Abstract
This paper considers a dual-channel supply chain with product customization. One manufacturer and one retailer are involved. The online direct sales channel sells standard and customized products, and the offline retail channel sells standard products. The prices and service levels of products sold via different channels are differentiated, and the customization level which influences the customization cost and choices of customers is decided by the manufacturer. Three game models are proposed: the manufacturer Stackelberg (MS) model, the retailer Stackelberg (RS) model, and the Nash game model. The price and service decisions of the players are derived. Meanwhile, a service-cost-sharing contract is designed for the MS model. The impacts of price and service competition, service cost, and customers sensitivity to the customization level on the optimal decisions are investigated. Through the numerical analysis, we find that, among the three models, the manufacturer Stackelberg model is the most beneficial game structure for the overall supply chain but has the largest revenue gap between the two members. Second, under price competition and service competition, the manufacturer should differentiate the prices and services for direct sales standard products and customized products according to his market status. Third, the manufacturer should increase customization expenditures to construct his customization production line and provide more diversified products when consumers are more sensitive to product customization.
Highlights
Owing to the popularity of the Internet, the e-commerce industry is gradually maturing, and e-commerce websites, such as Amazon and Taobao, enable customers to purchase most products, including electronic and digital products, food, clothing, and more, through the Internet
In a dual-channel supply chain (SC), considering differentiated prices and services provided for products sold via different channels, price competition and service competition exist between the online channel and retail channel
Under price competition and service competition, the manufacturer should differentiate the prices and services for direct sales of standard products and customized products according to his market status
Summary
Owing to the popularity of the Internet, the e-commerce industry is gradually maturing, and e-commerce websites, such as Amazon and Taobao, enable customers to purchase most products, including electronic and digital products, food, clothing, and more, through the Internet. In a dual-channel SC with product customization, the selling prices and service provided by the manufacturer and the retailer should be differentiated considering the product variety and sales channel diversity. 2. Literature Review is study relates to the literature following: one is about the price and service competition or coordination in an SC, one relates to decisions in a dual-channel SC, and the third one is about the product customization. The dual-channel sales model with product customization assumes that standard products are sold via the retailer while customized products are sold online [25, 26] Under this condition, Xiao et al [26] propose a dual-channel SC model to analyze the impacts of product variety and channel structure on the optimal decisions. Our paper is among the first pieces of research that considers price and service competition and coordination in a dual-channel SC with product customization. By analyzing the effects of price and service competition intensity and by comparing the prices and service levels of two products, managerial insights are offered
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