Quality-adjusted price comparison of non-homogeneous products across Internet retailers

This study compares prices offered by multiple Internet retailers. This task is challenging because e-tailers cannot present their entire assortments to each consumer. Therefore, the quality of the product assortments presented by different e-tailers to each consumer is not directly comparable on an item-by-item basis, resulting in non-homogeneous offerings across retailers. We further consider the interaction between retailers (product information presentation format) and consumers (product information search strategies), which makes price comparisons among the retailers even more non-homogeneous. To grapple with this quality-adjusted price comparison problem for non-homogeneous products, we use a stochastic-frontier hedonic-price regression model to find the “lowest” theoretical price for a product given its characteristics. We then assess the price efficiency of the product as the ratio between this lowest price and the offered market price. This framework allows for the comparison of retailers in their ability to offer the “best deals” even when their actual assortments are not directly comparable in quality. Moreover, this framework provides Internet retailers with a relative measure of price efficiency. This helps them understand when and where they offer competitive prices to consumers. We illustrate our approach empirically in a comparison of price efficiency among three major Internet travel agents on a sample of posted itineraries and airfares. Furthermore, we demonstrate that the price efficiency of an Internet travel agent depends on the format of its website and on consumers' search strategies.     

The effects of wait expectations and store atmosphere evaluations on patronage intentions in service-intensive retail stores

Many factors, both obvious and subtle, influence customers’ store patronage intentions. Using videotape technology that enabled us to experimentally manipulate the number of visible store employees, number of customers, and music, we test the relative importance of wait expectations and store atmosphere evaluations on patronage intentions. These constructs are found to be critical antecedents of store patronage intentions in the context of the service-intensive retail store at which the model was tested. We also find support for the direct effects of gender on wait expectations and store atmosphere evaluations. We discuss some implications for retailing research and practice.     

The impact of external reference price on consumer price expectations

Comparative pricing practices are frequently used where actual product prices are accompanied by higher external reference prices. All types of stores, regular-price department stores as well as discount stores, use comparative price claims to frame price deals as attractive [Marketing Science 4 (1985) 199]. In this paper, a quadratic model is specified for the impact of external reference price (ERP) on consumer price expectations. Based on the research on communication discrepancy and advertising claim discrepancy, which in turn draw on assimilation-contrast, attribution, and prospect theories, we hypothesize a quadratic effect of external reference prices on consumer price expectations. An interactive, computer-controlled experiment using multiple levels of ERP is used to estimate the proposed model. As hypothesized, support for an inverted U-shape relationship is found between consumers’ updated price expectations and the difference between ERP and initial price expectations. That is, as the difference between ERP and subjects’ initial price expectations increases, subjects’ updated price expectations increase to a point and then start to decrease. We find that the fit of the quadratic model specification for the effect of external reference price on price expectations is noticeably superior to that of linear, logarithmic, square root, and S-shaped specifications. Finally, we provide implications of our results for both retail managers and for regulatory authorities alike.     

Price-matching guarantees as signals of low store prices: survey and experimental evidence

Many retailers offer a price-matching guarantee that promises to pay consumers the difference if they find a lower price elsewhere. This article proposes that the effectiveness of a price-matching guarantee as a signal of low store prices depends on individuals’ beliefs about the degree to which other consumers in the market engage in price search, enforce price-matching guarantees, or both. Consistent with signaling theory, results of a survey and two experimental studies demonstrate that market level factors affect consumer beliefs about the extent to which others engage in price search and thereby the effectiveness of price-matching guarantees in lowering perceptions of store prices. The implications of the findings for retail strategy are discussed along with directions for future research.     

Revisiting the showrooming effect on online and offline retailers: The strategic role of in-store service

This study revisits the showrooming effect on online and offline retailers and is the first to examine the strategic role of in-store service in this regard. Considering the effect of in-store service in attracting consumers to offline channels and the showrooming effect of persuading offline consumers to purchase online, we propose a model consisting of two firms, a brick-and-mortar (BM) store and an e-tailer that can invest the staff or facilities necessary to deliver in-store services to consumers. Based on the service decisions, the two firms make their pricing decisions. We compare the optimal decisions of retailers in the cases without and with showrooming to explore the interaction between in-store service and showrooming. Our findings indicate that when a customer bears a high travel cost to visit the BM store, the store should lower the price, and improving the in-store service is ineffective in countering the consumer's showrooming behavior. Moreover, the service level in the case with showrooming can be either higher or lower than in the case without, and the outcome mainly depends on the efficiency of the service investment. Interestingly, in-store services can lead to a win–win situation for both online and offline retailers with showrooming. This study can also be extended to the case of powerful e-tailers or competing BM stores.     

Prime time: The strategic use of subconscious priming to enhance customer satisfaction

A growing body of work explores how priming goals in the subconscious can improve employee productivity. Likewise, practitioners and scholars are seeking strategies and techniques for improving customer effectiveness in performing the roles they play as partial employees in their service experiences. The purpose of this article is to present the rationale and logic underlying subconscious goal setting, its application for improving customers’ success in their service experiences, a proposed typology of priming cues to illustrate how customers’ time spent waiting can be used to enhance their ability to successfully perform their co-production roles, and strategies organizations can use to improve customers’ performance in obtaining their expected service experience.     

基于抵消性权力的家电产品价格机制动态博弈分析

我国家电产品零售价格一直持续下降,有学者认为其原因为巨型零售商向消费者让利,并用抵消性权力理论给出了解释。然而"让利给消费者"并非是巨型零售商获取最大利润的必经之路,它们完全可以通过与家电制造商签合理的定价协议以获取最大收益。本文给出了家电零售价格下降的另一可靠的说法:家电价格下降并非家电零售巨头主动让利给消费者,而是零售巨头对制造商的压制,使价格机制在"上游制造商——下游零售商——消费者"这一个整体系统中运作,其中存在于这个系统中的那些零散的小型零售商对最终零售价的下降起了关键作用。     

The competitive impact of service process improvement: Examining customers’ waiting experiences in retail markets

In this paper, we investigate the impact of a service process improvement in front-end retail operations on the waiting experiences of shared customers, that is, those customers who patronize a retailer as well as its competitors. Our findings from two studies—a field study and a controlled laboratory experiment—suggest that while customers’ waiting time perceptions are independent across competing firms, their waiting time satisfaction is interdependent. As a result, the impact of a retailer's service improvement initiative that reduces waiting times is not merely local to the retailer but propagates to its competitors through its shared customers. Specifically, such an improvement not only raises shared customers’ satisfaction with the focal retailer, it also concurrently lowers their satisfaction with the retailer's competitors. By implication, current approaches that assess the impact of a service process improvement by just measuring the difference in customer satisfaction before and after the improvement may be underestimating the true impact of such improvements.     

Utilitarian and Hedonic Motivators of Shoppers’ Decision to Consult with Salespeople

Many retailers face the questions of whether providing consultation services would enhance store performance and, if so, what the retailers could do to increase the number of shoppers seeking salesperson consultation. Despite its importance, prior research has not answered the question of what influences retail shoppers to consult with salespeople. We use motivation theory and recent theorizing on behavioral decision-making to develop a model of four utilitarian and hedonic motivators of shopper consultation with salespeople. This model, which includes the relationship between consultation and amount of money spent by shoppers, was tested with data from 425 shoppers. Our results demonstrate situational and individual influences, both utilitarian (i.e., shoppers’ purchase uncertainty and efficiency orientation) and hedonic (i.e., shoppers’ situation-related affect toward salespeople and shopping enjoyment), that prompt retail shoppers to consult with salespeople. As well, we find that salesperson consultation is positively related to the amount of money spent by shoppers and completely mediates the spending effects of the four motivators of consultation. This research shows that motivation theory is useful for better understanding salesperson consultation and can assist retailers that compete on service to better implement consultation-oriented strategies.     

Product returns on the Internet: A case of mixed signals?

In two studies, we investigate the interrelationship between return policy leniency and retailer quality. In the first study, we content analyze the return policies of e-tailers randomly selected from those listed at BizRate.com. Then we relate the return policy characteristics to these quality ratings. Consistent with signaling theory, we find that as the ratings of e-tailer quality increase, return policy leniency increases in non-consumable product categories. However, the positive quality/return policy leniency relationship does not hold in consumable product categories. In a follow-up experiment, we investigate how consumers interpret the return policy signal. Specifically, we find that consumers' ability to control their shopping experience and their general trust of e-tailers moderate their reactions to return policies that differ in leniency. Finally, we discuss the theoretical and managerial implications of this research.     

Order management for profit on the Internet

To succeed, Internet retailers must make a profit on the goods and services they sell. But e-tailers are still searching for strategies that work. To test current practices, we became “phantom shoppers” and bought a randomly chosen set of CDs from a variety of Internet retailers. Our findings suggest that order management and logistics skills are pivotal for selling profitably on the Internet. In this article, we show how Internet retailers can deploy resources creatively to attract the right shoppers, convert these shoppers into buyers, and improve the chances of repeat purchase while maintaining profit margins.     

Retailers and Consumers: The Pass‐through of Import Price Changes

In this paper, we estimate pass‐through rates of import price changes to retail prices across retailers and consumers for apparel purchases in Germany for the period of 2000–07. We find that high‐price retailers do not pass through changes in the import price. Pass‐through rates for low‐price retailers are 53 per cent within three months. Consequently, pass‐through rates for low‐income households are 58 per cent, significantly larger than those for high‐income households. We then present one possible explanation for these observations in a theoretical model with endogenous vertical product differentiation due to bundling an ex ante homogeneous import goods with services. Following an import price change, retailers who sell a cheaper unbundled product change prices to a greater extent than retailers who sell a higher‐priced bundle of product and service.     

Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters

Despite retailers’ intense use of both price cuts and store flyer advertising, it is still unclear whether and when it is beneficial for retailers to combine the two promotion tools at the same time as opposed to using them separately. We systematically investigate synergies between price cuts and store flyers for a broad set of 488 brands from 44 consumer packaged goods categories across six leading German retailers. We find that a clear majority of the brands benefit from positive synergies and hence, combining price cuts and store flyer advertising is recommended, especially at supermarkets. This synergy can be strong. For instance, a 15 % price cut without store flyer support at a supermarket, on average, increases sales by 11 %, and medium spending on store flyers for the brand at its regular (non-promoted) price results in a sales lift of 8 %. The combined use of both tools, however, increases sales by 52 %, much more than the sum of their separate effects (11 % + 8 % = 19 %). Yet, there is also substantial variance in the synergy, which we explain with retailer format (supermarkets versus discounters) as well as various brand and category characteristics. Our findings have important implications for the coordination of promotion activities by retailers.     

Customers�� zone of tolerance for retail stores

The present study describes the zone of tolerance for customers’ service expectations and determines their satisfaction level for retail stores. It attempts to diagnose the service quality level of customers’ in retail store setting. A conceptual model RETZOT is presented in this study, and the results demonstrate that evaluation of services can be scaled according to different types of expectations—‘desired’ and ‘adequate’—and that customers use these two types of expectations as a comparison standard in evaluating retail store services. The findings reveal that customers have a narrow zone of tolerance with regards to the services provided by retail stores.     

Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences

This paper considers a dual-channel supply chain network consisting of multiple competing manufacturers, multiple competing retailers and multiple demand markets. Each manufacturer produces and distributes his products via direct e-commerce channel along with traditional physical channel. The manufacturers also provide services for the consumers in both channels, while the retailers only offer offline services to the consumers. On this basis, a dual-channel supply chain network equilibrium model with pricing and service decisions are established based on variational inequality theory. Nash equilibrium solutions are obtained by modified projection and contraction method. Combined with numerical examples, we analyze the impact of three critical factors on the equilibrium states and profits. Some interesting managerial insights are derived. We find that the profits of the manufacturers decrease (increase) in the raw material conversion ratio under single channel case (dual-channel case), while the increase of the raw material conversion ratio always benefits the retailers and the whole dual-channel supply chain network; the service level in each channel is positively correlated with its transaction volume. There are significant inconsistencies among the best combinations of cross-channel price coefficients between two channels for the manufacturers, the retailers and the whole dual-channel supply chain network. The same equilibrium decision (service level, price) or profit may exhibit the opposite changing trend with respect to cross-channel price coefficients under two cases of active e-commerce transaction and inactive e-commerce transaction. When the introduction of e-commerce channel can bring more profits for the whole dual-channel supply chain network, the manufacturers should provide reasonable allocation schemes of profit increment for the retailers to satisfy their participation constraints.     

The Drivers of E-tailers' Price Levels

One of the most important topics in online pricing is understanding the drivers of online price levels for different types of retailers, in order to better understand competition across retail channels. We developed a conceptual framework and conducted an empirical analysis on price levels in the books category among different e-tailers (pure play and multichannel) in Italy and obtained a dataset comprising 5,400 price quotes during 2002. We ran a correlation analysis that showed that e-tailer graphics, branding and trust, and shipping services are highly correlated to price levels. Moreover, we developed a regression analysis that showed that first impact attributes like graphics and navigability are the most important drivers of online price levels. We identify some areas of future research and offer some managerial insights.     

The battle of traditional retailers versus discounters: The role of PL tiers

For grocery retailers in Europe, intense competition from hard discount formats like Lidl and Aldi is an established part of the competitive landscape. Due to the highly competitive retail environment, traditional retailers’ private label (PL) tiers are now set to become the new battle ground in this competition. This study analyzes how PL tiers (i.e. economy, standard and premium) affect the competition between discounters and traditional retailers. We use a representative UK household panel dataset (2009–2010) for the ready-to-eat cereal and canned soup category, and estimate a demand model for the choice between national brands (NBs) and PL tiers across the top-7 UK retailers. Using our demand estimates, we conduct several counterfactual experiments that predict consumer responses to different strategies of traditional retailers and discounters in their fight for the consumer. In particular, we compare the effectiveness of three types of PLs offered by traditional retailers to fight discounters: economy PLs versus standard PLs versus premium PLs. We find that premium PLs are not very effective strategies for traditional retailers to fight with discounters. On the other hand, economy PLs manage to steal some market share from discounters, but as a downside they also cannibalize traditional retailers’ standard PLs. Standard PLs seem the most effective tool to fight with discounters, since they steal most market share from discounters (and NBs). From the point of view of the discounters, our results indicate that discounters benefit from a further increase in their NB offerings (assortment depth) as well as from a price cut in their own PLs.     

Pricing behavior in the online DVD market

Using a data set with of 5508 observations collected in the online DVD market, we compare the pricing behavior between online branches of multi-channel retailers (MCRs) and online-only retailers. We find that (1) prices by online-only retailers are lower than prices by online MCRs by an average of $1.51 or 6.8 percent; (2) the price dispersion for the popular titles is sharply lower among online-only retailers than that among MCRs online; and (3) online-only retailers change prices more often than online MCRs although price changes by both types are few. The evidence suggests that the pricing efficiency diminishes as the multi-channel retailing format dominates the online retailing market.     

Interactional service failures in a pseudorelationship: The role of organizational attributions

The current research investigates customer responses to interactional service failures, such as a service provider who is rude or inattentive, or unfriendly. We study interactional failures within pseudorelationships, which exist when a customer interacts repeatedly with the same firm but encounters different employees across service occasions. Empirical results demonstrate that customers’ responses to these interactional failures distinguish between the offending employee and the organization. Dissatisfaction with the organization critically depends on the customer's attribution of globality—how widespread the interactional failure is throughout the organization. Globality attributions and dissatisfaction with the organization can be lowered by excellent past experience with the organization; however, that same positive experience increases dissatisfaction with the offending employee. Thus, customers’ discrimination of the organization and employee in a pseudorelationship can work in the organization's favor after an interactional failure, and managing customers’ attributions of globality should be a managerial priority.     

Quality-based Price Discrimination: Evidence from Internet Retailers’ Shipping Options

This paper tests various implications of quality-based price discrimination theory in the context of internet book retailers’ shipping menus. Many internet retailers create quality variants of a homogeneous good by bundling it with several shipping options that differ by delivery time. This practice can allow retailers to extract further surplus from consumers through quality-based price discrimination. We find that the design of shipping menus offered by large retailers is consistent with main implications of quality-based price discrimination theory. Fringe sellers, however, do not appear to engage in price discrimination based on quality.