Research on inventory and pricing strategy between on-line and physical channels

Abstract

Motivated by the common practice that physical retailers such as "bricks and mortar" want to increase their sales or market share, they plan to build the online channel which is the better way during the information technology era. Then they will meet two problems: one is online channel whether uses its own stock or share stock with the physical store to fulfill orders from online. The other problem is how to solve the conflicts between physical and online channels as the price of online usually is lower than physical store which may influence the demand of physical store. For these reasons, our article compares the two models that weather online store share the inventory with physical store, to solve the first problem. And we also bring the dynamic pricing strategy to solve the channel conflicts on the base of previous research on dynamic stock admission policies. Finally, we make the retailer gain the better results which has the great practical significance.