Launch strategies for luxury fashion products in dual-channel distributions: Impacts of social influences

Abstract

Many studies show that social influences from purchase activities of fashion leaders and followers significantly affect luxury fashion management. Some luxury fashion manufacturers employ both direct and retail channels to sell products. Mostly, they launch new styles through direct channels initially. Thus, to ascertain whether this is the best strategy, this study constructs a two-period game model to examine the effects of social influences on channel sequence and pricing decisions in a dual-channel distribution system. The manufacturer can choose one of two alternative strategies: launching the product through direct channel first and through retail channel first. Our findings show that social influences significantly affect channel sequence and pricing decisions. If the impacts of social influences are high, the most profitable strategy for the manufacturer is to launch the new product through the retail channel first. In contrast, under this condition, the most profitable strategy for the retailer is to sell the product later than the direct channel. If the market size of fashion followers is larger than that of fashion leaders, social influences have a positive effect on both direct and retail prices under any strategy. This study primarily investigates the impacts of social influences on channel sequence and pricing decisions in a dual-channel distribution system for luxury fashion products.