Free riding and customer retention across retailers’ channels

When consumers employ more than one channel within a single transaction, they can obtain services from one retailer and place their business with another, hence they can engage in free riding. Conversely, customers may be inclined to stay with the same retailer, even when they switch channels. We used empirical data to determine the magnitude of both effects in two directions: from online shops to traditional retail stores and vice versa. We found that over 20% of consumers are free riders, and that retailers retain substantially fewer customers in both directions. To explain the variance within the free-riding rate and the customer-retention rate, we investigated the influence of selected product characteristics (search characteristics, speed of technological change, and purchase frequency) on cross-channel consumer behavior. Managerial recommendations based on the magnitude of the effects concern channel management and the relationship between retailers and manufacturers.