EXPRESS: Cross-Channel Effects of Failure in a Retailer’s Mobile App

Failures in omnichannel retailers’ mobile apps can significantly impact shoppers’purchases, extending beyond in-app to affect in-store transactions. Investigating such effects poses challenges because field experiments inducing app failures are infeasible, and non-experimental observational data typically suffer from selection biases. We leverage a natural experiment involving an exogenous failure in a large omnichannel retailer’s app that made the app unavailable during the failure period. We examine the impact of the app failure on purchases in both online (website, mobile app) and offline (store) channels using a difference-in-differences approach. Our findings show a substantial adverse effect of the app failure on shoppers’ frequency, quantity, and monetary value of purchases, leading to short-term revenue losses of up to $1.08 million, with an additional $1.89 million in potential long-term revenue erosion due to customer attrition over time. The effects are heterogeneous across channels and shoppers. The decline in purchases across channels primarily stems from reduced purchases in stores rather than the online channel. The decline in store purchases is predominantly explained by the search discontinuation mechanism, wherein shoppers who use the app primarily for search but complete their purchases in stores are unable to use the app for search and curtail their offline purchases following the app failure. The effect on purchases in the retailer’s online channel is insignificant, aligning with the channel switching mechanism, wherein shoppers who use the app primarily to purchase simply pivot their purchases to another online channel such as the website. Furthermore, shoppers with a lower monetary value of past purchases and more recent purchases are more sensitive to an app failure than others.