Date of Award

Spring 2022

Document Type

Open Access Dissertation

Department

Moore School of Business

First Advisor

Ramkumar Janakiraman

Abstract

Many upscale retailers operate discounted versions of their premium stores to engage with value-conscious customers, often as a separate channel. In the first essay, we empirically examine the effects of a high-end department store retailer’s opening of discounted store on customer shopping behavior. Leveraging a unique customer-level transaction dataset that spans pre- and post-opening of multiple discounted stores across the United States by the focal retailer, this essay seeks to disentangle the effects of discounted store opening (DSO) on the incumbent channels, namely the upscale regular physical stores and the online stores and to document the possible mechanisms that drive customer behavior in response to DSO. We adopt a quasi-experimental approach and employ the fixed effects difference-in-differences estimator that exploits the staggered opening of multiple discounted stores by the retailer across the different markets to estimate the impact of DSO on customer spending and product returns behavior. Our results show that DSO results in a decrease in customer spending in the regular store channel and a significant increase in spending in the online channel. We attribute the substitution effect of DSO on the physical store to a price sensitivity effect whereby price-sensitive customers migrate to the discounted store. We propose and identify a returns effect as the underlying mechanism that drives the complementarity effect of DSO on the online channel. The results suggest that DSO facilitates product returns, and the effect is greater for customers who are located nearer to the newly opened stores, have low prior experience with the brand, and in product categories that carry uncertain fit-and-feel products. We perform a series of robustness checks to rule out the effects of confounding factors and address endogeneity concerns. Based on the results, we offer several implications for upscale multichannel retailers who also offer off-price stores.

Sustainability and environment-related issues have become increasingly important for all stakeholders - policymakers, businesses, and individual consumers. While firms are embracing more sustainable practices in recent times, lawmakers are increasingly adopting many sustainability initiatives to promote sustainable behavior. In 2014 the state of California introduced a statewide ban on single-use plastic carryout bags thus becoming the first state to institutionalize a sustainability initiative of such magnitude in the United States. In my second essay, we focus on this plastic bag ban in the state of California and examine the spillover effects of the initiative on customers’ shopping behavior of sustainable brands. We leverage individual customer-level transaction data (from a retailer that offers both sustainable and regular brands) comprising detailed purchase behavior before and after the regulation and empirically examine the effects of the regulation on customers’ spending on sustainable products. To estimate the causal effects of the focal sustainability initiative, we compare the change in customers’ spending on sustainable products before and after the regulation between two groups of customers – a treatment group and a control group - and perform our analysis using the difference-in-differences (DD) estimation technique. We find that customers affected by the focal sustainability initiative significantly increase their spending on sustainable products post the regulation. We document several heterogeneous effects of the focal sustainability initiative across customers. We propose and find evidence for the role of a brand popularity effect as the underlying behavioral mechanism that drives the spillover effect of our reported results. We perform several robustness checks including testing the model based on border identification and falsification tests to address selection bias and other endogeneity concerns. Based on our results, we offer practical insights for retailers on how they can manage the growth of sustainable brands in their product portfolio.

Available for download on Friday, May 31, 2024

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