One of the biggest challenges for brick-and-mortar retailers is finding a
strategy to compete with online-only sellers such as Amazon. Although
Walmart and JCPenney, for example, have invested substantially in
e-commerce operations to complement their physical stores, the economics
facing these hybrid retailers remain daunting. Both chains announced
store closings in 2016. For retailers that operate both stores and Web
sites, the conventional "omnichannel" strategy is to encourage shopping
across channels so that customers who shop only in stores will begin
also buying online, and vice versa. Promotions and coupons are one way
to promote this behavior, and retailers such as Macy's, Bed Bath &
Beyond, and Home Depot routinely use them. However, few retailers have
closely examined the profitability of such promotions. To understand how
these variables interact to affect customer behavior and retailer
profitability, a research team led by Xueming Luo, a marketing professor
at Temple University, worked with a Chinese department store on its
coupon strategy. The more profitable play is to coax online shoppers to
come into your stores, where the environment can induce them to spend
more.