Dual-channel Retailer Research Articles

Coordinating pricing, warranty replacement and sales service decisions in a competitive dual-channel retailing system

This study is conducted based on real issues observed in online retailing industry where an electronic retailer competes with a traditional retailer. To gain a competitive advantage, in addition to pricing strategy, the electronic retailer provides a warranty replacement service to customers, and the traditional retailer offers sales service. This paper develops a competitive demand function where customers’ sensitivities depend on pricing and different services provided by sales channels using analytical coordination contracts. Furthermore, we analyze pricing, warranty replacement, and sales service strategies in decentralized, semi-centralized, centralized, semi-coordinated, and coordinated scenarios. The proposed models are also investigated in both endogenous and exogenous wholesale price cases. This study gives insights into the way managers of the supply chain (SC) choose sales channels. The results reveal that the proposed hybrid revenue-tariff contract benefits both chain members and customers by suggesting a longer warranty period and more sales service to customers. The finding also reveals that the proposed hybrid revenue-tariff contract achieves a win–win situation for all participators. Comparing endogenous and exogenous wholesale price cases indicates that the endogenous wholesale price is more beneficial for both customers and sales channels compared to the exogenous wholesale price case.

Whether to adopt “buy online and return to store” strategy in a competitive market?

This study attempts to examine whether it is beneficial to introduce the “buy online and return to store” (BORS) strategy in a competitive market. We consider two competing dual-channel retailers, and investigate conditions under which it is optimal for one or both of the retailers to offer the BORS strategy. We first assume that a partial refund is offered for online returns and then consider the important case of a full refund. We show that whether both retailers adopt this strategy significantly depends on the return rate and cross-selling profit. Specifically, if the return rate is sufficiently low (high), at least one retailer (both retailers) will adopt this strategy when the unit cross-selling profit is relatively high. Nonetheless, both retailers will fall into the prisoner's dilemma under certain conditions. Interestingly, the return rate and proportion of consumers with a high hassle cost associated with BORS returns significantly influence the equilibrium channel strategy and the existence of the prisoner's dilemma. We further find that, when both retailers implement the BORS strategy, they both benefit from offering a full refund return policy when the number of online-type consumers is large enough and the unit cross-selling profit is relatively small, but should provide a partial refund otherwise. When only one retailer adopts the BORS strategy, a partial refund return policy is preferable.

The Dual-Channel Retailer’s Channel Synergy Strategy Decision

The main research question asked in this paper is whether and when a dual-channel retailer (retailer in short) should adopt the “buy online and pick up in store” (BOPS) strategy. To answer this question, we first derive the optimal price decision using the non-BOPS and BOPS strategies. Subsequently, we compare the performance of retailers under non-BOPS and BOPS scenarios. Our main findings are that under the monopoly scenario, retailers may not always benefit from the BOPS strategy. Retailers will benefit only if the offline operational costs are low and the degree of customer acceptance of the online channel is high. However, the BOPS strategy cannot improve dual-channel retailers’ market share. Furthermore, under a Stackelberg game scenario with e-retailers as leaders, when the value of a product is medium and the transaction costs of the offline channel are high, retailers can use the BOPS strategy to enhance their market share. If the degree of customer acceptance of the online channel is also high, retailers can further improve their profits by using the BOPS strategy. Overall, these findings not only provide decision support for retailers, but also enrich the theories on dual-channel retailing in operations management.

Research on Multichannel Supply Chain Pricing Under Different Dominance

In a multichannel supply chain comprising of dual-channel retailers with both physical and online channels as well as single-channel e-tailers with online channels, a multichannel demand model for e-commerce is constructed based on customer channel preferences, and a Stackerberg game model with price competition dominated by dual-channel retailers and single-channel e-tailers as well as a Bertrand game model with equal rights are established to analyze the impact of different channel rights structures on the price, demand, and profit of the two retailers. The results show that the single-channel e-tailer under the dual-channel retailer-dominated game has the highest profit, and the dual-channel retailer under the single-channel e-tailer-dominated game has the highest profit; thus, both retailers should accept the other’s dominant channel rights for profit maximization.

Optimizing decisions for a dual-channel retailer with service level requirements and demand uncertainties: A Wasserstein metric-based distributionally robust optimization approach

This study explores a dual-channel management problem of a retailer selling multiple products to customers through a traditional retail channel and an online channel to maximize expected profit. The prices and order quantities of both the online and the retail channels and the delivery times of the online channel are the decision variables. The demand for each product and each channel is assumed to be random and dependent on the prices of both channels and on the online delivery time. In addition, to ensure an adequate performance, service level requirements are considered and are modeled as joint chance constraints. Wasserstein uncertainty sets using the Wasserstein metric for demand probability distributions centered at the empirical distributions on the observed demands from the historical data are constructed in a data-driven approach. Accordingly, a data-driven distributionally robust joint chance constrained model is developed based on the data-driven Wasserstein uncertainty sets. A conservative CVaR approximation is used for the distributionally robust joint chance constraints. Through mathematical manipulations, the developed model is transformed into a bilinear program, which can be approximated by a mixed integer quadratic programming model using piecewise affine relaxations of the bilinear terms and can be solved efficiently. Numerical experiments are performed to illustrate the effectiveness and practicality of the proposed data-driven distributionally robust optimization approach to deal with demand uncertainties. The effects of the key parameters such as delivery time sensitivity, price sensitivity and customer channel preference are analyzed and managerial insights are provided. The results show that the decisions obtained by the proposed approach are robust to hedge against demand uncertainties. The proposed model and solution approach can provide effective decision supports for retailers selling products through an online channel and a traditional retail channel without reliable demand distribution information. Furthermore, compared with the L1-norm and the L2-norm, the L∞-norm is verified to perform better when used in the Wasserstein metric for constructing the Wasserstein uncertainty sets.

Studying the Complexity of Multichannel Supply Chain with Different Power Structures Under Carbon Subsidy Policy

The game characteristics and equilibrium strategies of a triple-channel supply chain under the carbon subsidy policy are studied in this work with three different game power structures. There are simultaneous decision-making, manufacturer-dominated market and retailer-dominated market. The decision mechanism for order quantity of manufacturer and dual-channel retailer, is discussed. Meanwhile, their complex dynamic characteristics are studied. It is found that when the government implements dual low-carbon subsidies, the supply chain system in which the manufacturer dominates the market is more stable. The government should pay attention to the power structure of the market to determine an appropriate subsidy rate. The over-adjustment of order quantity from manufacturer’s direct sales channel and retailer’s online channel both will lead to large periodical fluctuations in the system, and even bifurcation and chaos. These will cause substantial fluctuations and even loss in the profits of supply chain companies. This analysis shows that delayed feedback can effectively stabilize the periodic bifurcation and chaos in the system.

Reducing transaction uncertainty with brands in web stores of dual-channel retailers

Transaction uncertainty is an impediment to customer satisfaction and remains a problem in the dual-channel retailing context. Most consumers use web stores for information and evaluation. This process influences their subsequent retailer selection and consumer satisfaction. In this study, the retailer brand, as the source of transaction information, is considered as a solution to the problem of transaction uncertainty. Brand attractiveness, the affective aspect of brand, is identified as an affective-based uncertainty mitigator and is considered together with brand credibility, the cognitive aspect of brand. Drawing on the source attractiveness/credibility model, retailer brand attractiveness and credibility are proposed and confirmed to reduce transaction uncertainty, in turn improving customer satisfaction. The moderating role of online–offline channel integration on the uncertainty reduction effect of retailer brand attractiveness and credibility is investigated. Online–offline channel integration has been found to be the essential condition for the uncertainty reduction effect of retailer brand attractiveness. Online–offline channel integration is also found to form a synergy with retailer brand credibility in reducing uncertainty. These findings show that the web stores of dual-channel retailers should invest in brand attractiveness and credibility orderly and coordinate brand investment with online–offline channel integration.

Products pricing and return strategies for the dual channel retailers

Products pricing and return strategies for the dual channel retailers

Dual-channel competition: the role of quality improvement and price-matching

Quality improvement and price-matching are two commonly used competing strategies by the retailers. However, it is still unclear how the retailers should deliberate over the two strategies when selling in both online and offline markets. In this paper, we consider two dual-channel retailers selling a substitutable product to consumers in both online and offline markets. Especially, the retailers compete in the online market, and their offline markets are exclusive to themselves. We establish a game-theoretical model to investigate the trade-off between quality improvement and price-matching in competition, and the impact on retailers' profits and consumer surplus in the dual-channel market structure. The analysis shows that, first, a retailer should choose to improve its quality to avoid price competition when the online market is small; second, when retailers engage in price competition, the retailer with larger offline market is more willing to adopt price-matching, while the retailer with a small share of offline market can be hurt; third, quality improvement can always increase the consumer surplus, while price-matching always hurts consumer surplus due to price collusion.

The optimal pricing and service strategies of a dual-channel retailer under free riding

<p style='text-indent:20px;'>Free riding refers to that in a multi-channel market, consumers enjoy the presale service of a product at one channel but purchase the product at another channel. In this paper, we study the optimal pricing and service strategies for a dual-channel retailer, who sells a product through both a traditional retail channel and an online channel. We assume that the offline channel provides the presale service but the online channel does not. We investigate how the changes of the degree of free riding affect the pricing/service strategies and profits of the two channels under three different scenarios: Stackelberg competition, Bertrand competition and channel integration. Our analysis shows that when the dual-channel retailer operates the two channels separately, no matter under which competitive scenario, free riding has a negative effect on both channels. And it is much more beneficial for the dual-channel retailer to let one channel work as a leader and another channel as a follower than to let the two channels make their decision simultaneous. In contrast, when the dual-channel retailer runs the two channels jointly, i.e., employs the channel-integration scenario, free riding may be beneficial to the retailer. Finally, this paper proposes and analyzes a revenue-sharing contract to coordinate a decentralized dual-channel retailer to achieve beneficial outcomes for both channels.</p>

Presale Strategy for a Dual-Channel Retailer Considering Sales Effort

We study the presale strategy and decision-making problems for a retailer selling products. Based on the penetration and skimming pricing strategies, we consider the characteristics of consumer market segmentation and valuation heterogeneity, focus on the implementation conditions and optimal decision results of different pricing strategies before and after the introduction of an online presale channel, and conduct a multidimensional comparative study on the impact of the introduction of the online presale channel. We find that the introduction of an online presale channel can always improve the retailer’s profitability, but its pricing strategy and sales effort should be adjusted to align with the consumer market segmentation. When the proportion of online consumers is high or their preference for the spot channel is high, the retailer should always adopt a penetration pricing strategy. If online consumers also show a high consumption preference for the presale channel, the retailer should reduce its sales effort to save costs after introducing the presale channel; otherwise, the retailer should increase its sales effort to increase demand in the offline spot channel. When the proportion of online consumers is low and their preference for the spot channel is low, the retailer should always adopt a skimming pricing strategy and keep sales effort unchanged. When the proportion of online consumers and their consumption preference for the spot channel are moderate, the retailer should adjust its pricing strategy from penetration to skimming after introducing the online presale channel and appropriately reduce the level of sales effort.

Analysis of Pricing and Service Effort in Dual-Channel Supply Chains with Showrooming Effect

Showrooming has become common practice of consumers in the context of dual-channel retailing. Under different intensities of showrooming, the manufacturer can decide whether to directly retail online (the M-R case) or resell through an e-retailer (the E-R case). Dual-channel supply chain models and dynamic game models are developed and both online selling formats are investigated. The dynamic game process of the supply chain is numerically simulated. The stability of the Nash equilibrium point is investigated by parameter basins for periodical cycles and bifurcation diagrams. The results show that the price adjustment speeds have a larger stability range in the M-R case while the service effort adjustment speed has a larger stability range in the E-R case. The stability of the systems is more sensitive to price adjustment speed than service effort adjustment speed in both supply chain structures. It is found that the systems will enter chaos through a flip bifurcation or a Neimark–Sacker bifurcation. The changes in attractors and basins of attraction indicate that both channels can reach the equilibria more easily when they choose a lower speed of retail price adjustment. The effects of showrooming on decision variables are greater in the M-R case than in the E-R case. When the showrooming effect is moderate, the manufacturer should choose the M-R case; when the showrooming effect is sufficiently large or sufficiently small, the manufacturer should choose the E-R case. We propose a wholesale price markdown strategy which can: (i) eliminate the double marginalization and coordinate the supply chain; (ii) effectively control the chaos caused by the overhigh adjustment speed of wholesale price, and restore the system to a stable state; (iii) improve the retailer’s service effort.

Impacts of horizontal mergers on dual-channel supply chain

<p style='text-indent:20px;'>This paper investigates the impacts of horizontal mergers on a dual-channel supply chain given the rapid development of e-commerce. Three types of horizontal mergers are considered in a dual-channel supply chain consisting of three firm types: suppliers, single-channel retailer, and dual-channel retailer. A comparison with a benchmark pre-merger scenario underscores the impacts of each horizontal merger on firms in the dual-channel supply chain. First, where horizontal mergers occur (i.e., at upstream or downstream tier) has an impact on firms in the dual-channel supply chain. Second, synergy costs trigger the domination of the synergy effect. Third, the degree of consumer preference for channels affects the trigger due to which the synergy effect outweighs the competitive effect. Although dual channels prevail in supply chain management, few studies pay attention to horizontal mergers in this context. Unlike literature on horizontal mergers in single-channel supply chains, we suggest that the impacts of horizontal mergers in dual-channel supply chains have unique features, and channel preference plays an important role in such impacts.</p>

Pricing and Return Strategy: Whether to Adopt a Cross-Channel Return Option?

Dual-channel retailers are increasingly adopting a typical cross-channel return option (CC) to allow online consumers to return their unsatisfied items at physical stores. It is important for retailers to determine whether to introduce this option in addition to the same-channel return option (SC) that requires online purchases to be returned online. To address such challenging issue, we consider a dual-channel retailer and develop theoretical models to derive the optimal return strategy and pricing decisions. To this end, two scenarios, i.e., the SC and CC scenarios, are considered. In the latter scenario, the SC is also allowed. We show that the retailer cannot always benefit from adopting the CC. Specifically, given that consumer online purchase hassle cost is sufficiently low, when the cross-selling profit is sufficiently high, the retailer is better off adopting this option, and vice versa. Adopting this option cannot always help increase the demand, but always increases the return quantity. We also find that the retailer is not always better off adopting a uniform or differential pricing scheme. Interestingly, the retailer benefits from offering a relatively low return service charge, especially when adopting the CC. Our numerical results further show that, the retailer benefits from adopting the CC when the return rate is relatively low or moderate, and vice versa.

The Impact of Consumers’ Peer-Induced Fairness Concerns on Mixed Retail and E-Tail Channels

With the rapid development of e-commerce, online retailing has become an important part of the market. In order to improve market competitiveness and increase market share, more and more retailers have opened both regular offline channel and online e-tail channel to sell products. Then how to price becomes an urgent problem for upstream manufacturers and dual-channel retailers when there is price competition between regular channel and e-tail channel, especially when consumers have peer-induced fairness concerns. However, linking consumers’ behavioral factors such as fairness concerns to pricing decisions of mixed retail and e-tail channels draws little attention in the literature on supply chain management. This paper incorporates “consumers’ peer-induced fairness concerns” (CPFC) into pricing decisions in a dyadic supply chain, where dual-channel retailer obtains products from manufacturers and then sells products to consumers through both regular channel and e-tail channel. We use game-theoretic models to analyze the equilibrium pricing strategies under the setting with “symmetry consumers’ peer-induced fairness concerns” (SCPFC) and with “asymmetry consumers’ peer-induced fairness concerns” (ACPFC), respectively. Detailed comparisons and numerical analysis are further conducted to examine the impacts of different types of CPFC on equilibrium pricing strategies and profits.

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

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.

Impacts of the BOPS Option on Sustainable Retailing

This paper focuses on the value of an omnichannel retailing option, Buy-Online-and-Pick-up-in-Store (BOPS), in reducing environmental impact. Analytical models were established to explore the impacts of the BOPS strategy on the pricing and expected profit of the dual-channel retailer as well as the environment. The equilibrium solutions under dual-channel and omnichannel scenarios were obtained. Then, we considered the impact of loyal store consumers in the extended model. We find that the retailer will increase the product price after adopting the BOPS strategy. Our analytical results also show that when the operating cost of the BOPS strategy is relatively low, the total demand under the omnichannel scenario is greater than that under the dual-channel scenario and vice versa. In addition, this strategy can always reduce the environmental impact in terms of the pure online demand. Finally, when the operating cost is lower and the fraction of consumers without channel preference is higher, the retailer can benefit from the BOPS strategy. In this case, the BOPS strategy can achieve profit improvement and environmental impact reduction.

Return Mode Selection and Pricing Strategy for a Dual-Channel Retailer

With the rapid development of e-commerce and the economy, an increasing number of retailers are adopting a dual-channel retail strategy (DCRS), which allows customers to return unsatisfactory products, provided that their complaints are reasonable, and receive a full refund. This paper studies the pricing strategies of an integrated dual-channel retailer (DCR) when it provides return policies to customers, including original channel return, fixed cross-channel return, and relaxed cross-channel return. The relationship between the DCR’s system performance and channel pricing is impacted by customer channel preferences, and the return rates of different channels are discussed. The results show that the greater the difference in customer preferences between channels is, the greater the profitability of the DCR will be. A fixed cross-channel return model should be selected when the return rate in the online channel is higher or the cross-channel return rate is lower; otherwise, the original channel return model should be selected. When the return rate of a certain channel is high, the retailer should increase the price in that channel and reduce the pricing of its competing channel to compensate for the loss caused by the returns and transfer sales between channels. A selective return policy can not only improve the flexibility of business operations and enhance competitive advantage but also provide convenient customer returns and enhance consumers’ sense of security.

Channel Integration Choices and Pricing Strategies for Competing Dual-Channel Retailers

The “buy online and pick up in store” (BOPS) mode is gaining tremendous popularity among retailers since it is convenient for consumers and brings additional store sales to retailers. However, operating the BOPS channel requires additional investment, which is a challenge for retailers. This article considers the pricing strategies of competing dual-channel retailers, focuses on whether and when they should adopt the BOPS strategy, and explores the impacts of market factors on the equilibrium outcomes. Since retailers’ decisions are usually made sequentially in reality, we use the Stackelberg game model to analyze retailers’ optimal strategies. First, we show that the follower's price is not always lower than the leader's price. Specifically, when the unit additional profit from cross-selling of the follower is low enough, the follower will set a higher price than the leader. Second, we find that retailers prefer the BOPS strategy when the fixed costs for offering BOPS channels are low enough, or when the difference between the additional profits from cross-selling of two retailers is sufficiently large. Third, we present an interesting insight: an increase in product return probability or retailer cost of handling a returned product can be beneficial to retailers.

Game-Theoretic Models of Green Products in a Two-Echelon Dual-Channel Supply Chain under Government Subsidies

This paper deals with issues concerning green subsidies of government and optimal decisions of a manufacture and dual-channel retailers in a two-echelon dual-channel supply chain. Both a decentralized supply chain and a centralized supply chain are considered. Sufficient and necessary conditions for guaranteeing that the two supply chains run normally under government subsidies are proposed. For the decentralized supply chain, a three-layer model is constructed according to different priorities of the four participants. Both Bertrand game and Stackelberg game are involved. For the centralized supply chain, a two-layer model is given. Decision models of the government under a financial budget are developed for maximizing the green degree of each case. It is shown that the green degree of the product of the centralized supply chain is always higher than that of the decentralized supply chain. Meanwhile, the total profit of the centralized supply is also higher. Finally, a numerical illustration is presented to visualize the discussed models and make some supplements.