Operations Dept. Research Seminar
Understanding and Managing Customer-Induced Negative Externalities in Congested Self-Service Environ
Sponsored by: Dept. of Operations
Speaker(s): Saravanan Kesavan, Univ of N. Carolina
Date & Time: Friday, Nov. 18, 2016 from 1 p.m. to 2:30 p.m.
Managing congestion in self-service environments such as fitting rooms in apparel retailers is vital as retailers increasingly rely on their customers to perform many tasks independently. Using point-of-sale (POS), traffic, and labor data obtained from a retail technology platform firm, RetailNext, and one of its clients, we demonstrate an inverted-U relationship between fitting room traffic and sales; this shows that managing congestion in fitting rooms is critical for store performance. Further, we identify a new phenomenon called thwarting behavior, defined as a systematic change in customers’ behavior when they experience congestion that imposes negative externalities on other customers. To understand the underlying mechanisms that drive the negative impact of congestion, we conducted a field study observing customer behavior at another retailer. Our field study provides evidence that customers change their behavior in a way that induces negative externalities on other customers through an increase in (1) waiting time due to service slowdown; and (2) the likelihood of lost sales due to phantom stockouts. Finally, we use two field experiments at both retailers to show the effectiveness of accommodating thwarting behavior through labor intervention to mitigate the negative impact of congestion. Our field experiments quantified the impact of increasing fitting room labor by one person on hourly sales by 17.7% to 19.02%. Our solution was adopted at both retail organizations. This paper is co-authored with Hyun Seok Lee and Vinayak Deshpande, University of North Carolina at Chapel Hill.
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Attachment: Kesavan paper
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