Channel integration, sales dispersion, and inventory management

Santiago Gallino, Antonio Moreno, Ioannis Stamatopoulos

Research output: Contribution to journalArticle

56 Scopus citations

Abstract

We study the effects of the introduction of cross-channel functionalities on the overall sales dispersion of retailers and the implications of these effects for inventory management. To do that, we analyze data from a leading U.S. retailer who introduced a "ship-to-store" (STS) functionality that allows customers to ship products to their local store free of charge when those products are not available in their local store. Based on the fact that stores prioritize carrying products for which local demand is high, we test the hypothesis that introducing the STS functionality increased the retailer's overall sales dispersion. We find that, on average, the contribution of the 90% lowest-selling products to total sales increased by 0:75 percentage points, increasing sales dispersion. Calibrating conventional inventory-ordering models, we show that to respond optimally to the observed increase in dispersion, the retailer would need to increase its cycle and safety inventories by approximately 2:7%. Our paper points out the effect of an increasingly important retail phenomenon (channel integration) on a key factor for inventory management (sales dispersion).

Original languageEnglish (US)
Pages (from-to)2813-2831
Number of pages19
JournalManagement Science
Volume63
Issue number9
DOIs
StatePublished - Sep 2017

Keywords

  • Channel integration
  • Empirical operations
  • Inventory management
  • Long tail
  • Omnichannel retail
  • Online retail
  • Retail operations
  • Sales dispersion

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

Fingerprint Dive into the research topics of 'Channel integration, sales dispersion, and inventory management'. Together they form a unique fingerprint.

  • Cite this