Impacts of consumer virtual showrooming behavior on manufacturer and retailer strategic decisions in a dual-channel supply chain

Abstract

A dual-channel supply chain is considered with a manufacturer selling its product through an offline retailer and an online store. The manufacturer can set up a virtual showroom to help consumers judge the product suitability. Consumers may switch to the offline retailer to buy the product after experiencing virtual demonstration, called virtual showrooming behavior (VSB). Consumers are divided into H-consumers with, and L-consumers without, positive experience cost. The problem is modeled as a Stackelberg game with the manufacturer as the leader and the retailer as the follower. Based on consumer heterogeneity and VSB, the manufacturer makes the strategic decision of whether to set up a virtual showroom and the retailer makes the strategic decision of whether to support consumer VSB. The conditions influencing the manufacturer and retailer decisions are explored. The results show H-consumers may engage in VSB if their experience cost is low, and L-consumers may engage in VSB if their store visit cost is relatively low. Consumer VSB significantly depends on the product suitability and the virtual showroom informatization degree. When the experience cost is neither too high nor too low, the manufacturer will set up a virtual showroom if the consumers are relatively sensitive to the store visit cost. The retailer may not benefit by supporting consumer VSB regardless of the experience cost, when consumers are relatively insensitive to the store visit cost. The retailer will choose the same strategy and the manufacturer may choose the opposite strategy when the wholesale price is endogenous instead of exogenous.