Optimal Channel Choice Research Articles

The interplay between logistics strategy and platform’s channel structure design in B2C platform market

B2C platforms choose different channel choices and logistics strategies and many platforms changed their channel structures after building platforms’ self-supporting logistics. With the platform’s logistics, some manufacturers adopt the platform’s logistics while others do not. In this paper, we develop a game-theoretic model consisting of a platform, a manufacturer, and consumers to investigate the interplay between the logistics strategy and the platform’s channel choice. In the first stage, the platform decides whether to build its self-supporting logistics and its optimal logistics level. In the second stage, the platform chooses among the marketplace channel, the reselling channel and the hybrid channel. In the third stage, the manufacturer chooses whether to adopt the platform’s logistics if its store exists in the market (under the marketplace or hybrid channel). In the fourth and fifth stages, the manufacturer and the platform make pricing strategies. The results indicate the interplay between the two types of strategies. First, when the platform logistics level is much higher than the third-party logistics, the platform’s optimal channel choice is to operate the hybrid channel. Second, the platform’s channel choice affects the manufacturer’s logistics provider. When the platform logistics level is slightly higher than the third-party logistics level, the manufacturer chooses to adopt the platform’s logistics under the marketplace channel and not adopt it under the hybrid channel. We also find that the platform chooses to build its self-supporting logistics when the third-party logistics level is in the low or medium ranges.

Optimal channel choices and online refund policies in a low-carbon tourism supply chain considering carbon reduction level

With the rapid development of low-carbon tourism and online travel agencies (OTAs), whether to enter OTAs has been a problem faced by tour operators in the context of low-carbon tourism. Besides, if tour operators enter OTAs, whether to provide online refund policies is also a challenge for them. To research whether tour operators should enter OTAs and provide online refund policies, three models are built. Main results reveal that when OTAs charge relatively high annual service fees, tour operators should not enter OTAs. When the annual service fees are relatively low and tourist’s satisfaction rate with tour package from online channel meets the constraint in our models, tour operators will enter OTAs and always provide online refund policies for tourists. Although entering OTAs and providing online refund policies will benefit tour operators and tourists, they will cause the worst impact on the environment. Moreover, when considering the impacts of online reviews, government subsidy and discounted value of the dissatisfied low-carbon tour package, operation strategies of tour operators are still held. When considering the different power structure, tour operators’ optimal channel choice strategies are not changed but optimal online refund policy strategies have changed a lot.

Optimal collection delegation strategies in a retail-/dual-channel supply chain with trade-in programs

A continuous supply of used products ensures large-scale remanufacturing. Manufacturers can delegate used product collection to third-party collectors (3PCs) that provide a trade-old-for-cash (TOC) program, in addition to collecting used products through a trade-old-for-new (TON) program. However, few studies have investigated the interactions between collection delegation and channel structure in a supply chain. To fill this gap, we develop game-theoretic models in a supply chain under traditional retail channel and dual-channel structures to explore whether and when the manufacturer adopts the collection delegation policy and examine the optimal channel choice for trade-ins. Our finding shows that the manufacturer always benefits from collection delegation, but the retailer would be worse off from such delegation in certain cases. To be specific, under the retail channel structure, collection delegation has no impact on the retailer when the salvage value of used products is relatively low, whereas it hurts the retailer when the salvage value is relatively high. However, under the dual-channel structure, collection delegation never affects the retailer. Moreover, we find that the manufacturer's channel choice depends on the consumer acceptance of the direct channel and the salvage value of used products. We further consider the case that the manufacturer does not introduce the TON programs to explore the effects of TON and the case that the new and remanufactured products are sold at different retail prices to examine the equilibrium strategies. Our results can provide useful managerial insights for decisions-makers who face the choice of collection delegation under different channel structures.

Optimal channel decision of retailers in the dual-channel supply chain considering consumer preference for delivery lead time

Facing competition from manufacturers' online direct channels, how retailers make sales channel decisions to increase consumer stickiness has become the core concern of the industry and academia. Empirical research showed that delivery lead time is a key factor that affects consumers' preference for online channels. To analyze the impact of consumer delivery time preference on channel selection and pricing strategy of retailers, consumer delivery lead time preference function was improved from a linear function to an exponential function and consumer demand under the mixed dual-channel supply chain of manufacturer and retailer was derived. Then, the Stackelberg game models under different channel strategies of retailer were established and solved. Results show that consumer preference for delivery lead time has four implications on the channel decision of retailers under manufacturer encroachment in the dual-channel supply chain. First, the dual retail channels strategy is the optimal choice for retailers, and the profit margins that a retailer obtains from dual retail channels supply chain and single online retail channel supply chain will increase as consumers' delivery lead time preference coefficient increases. Second, the optimal pricing of online retail channel and offline retail channel is positively related to consumers' delivery lead time preference coefficient. By contrast, the optimal pricing of online direct channel is negatively related to consumers' delivery lead time preference coefficient. Third, the optimal pricing of online retail channel is higher than that of offline retail and online direct channels. Fourth, a retailer and a manufacturer can adopt a compensation-based whole price contract to address the conflict brought about by the optimal channel choice of the retailer. This study introduces consumer delivery lead time preference into retailer channel decision making and provides a theoretical reference for retailer's mixed channel construction in practice.

Electric vehicle battery capacity allocation and recycling with downstream competition

We study the optimal channel choice and battery capacity allocation strategies of an electric vehicle (EV) manufacturer in the presence of battery recycling. The EV manufacturer also produces EV batteries. As an upstream manufacturer, this firm has the option to supply batteries to its competitor, a downstream EV manufacturer which is unable to produce batteries. We characterise the equilibrium decisions of the two EV manufacturers under different channel structures. One finding is that the optimal channel choice of each EV manufacturer depends on the procurement cost from an external battery supplier. If the procurement cost is moderate, the downstream manufacturer prefers to order from the upstream manufacturer and the upstream manufacturer will supply batteries to satisfy the order. In addition, we investigate the effects of key parameters on the equilibrium capacity allocation decisions and manufacturers’ profits using numerical experiments. We also show that to maximise social welfare, the upstream EV manufacturer should not supply batteries to its competitor if the procurement cost from the external supplier is low, which is contrary to the case of profit maximisation.

Optimal Channel Choice of Firms with New and Remanufactured Products in the Contexts of E-Commerce and Carbon Tax Policy

This paper is motivated by the dilemma faced by firms who sell new and remanufactured products offline that need to consider whether to enter e-commerce platforms considering that more and more consumers are shopping online on e-commerce platforms rather than shopping offline. Our paper aims to help firms with new and remanufactured products make a channel choice and determine product pricing strategies in the contexts of e-commerce and carbon tax policy. Our paper uses optimization theory, game theory, utility functions and profit-maximization models to investigate the optimal channel choice of whether a firm should enter an e-commerce platform; it also investigates the optimal prices of new and remanufactured products and referral fees in two cases—the firm does not enter the platform (N) and the firm enters the platform (Y). Some insights are presented as follows: We found that the firm should enter the platform if the annual service fee is relatively low, otherwise, the firm should not enter the platform. Interestingly, in the case of a firm with an offline store with relatively large operational costs or hassle costs, the firm is more reluctant to enter the platform. In the extension, we considered some consumers who only purchase offline products, and found that the firm considering these consumers is more likely to choose not to enter the platform. Moreover, we argue that the carbon tax policy has a positive effect on product prices but a negative effect on referral fees charged by the platform, and the choice of Y hurts the environment due to a relatively high total carbon emission.

Optimal Channel Choice for Lossy Data Flow Transmission

We consider the optimal control problem for the load of several communication channels defined by independent Markov jump processes. Implicit information on the state of a channel is available in the form of a flow of losses whose intensity is proportional to the controllable load of this channel. The optimized functionals take into account the total throughput of channels and energy costs for data transmission over a fixed interval of time. We obtain optimal filtering equations for joint estimation of channel states. We construct a locally optimal strategy that explicitly depends on the set of state estimates.

Cooperation or Competition? Channel Choice for a Remanufacturing Fashion Supply Chain with Government Subsidy

In this paper, we address the problem of choosing an appropriate channel for the marketing channel structure of remanufactured fashion products. To be specific, we consider a remanufacturer who has two options for selling the products: (1) provide the remanufactured products to a manufacturer, then the manufacturer sells both new products and the remanufactured products to customers, and (2) sell the remanufactured products directly to customers. Because of the relatively low acceptance of remanufactured products and environment consciousness of customers in developing countries like China, we model the two scenarios as decentralized remanufacturing supply chains, with the manufacturer being the Stackelberg leader and the government offering subsidy to the remanufacturer to incentivize remanufacturing activities. We find that the subsidy can incentivize remanufacturing activity regardless of the remanufacturer’s channel choice. A “too high” or “too low” subsidy makes the remanufacturer compete with the manufacturer, and an intermediate subsidy results in cooperation between the two members of the remanufacturing supply chain. Meanwhile, if the customers’ acceptance for remanufactured products is higher, the remanufacturer will be more likely to compete with the manufacturer. However, the remanufacturer’s optimal channel choice may be inefficient in the sense of social welfare and environmental protection.

Optimal Channel Choice under Stochastic Demand with Multiplicative and Additive Shocks

Based on the framework of Stackelberg game, we analyze and compare the optimal channel choices for the manufacturer and the retailer under consignment contract, when the demand is stochastic with uniformly distributed shock in multiplicative and additive forms respectively. We find that the price elasticity, range of demand fluctuation and the revenue sharing ratio affect the optimal channel choices for the manufacturer and the retailer differently under different forms of stochastic demand shocks.

The value of losing control: Competition in markets for complements

AbstractWhen selling complementary products, manufacturers can often benefit from considering the resulting cross‐market interdependencies. Although using independent retailers makes it difficult to internalize these positive externalities, the ensuing double marginalization can mitigate within‐market competition. We use standard game theoretic analysis to determine optimal distribution channel strategies (through independent retailers or integrated) for competing manufacturers who participate in markets for complements. Our results suggest that a firm's optimal channel choice is highly dependent on its competitive positioning. A firm with a competitive advantage in terms of product characteristics (customer preferences) or production capabilities (cost) might benefit from selling through company‐controlled stores, allowing coordinated pricing across the two markets, whereas a less competitive firm might be better off using independent channel intermediaries to mitigate price competition. We consider two scenarios depending on whether the two firms make their distribution channel decisions sequentially or simultaneously. Although firms are unlikely to make such decisions at exactly the same instant, the simultaneous model also serves as a proxy for the scenario where firms decide sequentially, but where they cannot observe each other's strategic channel choices. For the sequential case, we find that the sequence of entry can have tremendous impact on the two firms'profits; whereas in some cases, the first mover can achieve substantially higher profits, we find that when the two markets are of sufficiently different size and only loosely related, a firm with a competitive advantage might be better off as a follower. Interestingly, our results suggest that, when the markets are of rather similar size, both firms are better off if they enter the industry sequentially. In those cases, the first entrant has incentive to reveal its planned channel strategies, and the follower has incentive to seek out and consider this information. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010