Clicks and mortar: The effect of on-line activities on off-line sales

Retailers did not immediately extend their business to the Internet environment, fearing that on-line activities could adversely impact their off-line sales. To facilitate assessment of the impact of on-line activities on off-line sales, we develop a method that allows retailers to use readily available market data for making informed decisions. The proposed method determines ( 1) the extent to which on-line sales cannibalize off-line sales, and ( 2) whether on-line activities build on-line equity for the firm. We illustrate the method using data from Tower Records' Internet sales division. We find that on-line sales do not significantly cannibalize retail sales and that the firm's web activities build long-term on-line equity. While the proposed method can be used by any "clicks-and-mortar" firm, our firm-specific results indicate that Towers' fears regarding cannibalization due to its own Internet activities were unfounded.