Dynamic joint strategy of channel encroachment and logistics choice considering trade-in service and strategic consumers

Abstract

As Internet technology develops rapidly, consumers’ consumption habits gradually shift from offline to online, and they are growing more strategic. In order to cater to strategic consumers, offline durable goods firms providing trade-in service are faced with practical issues of making dynamic strategies about whether establishing online channels and adopting which logistics service between self-logistics and third-party logistics (TPL) to deliver online orders. To tackle these problems, this study considers three scenarios and analyzes dynamic joint strategy of channel encroachment and logistics choice for a durable goods firm who owns an offline channel and offers trade-in service to strategic consumers via constructing a two-period game model. Results show that the firm’s dynamic joint strategy of channel encroachment and logistics choice will be affected by fixed operating cost, logistics service level difference and self-logistics cost. Moreover, trade-in service will have huge impacts on channel encroachment and logistics choice strategy. At last, when considering cap-and-trade policy, the service level of self-logistics and the cost of shipping used products, the optimal dynamic joint strategy of channel encroachment and logistics choice remains viable.