Abstract
This study focuses on a a dual-channel supply chain that consists of a capital-constrained brick-and-mortar retailer and a manufacturer, where a manufacturer can simultaneously sell products through a traditional retail channel and a direct online channel. Supplementary pricing strategy and competitive pricing strategy are simulated in our model, and we find that the former one is the better choice for the manufacturer when the retailer suffers capital constraints. In our analysis, the capital constraint on retailer could mitigate the price competition between two channels, and it may be beneficial to the manufacturer under certain conditions. Our findings show that the manufacturer should strategically provide trade credit to retailers rather than unconditionally provide it. We present two trade-credit strategies (trade credit with positive interest rate and trade credit with zero interest rate) and suggest that the manufacturer should choose an appropriate trade-credit strategy according to the initial capital of the retailer. To guide the manufacturer when and how to provide trade credit, we conduct several numerical simulations based on our results and further plot out a graph to direct the manufacturer to an appropriate strategy of trade credit.
Highlights
More and more manufacturers have joined into the dualchannel supply chain, which combines a direct online channel with a physical retail channel
Our model focuses on a Stackelberg game between manufacturer and retailer, by incorporating consumers’ acceptance level of the direct channel and the sales costs in both channels, and several key questions should be taken into consideration by the manufacturer: (1) Is a capital constraint always bad for the retailer? Is a capital-constrained retailer willing to be financed by trade credit?
Considering that a dual-channel supply chain consists of a manufacturer and a capital-constrained physical retailer, the manufacturer produces a kind of product at a unit production cost c and sells the product through a direct online channel and a traditional retail channel
Summary
More and more manufacturers have joined into the dualchannel supply chain, which combines a direct online channel with a physical retail channel. Since our emphasis is trade-credit provision to a capital-constrained retailer in a dual-channel supply chain, this study is primarily relevant to three literature streams, including trade credit in a capital-constrained supply chain, the sales cost in the direct channel, and consumers’ acceptance of direct online channel. Ey present that the performance of credit financing provided by other channel members is better than that of bank financing in most cases Different from these studies focusing on a capital-constrained manufacturer in a dual-channel supply chain, we concentrate on a capital-constrained physical retailer. In this study, we simultaneously consider the sales cost in both channels and consumers’ acceptance level of the direct channel and try to explore a dual-channel supply chain fundamental for the efficiency of the tradecredit strategy
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