Consumer Inter‐Product Showrooming and Information Service Provision in an Omni‐Channel Supply Chain

Abstract

ABSTRACTFacilitated by physical showrooms, many online first retailers have embarked on the practice of omni‐channel retailing. This offline to online mode (information delivery offline and product fulfillment online) empowers consumers’ showrooming behavior in two ways, namely, intra‐product showrooming (intra‐SR) and inter‐product showrooming (inter‐SR). As the physical showroom usually displays a partial assortment of the online products, consumer inter‐SR, i.e., the behavior of inspecting one product offline but buying a different or related product online, is critical to firms’ decisions. Moreover, inter‐SR facilitated by the retailer's omni‐channel operations changes the nature of upstream competition between manufacturers. In this article, we develop a theoretical model to investigate consumer inter‐SR behavior and the information service provision in an omni‐channel supply chain. Our main findings are as follows. First, consumer inter‐SR benefits the manufacturer whose product is displayed online exclusively but hurts the manufacturer whose product is dual‐channel displayed; inter‐SR is beneficial to the omni‐channel retailer only when the inter‐SR intensity is not too high. Second, under the service compensation contract, the dual‐channel manufacturer and the retailer can be coordinated to provide enhanced information service; the online‐exclusive manufacturer, however, may be either better off or worse off depending on the relative strengths of the utility‐increasing effect and the service‐differentiating effect of the information service enhancement. Third, the consumers located far from the showrooms are more likely to be hurt by the inter‐SR behavior and the information service compensation, while the local consumers generally benefit from them. Finally, the in‐store inventory that facilitates immediate product fulfillment has a positive impact on the retailer's information service provision.