Bait and ditch: Consumer naïveté and salesforce incentives

We analyze a model of price competition between a transparent retailer and a deceptive one in a market where a fraction of consumers is naïve. The transparent retailer is an independent shop managed by its owner. The deceptive retailer belongs to a chain and is operated by a manager. The two retailers sell an identical base product, but the deceptive one also offers an add‐on. Rational consumers never consider buying the add‐on while naïve ones can be “talked” into buying it. By offering the manager a contract that pushes him to never sell the base good without the add‐on, the chain can induce an equilibrium in which both retailers obtain more‐than‐competitive profits. The equilibrium features price dispersion and market segmentation, with the deceptive retailer targeting only naïve consumers whereas the transparent retailer serves only rational ones.     

The impact of corporate social responsibility associations on trust in organic products marketed by mainstream retailers: a study of Italian consumers

This paper investigates the determinants of consumer attitudes toward organic products marketed by mainstream retailers under a private label. Since organic products are credence goods, consumers cannot directly verify whether these products comply with official standards. Organic labels are the primary source of consumer trust in organics, but these labels must be noticed and understood before consumers will actively seek them out. In that some consumers may not prioritize product labels when they shop, it is sometimes up to retailers to strengthen consumer trust. Within the antecedents of this trust, we isolated the contribution of the corporate social responsibility associations held by consumers about retailers. We surveyed Italian customers interested in organics and found that they are more likely to trust the private‐label organic products sold by a retailer when it is considered socially responsible. Our results also show that consumer trust translates into brand loyalty and a willingness to pay a premium price for organic products. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.     

Direct Marketing in Oligopoly

We consider a game in which symmetric manufacturers decide whether to set up sites (e.g., web sites) where consumers can buy their products directly. Following this decision, the manufacturers choose quantities to sell to the retailers, and then the manufacturers with direct‐sales sites and retailers choose quantities to sell to the consumers. We show that since an increase in the number of retailers may drive the direct‐selling manufacturers from the retail market, it may raise the retailers’ profit and reduce social welfare. Finally, we discuss two cases: an oligopolistic wholesale market and a market with price competition and differentiated products.     

Unlimited shelf space in Internet supply chains: Treasure trove or wasteland?

Internet retailing offers merchants limitless shelf space. This has led experts to highlight the existence of a “long tail” of offerings on the web and assert that the future of online business is “selling less of more.” However, it is difficult for Internet retailers of physical goods to sell a large scope of products without having to handle potentially large amounts of product returns from customers. This is due to the fact that customers can and do get overwhelmed by excessive product variety and often make erroneous purchasing decisions. We shed light on this issue through an assessment of theoretical predictions based on data from sales and returns of almost 7000 products in a particular product category. While retailers can benefit from expanding the scope of their inventories to generate Internet sales, the success of this strategy will depend on the control of unjustified product returns by consumers and the management of recurrent execution errors and product fit failures in transactions with customers. Furthermore, from our results, the gains that this strategy will bring to retailers will be bound by the amount of time products have been available on the Internet retailer's site, as well as by other attributes such as product price and size.     

Product Differentiation by Competing Vertical Hierarchies

We revisit the choice of product differentiation in the Hotelling model, by assuming that competing firms are vertically separated, and that retailers choose products' characteristics. The “principle of differentiation” does not hold because retailers with private information about their marginal costs produce less differentiated products in order to increase their information rents. Hence, information asymmetry within vertical hierarchies may increase social welfare by inducing them to sell products that appeal to a larger number of consumers. We show that the socially optimal level of transparency between manufacturers and retailers depends on the weight assigned to consumers' surplus and trades off two effects: higher transparency reduces price distortion but induces retailers to produce excessively similar products.     

基于策略型消费者的预售策略研究

季节性易逝品的销售期短,并且残值低,这类产品可以采用预售策略.考虑消费者估价不确定性及消费者的策略性行为,对预售策略的定价及库存进行了研究.同时优化了预售价格及实物销售价格,得到了当消费者的估值分布满足一定的条件时的最优价格,并通过建立报童模型,得到了最优的产量及利润.通过预售与不预售两种策略的比较,得到了销售商采取预售策略的充分条件.最后,对模型进行了数值分析.     

The role of physical distribution services as determinants of product returns in Internet retailing

Pressure continues to build on Internet retailers to squeeze out inefficiencies from their day-to-day operations. One major source of such inefficiencies is product returns. Indeed, product returns in Internet retailing have been shown to be, on average, as high as 22% of sales. Yet, most retailers accept them as a necessary cost of doing business. This is not surprising since many retailers do not have a clear understanding of the causes of product returns. While it is known that return policies of retailers, along with product attributes, are two important factors related to product return incidents, little is known about which aspects of the online retail transaction make such a purchase more return-prone. In the current study, we seek to address this issue. We use a large data set of customer purchases and returns to identify how process attributes in physical distribution service (PDS) influence product returns. The first attribute involves perceptions of scarcity conditions in inventory availability among consumers when retailers reveal to consumers information on inventory levels for the products that they intend to buy. Our results show that orders in which items are sold when these conditions are revealed to shoppers have a higher likelihood of being returned than orders in which these conditions are not revealed. While prior research has argued that inventory scarcity perceptions have an effect on purchases, our findings suggest that they are also related to the likelihood of these purchases being returned. The second attribute involves the reliability in the delivery of orders to consumers. We find that the likelihood of orders being returned depends on the consistency between retailer promises of timeliness in the delivery of orders and the actual delivery performance of the orders. Moreover, we find that the effect that consistency in the delivery has in the likelihood of returns, is stronger for orders that involve promises for expedited delivery than for orders with less expeditious promises. That is, although the occurrence of returns depends on the delays in the delivery of orders to consumers relative to the initial promises made by the retailers, this effect is more notable for orders that involve promises of fast delivery.     

消费者跨渠道搭便车意愿的驱动因素分析

在多渠道环境下,消费者利用一家离线零售商来搜集信息或评估产品,然后转换到另一家在线零售商来实现其购买决策。通过实证方法分析可能会引起消费者在购买决策过程中转换渠道的驱动因素。其中,推动作用包括消费者使用多种渠道的自我效能;拉动作用,即竞争对手的在线零售商的吸引力,两者对搭便车意愿都具有正面影响。然而,系泊作用,即零售商锁定,对跨渠道搭便车意愿具有负面影响。     

“When Should Manufacturers Want Fair Trade?”: New Insights from Asymmetric Information when Supply Chains Compete

We study a model of competing manufacturer/retailer pairs where adverse selection and moral hazard are coupled with promotional externalities at the downstream level. In contrast to earlier models mainly focusing on a bilateral monopoly setting, we show that with competing brands a ‘laissez‐faire’ approach towards vertical price control might not always promote productive efficiency. Giving manufacturers freedom to control retail prices is more likely to harm consumers when retailers impose positive promotional externalities on each other, and the converse is true otherwise. Our simple model also suggests that, with competing supply chains, consumers and manufacturers might prefer different contractual modes if promotional externalities have substantial effects on demands.     

Consumer evaluations of store brands: Effects of product-perceived risks

The significance of retail store brands has increased. However, despite the emergence of numerous exclusive retail products, not all of them achieved success. Seemingly, retailers have a shortsighted comprehension of the different risks related to including new categories of products to the store brands. This research analysis investigates how various categories of perceived risks connected with attributes, products, and atmosphere of stores impact consumers’ evaluation of store-branded products. A developed and tested structural model gave indications of the probability of consumers’ evaluations of store brands. The research discovered various perceptions of store brands among the respondents. Also, one of the research results found different perceptions among users and non-users of store brands.     

非缺陷退货情形下的供应链协调

非缺陷退货指的是没有功能或质量上的缺陷却被客户退给零售商的产品.非缺陷退货造成的成本相当惊人,且主要由生产商承担,然而,减少非缺陷退货则主要靠零售商的努力和投入.本文研究了怎样通过供应链协调来减少非缺陷退货.本文介绍国外学者提出的一种“目标补偿”合同,即当非缺陷退货量低于某一特定目标值时,生产商将对低于目标值的每单位非缺陷退货量支付一定的补偿金.这种合同能有效地激励零售商加大努力来降低非缺陷退货,从而提高整条供应链的期望利润,研究表明,该合同在大多数情形下是Pareto改进的,在某些情形下对生产商和零售商都有利.     

Efficient Consumer Altruism and Fair Trade Products

Consumers have shown a willingness to pay a premium for products labeled as “FT” and a preference for retailers that are seen to be more generous to their suppliers/employees. A FT product is essentially a bundle of a base product and a donation to the supplier (e.g., a coffee farmer). An altruistic rational consumer will only choose this bundle if doing so is less expensive than buying the base product and making a direct donation. For FT to be sustainable either in a competitive equilibrium or in a monopolistic environment this bundling must yield an efficiency. This efficiency is generated in the following context. A supplier’s investment reduces the retailer’s cost or boosts the final product’s quality, but this investment is not immediately observable and cannot be enforced, hence there exists a moral hazard problem. In this environment, the altruism of the consumer can facilitate a more efficient contract: by paying the supplier more the retailer can both extract more consumer surplus and increase the level of contracted investment, while preserving the supplier’s incentive compatibility constraint. We assess our model in the context of the coffee industry.     

A Study of Vertical Integration and Vertical Divestiture: The Case of Store Brand Milk Sourcing in Boston

This article investigates whether a retailer’s store brand supply source impacts vertical pricing and supply channel profitability. Using chain‐level retail scanner data, a random coefficients logit demand model is estimated employing a Bayesian estimation approach. Supply models are specified conditional on demand parameter estimates. Bayesian decision theory is applied to select the best fitting pricing model. Results indicate that a vertically integrated retailer engages in linear pricing for brand manufacturers’ products while competing retailers make nonlinear pricing contracts with brand manufacturers for branded products and store brands. A simulated vertical divestiture based on real world events provides evidence for improved channel efficiency.     

Streets, Malls, and Supermarkets

We develop a model of competition between shopping centers, comparing competitive outcomes in three alternative modes of retail organization, namely: streets (in which neither developers or retailers internalize agglomeration effects between products); malls (in which developers internalize); and supermarkets (in which both developers and retailers internalize). For a fixed number of centers: (i) converting streets to malls intensifies developer (but not retailer) competition, which increases product range (i.e., the number of shops built by the developers) and consumer surplus, reduces profits, and has ambiguous effects on welfare; (ii) converting streets to supermarkets intensifies retailer and developer competition, has ambiguous effects on product range (number of shops), reduces profits, and increases social welfare. With free entry both conversions reduce the number of centers and, if there is excess entry, conversion to supermarkets (but not malls) unambiguously increases welfare.     

Retailers’ incentives for green investment in differentiated competition channels

With increasing public environmental awareness, green activities in retail and distribution processes have become crucial tools for retailers to boost demand and enhance competitiveness. This study develops an analytical model to study the green investment choices of two differentiated retailers dealing with a common green manufacturer. It also explores the impacts of these investment choices on the manufacturer's operational decisions, channel efficiency, consumer welfare, and the environment. We derive three main results. First, the powerful retailer always favors green investments, whereas the less powerful (inferior) retailer may either prefer or avoid green investments. The fiercer the inter-retailer competition, the lower the willingness of the inferior retailer to introduce green investments. Second, although all supply chain parties may disagree on their preferences for retailers' green investments, a bilateral green investment (i.e., both retailers make green investments) can reach an incentive alignment for all firms if the differentiation between retailers is low enough and the competition between them is not substantially fierce. Moreover, a bilateral green investment improves consumer welfare and channel efficiency because of the great demand expansion and double marginalization reduction. Third, the retailers' green investments can motivate the manufacturer to produce greener products, but they do not necessarily benefit the environment. We show that the supply chain's economic sustainability aligns with its environmental sustainability only if the environmental improvement efficiency of green investments is substantially high. We further examine the impact of retailers with differentiated green investment abilities and the manufacturer's green investment efficiency to verify the robustness of the main results.     

On the corporate use of green bonds

When do wholesalers issue green bonds to finance their socially responsible activities instead of charging a premium for the products they produce? We show that in less competitive retail markets when retailers can “skim” more of the premium that end consumers pay for socially responsible products, green bonds provide additional funds to help cover the cost of a wholesaler's socially responsible activities. Similar incentives arise if the wholesaler's input is a small component of the end consumers’ product, or if it is difficult for end consumers to identify the wholesaler's socially responsible activities.     

Resale price maintenance in a model of consumer search

A retail search model of Salop and Stiglitz (1977) is adapted to analyze manufacturer incentives for resale price maintenance. For some retailer cost functions and distributions of consumer search costs, imposition of a minimum price for retailers causes a price distribution to collapse to an intermediate price. Manufacturers may benefit from price floors when sales to high-search-cost consumers that have obtained lower prices increase sufficiently so as to offset decreased sales to other consumers facing higher prices. In contrast to previous work, no free-riding problem with respect to dealer services is necessary for manufacturers to prefer banning discounting of their products.     

Integration of the Kano and QFD model in health food development: using black beans as examples

This study applied the Kano two-dimensional quality model and quality function deployment (QFD) to develop the black bean’s reputation as a health food and identify quality attributes of consumers’ needs in order to effectively control the attributes. This study first conducted a literature review and summarized the product’s quality attributes and then carried out expert interviews to determine health food quality attributes and consumer need quality attributes. A questionnaire survey was conducted to discuss which quality attributes of black beans consumers perceived to be important when they were presented as a health food and classify their answers using the quality attributes in the Kano model in order to effectively control consumers’ needs. Consumers’ demand for quality attributes was transformed into a technique of product quality development. In a matrix of the two constructs, quality classification of health food in the Kano model and order of consumers’ satisfaction with eating types of health food products, quality factors were transformed into technical specifications of product development for QFD and the construction of the first-stage of the House of Quality matrix. The results serve as references for companies to effectively distribute resources and establish strategies of product development, enhance product quality and consumer satisfaction, reduce product development time, and increase the success rate of products in the market. The results contribute to the health food enterprises are not only can make profit of product but also meet customers’ need.     

考虑强势零售商压价和投资行为的供应链协调

中国流通产业的零供矛盾日益凸显,针对强势零售商的压价问题构建博弈模型并分析其对供应链协调的影响。在由单制造商和单零售商构成的二级供应链中,考虑零售商在主导产品零售价格的同时,通过增加广告投入或提高服务水平等市场投资措施刺激产品需求,探讨当零售商运用其较强的议价能力对制造商提出的批发价进行强制压价时,双方如何通过合作博弈寻找最佳策略。发现在一定的条件下,强势零售商的压价行为不仅可以提升品牌商誉,更能帮助实现供应链协调。     

Sustainable Development in Retailing: What is the Impact on Store Choice?

Sustainability is gaining ground in the food retail industry. But empirical studies on sustainable development in retailing are rare when it comes to highlighting the customer's perspective. This paper investigates the impact of sustainability initiatives on store choice. We report from a web‐based conjoint experiment with 153 customers from Austria, Germany and Switzerland and investigate 1224 choice‐decisions conducted between June and October 2009. We find that sustainability is more than a soft topic and has a hard impact on customers’ store choice. In particular we show that price is not of paramount importance when it comes to store choice, and if retailers consider different sustainability measures they can have a positive impact on store choice. We propose that retailers incorporate matters of sustainability in general management and performance‐oriented management. Further, more detailed implications apply. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment