -0.813*** -0.788*** 0.026
x prior brand presence (0.232) (0.229) (0.261) (0.213) (0.228) (0.234) (0.237)
# of Observations 340,173 379,360 299,622 409,579 387,129 309,62 38,787
# of tracts 16,199 18,065 14,268 19,504 18,435 14,746 7,837
Log pseudolikelihood -10584153 -10887066 -8108331 -13226780 -12937423 -8486789 -12204
Sum of first two rows is Yes – Yes – Yes – Yes – Yes – Yes – Yes –
significant with 95% Negative Negative Negative Negative Negative Negative Negative
confidence
Unit of observation is the census brand-tract-month. Fixed effects Poisson regressions shown here. Regressions include brand-location fixed
effects, monthly fixed effects, and interactions between population and the month fixed effects. *** p<0.01, ** p<0.05, * p<0.1

60
 E. Other relevant analysis

Table A23: Marketing Variable as the Dependent Variable

Dependent Variable  # emails sent # catalogs sent # total direct

marketing messages
sent
Store open within 25 miles 0.005 -0.007 -0.004
(0.009) (0.009) (0.020)
Competition store open within 10 -0.001 -0.004 -0.009**
miles (0.003) (0.003) (0.005)
Competition store open within 10 -0.002 0.002 -0.001
- 25miles (0.002) (0.002) (0.003)
# of Observations 650,095 899,742 949,767
# of tracts 30,957 42,845 45,227
Log pseudolikelihood -2370821 -717958 -2246268
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed
effects, and interactions between population and the month fixed effects. Robust standard errors in parentheses **
p<0.05, * p<0.1

61
 Table A24: Multi-channel Shoppers

Compare multi-channel shoppers before and after a Compare multi-channel shoppers per month
store opens within 25 miles
Dependent Variable  # multi- # multi- # multi- # multi- # multi- # multi # multi- # multi
channel channel channel channel channel channel channel channel
shopper /# total shopper /# total shopper /# total shopper /# total
shopper shopper (per month) shopper (per month) shopper
(per month) (per month)
Store open within 25 0.625*** 0.196 *** 0.254 0.024 0.591*** 0.494*** 0.134 0.215
miles (0.040) (0.026) (0.254) (0.130) (0.080) (0.065) (0.304) (0.257)
Store open within 25 0.373 0.172 0.455 0.267
miles x brand presence (0.233) (0.127) (0.296) (0.252)
# direct marketing 0.009*** 0.007*** 0.009*** 0.007*** 0.016*** 0.016*** 0.015*** 0.015***
message (0.001) (0.0002) (0.001) (0.0002) (0.001) (0.001) (0.001) (0.001)
Competition store open -0.006 -0.003 -0.006 -0.003 0.02 -0.014 -0.016 -0.029*
within 10 miles (0.005) (0.002) (0.005) (0.003) (0.024) (0.017) (0.022) (0.016)
Competition store open 0.004 0.001 0.005 0.001 -0.016 -0.011 -0.002 0.001
within 10 - 25miles (0.003) (0.002) (0.004) (0.002) (0.019) (0.014) (0.017) (0.012)
# of Observations 193,309 193,288 193,309 193,288 162,197 158,453 162,197 158,453
# of tracts 11,251 11,251 11,251 11,251 7,408 7,402 7,408 7,402
Log pseudolikelihood -728623 -152471 -728397 -152469 -121487 -71369 -138918 -81807
Sum of first two rows is N/A N/A No No N/A N/A No No
significant with 95%
confidence
Unit of observation is the census brand-tract-month. Regressions include brand-location fixed effects, monthly fixed effects, and interactions
between population and the month fixed effects. Robust standard errors in parentheses *** p<0.01

62
 F. Details on Propensity Score Matching

Treatment and Control Groups Matching Procedure

To check for robustness of our findings, we perform propensity score matching on our data,

then use difference-in-difference identification strategy on the matched data. We match the treated

and control groups using the following procedure. We first organize treated or non-treated unit by

brand-census tracts. Treated group is defined as a census tract that has a first store opening of a

brand within 25 miles during the data period (July 2010 to end of June 2012). The goal is to match

each census tract with a store opening (treated) with a similar census tract without a store opening

(control), which has a similar probability of having a store opening. The matching is based on

observable characteristics of census tracts. We achieve this by first collecting data for each census

tract that appeared in the sales data. We include 10 matching variables, 9 of which are demographic

variables, and 1 is our measure of brand presence in a census tract for a particular brand. For

demographic variables, we use census tract population, total employed population, median income,

and 5 different education measures. Our measure of brand presence is consistent with what is used

in the main analyses: if there are any positive sales in the first three months of the data period in a

census tract from a particular brand. We then use a Probit model to predict the likelihood of having

a store opening using the 10 matching variables. After matching, we keep only matched treated

(with store opening) and non-treated (without store opening) brand-census tracts, and re-run our

analyses using fixed effect Poisson models.

The reason we go through such a matching process is that we try to eliminate the effect of

endogenous store openings, so that the effect of store opening on sales is not biased upwards

because the areas with store openings were going to have higher sales regardless of having a

physical store or not. After matching, we are comparing areas with a store opening, with

comparable areas that are just as likely to have a store opening (but do not). Results on propensity
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score matching we report is based on nearest neighbor score matching algorithm. We also

performed the same analyses using radius matching and kernel matching, and obtained

qualitatively similar results.

Table A25: Comparison of Mean Demographic Characteristics and Brand Presence

Unmatched census tracts Matched census tracts
Variables With store Without store With store Without store
opening opening opening opening
Total population 4734.938 4787.335 4737.001 4761.162
Employed population 1600.87 1583.489 1599.192 1602.699
Medium income 7989.507 7515.097 7989.507 7967.922
Less than high school 112.709 129.340 112.787 110.704
degree
High school degree 145.432 147.879 145.534 145.735
Some university 127.645 136.260 127.460 129.670
education
Associate degree 150.003 150.092 150.108 151.392
Bachelor degree 211.238 212.034 211.386 211.414
Brand presence 0.111 0.287 0.111 0.118

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