Stuck online: When online engagement gets in the way of offline sales

In recent years, billions of dollars have been spent by both online and offline retailers on website design aimed at increasing consumers’ online engagement. We study the relationship between online engagement and offline sales, utilizing a quasi-experimental setting in which a leading premium automobile brand gradually launched a new interactive website across markets, allowing for a treatment-control comparison. This paper offers evidence of a causal effect of online engagement on offline sales, with the high-engagement website leading to a decline of approximately 12% in car sales. This negative effect is due to substitution between online and offline engagement; users of the high-engagement website exhibited a decreased tendency to seek out personal contact with a car dealer and proceed to offline engagement—a necessary stage in the car purchase funnel. We develop an analytical model of the online-to-offline sales funnel to generalize our findings and highlight the conditions under which online engagement substitutes for offline engagement and potentially decreases offline sales. Taken together, our findings suggest that while online engagement serves as a means for both product information provision and consumer persuasion, it may fall short in achieving the latter goal, as compared to the offline channel. For purely offline products, hands-on engagement is a necessary step toward purchase. Thus, increasing consumers’ online engagement may not be an optimal strategy if it has the potential to halt progression down the sales funnel and reduce offline engagement.