Supply chain channel strategies for online retailers: Whether to introduce web showrooms?

Abstract

Online retailers are increasingly adopting the web showroom service to attract consumers to buy products online. However, this service may facilitate consumer webrooming behavior. Such behavior lead to a virtual channel in which consumers view web showrooms online but buy products at physical stores. This study aims to investigate the channel strategies for online retailers regarding whether to introduce web showrooms in the face of consumer webrooming behavior. To address this challenging issue, we develop a theoretical dual-channel retailing model under two market environments when the online channel and the offline channel are owned by a monopolistic retailer or two independent retailers, respectively. Our results show that the presence of consumer webrooming behavior is heavily dependent on the hassle cost of viewing web showrooms and the travel cost of visiting physical stores. Interestingly, when both costs are sufficiently large, more consumers exhibit webrooming behavior in the duopoly market than in the monopoly market. The results further show that it is beneficial for an online retailer to introduce web showrooms when consumer sensitivity to the travel cost is relatively low under both market environments. In particular, the monopolistic retailer benefits from the web showroom service by increasing its selling price, whereas the online retailer in the duopoly market gains benefits by inducing consumer switching behavior. Notably, when consumer sensitivity to the travel cost is relatively high, offering web showrooms in the duopoly market may increase the offline retailer’s profit but reduce the online retailer’s profit, which is counterintuitive.