Operation strategies for an omni-channel supply chain: Who is better off taking on the online channel and offline service?

Abstract

Abstract The retail industry is accelerating the transition from multi-channel to omni-channel. A display showroom is a main mode of operation in omni-channel retailing. In this, consumers find products in an online channel, experience products and receive services in offline showrooms, and make a purchase by placing an order online or offline. In practice, the online channel (offline service) can be opened (invested in) by the manufacturer or the retailer. This paper explores the relevant issues by establishing and comparing four kinds of Stackelberg game models: (1) the manufacturer simultaneously opens an online channel and invests in the offline service (MM mode; (2) the manufacturer opens an online channel, but the retailer invests in the offline service (MR mode); (3) the retailer opens an online channel, but the manufacturer invests in the offline service (RM mode); and (4) the retailer simultaneously opens an online channel and invests in the offline service (RR mode). In these models, the online channel and offline channel cooperate through a display showroom. The results show that regardless of the kind of channel structure, a display showroom can generate benefits for the manufacturer, the retailer and the whole omni-channel supply chain. And from the perspectives of the manufacturer and the whole supply chain, if the consumer service perception degree is low, the price competition degree is high (low), and the service cooperation degree are high (low), and the MM (MR) mode is the optimal channel structure. Otherwise, if the consumer service perception degree is high, the RR mode is the most efficient channel structure for the manufacturer and the omni-channel supply chain. For the retailer, the RR mode is always the best channel structure. The improved revenue-sharing contract and two-part tariff contract can achieve full coordination of and improvement in the operational efficiency of the omni-channel supply chain and achieve Pareto improvement for the supply chain members.