Abstract
Consumers' perceived product quality reflects their psychological estimations on product quality, which directly affected by the real product quality provided by the manufacturer and the appearance of products from the retailer. Generally, consumer's willingness-to-pay is affected by their perceived quality. This study explores how consumers' perceived quality affects supply chain decisions with different supply chain structures. To conduct this study, demand function consisted of consumers' perceived quality is built. After that, the retailer and manufacturer's revenues models are formulated. Analytical solutions of supply chain partners, i.e., optimal product quality, wholesale price, packaging investment and retail price, are obtained with Stackelberg games. Investigation on the relations between supply chain circumstances and equilibrium decisions under different supply chain power structurers suggests some novel findings and managerial insights. For example, retailer's optimal product retail price negatively affected by market demand, manufacturer's optimal product quality is proportionate to retailer's packaging investment and vice versa.
Highlights
Private Brand (PB) products are a variety of goods that branded and sold by retailers where manufacturers are entrusted to output the goods following some reengaged specifications
Due to the fact that the entire retail industry was battered by new retail channel such as cross-border e-commerce and new retail concept stores around 2015, it is imperative for the retailer to attach more emphasis on private brand product and begin to produce customized product in cooperation with some original equipment manufacturers (OEM)
D(ps, q, t) = a − αps + β(q + γt) where a is the market demand base reflecting the inherent consumer demand in the whole market. α is price coefficient reflecting the impact of product price on consumer demand. β is quality coefficient reflecting the impact of consumer perceived quality on consumer demand. q + γt is consumer perceived quality, which means the subjective evaluation on product by consumers after they perceive product quality and packaging [8, 11]. γ is packaging investment coefficient reflecting the influence of retailer packaging investment on consumer demand [4]
Summary
Private Brand (PB) products are a variety of goods that branded and sold by retailers where manufacturers are entrusted to output the goods following some reengaged specifications. The consumers’ perception of quality for Great Value products is partly influenced by Walmart’s reputation, which indicates that the products potentially benefit from the reputation of Walmart. This study exploreS how the supply chain partners make decisions considering consumers’ perception of product quality and thereby suggest some managerial insights. The contribution of this paper are threefold: (1) A demand model based on product perceived quality is established, and the impact from manufacturer product quality and retailer packaging investment to profit is analyzed.
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