Competitive sustainable processes and pricing decisions in omnichannel closed-up supply chains under different channel power structures

In recent years, omnichannel retailing and remanufacturing issues have rapidly emerged in the closed-loop supply chain (CLSC). The omnichannel is a combination of online and in-store retailing, and it affects supply chain relationships and channel power structures by changing value creation processes. It allows consumers a hybrid shopping experience where they can order products online and pick them up in the store or test in-store and buy online (TSBO). Despite this practice, no studies exist on CLSC considering omnichannel retailing under different channel power structures. We investigate the TSBO retailing strategy and its impact on CLSC profit considering price competition between manufacturer and remanufacturer under Manufacturer Stackelberg (MS), Retailer Stackelberg (RS), Vertical Nash (VN), and cooperation (CO) models game settings. In this paper, mathematical models are developed to drive the optimal solution. A two-part tariff coordination mechanism (i.e., IS model) is also used to integrate all supply chain members. The proposed models examine the environmental and social welfare benefits of adopting green innovation products and remanufacturing processes in omnichannel retailing. A numerical study is carried out to illustrate the proposed models' application. The results show that the IS model can synchronize the economic, environmental, and social aspects leading to significant increases in performance. Total supply chain profit under the CO model is the highest. The manufacturer and remanufacturer generate higher profits in the MS model, whereas the retailer makes higher profits in the RS and VN models. When a manufacturer only wants to increase profit with green processes and is not concerned about omnichannel processes, more resources must be allocated for green innovation.     

Interacting with strategic waiting for store brand: Online selling format selection

This paper studies the interaction of online selling format selection with store brand introduction following national brand in the presence of strategic consumers. We find that platform under reselling format prefers the high pricing strategy for national brand while the manufacturer under agency selling format prefers the low pricing strategy. Moreover, highly strategic consumers discourage the platform from introducing the store brand and manufacturer from being the end-seller of national brand. Specifically, when consumers are less strategic, the platform tends to introduce a store brand with similar quality to national brand under reselling format, and a store brand with different quality to national brand under agency selling format. The manufacturer prefers agency selling format when consumers are less strategic; otherwise, reselling format is preferred. The platform and manufacturer can achieve a “win-win” result under agency selling with store brand when consumers are less strategic. However, the reselling format enables the manufacturer to deter the platform from introducing the store brand if the platform raises the accessing fee. We further extend to consider a store brand with quality better than the national brand and show above results remain valid.     

Return freight strategies and selling formats in e-commerce supply chain: The perspective of consumer fairness concerns and online shopping returns

Returns and consumer fairness concerns put a huge pressure on manufacturers who sell their products online. The optimal selling format and return freight strategy become particularly important for manufacturers in an e-commerce supply chain. Therefore, we build game models for the following scenarios under different selling formats: the seller bearing the return freight costs or the return-freight insurance premiums, consumers buying insurance for themselves, and no one buying insurance. By comparing the optimal solutions of the game models under reselling and agency formats, several conclusions are derived. In the agency format, if the return-freight insurance premium is higher than a particular threshold, then the optimal strategy of the manufacturer is to decrease the selling price to encourage consumers to purchase the insurance, otherwise, the manufacturer should purchase the insurance. As the level of consumer fairness concerns and platform commission rates increase, the manufacturer should gradually move from the agency to reselling format. In the reselling format, if the return-freight insurance premium is lower than a particular threshold, then consumers will purchase insurance and this will make the platform more profitable, and conversely, the platform should bear the return freight costs.     

On manufacturers complementing the traditional retail channel with a direct online channel

With the explosion of the Internet and the reach that it affords, many manufacturers have complemented their existing retail channels with an online channel, which allows them to sell directly to their consumers. Interestingly, there is a significant variation within product categories in manufacturer's use of the Internet as a direct distribution channel. The main objective of this study is to examine the strategic forces that may influence the manufacturer's decision to complement the retail channel with a direct online channel. In particular, we are interested in answering the following questions:

1. Why is it that in some markets only a few firms find it optimal to complement their retail channels with a direct Internet channel while other firms do not?
2. What strategic role (if any), does the direct Internet channel serve and how do market characteristics impact this role?

To address these issues we develop a model with a single strategic manufacturer serving a market through a single strategic retailer. In addition to the focal manufacturer's product the retailer carries products of competing manufacturers. Consumers in this market are one of two types. They are either brand loyal or store loyal. The retailer sets the retail price and the level of retail support, which impact the demand for the manufacturer's product. The retailer's decisions in turn depend on the wholesale price as well as the Internet price of the product if the manufacturer decides to complement the retail channel with an online channel. Our analysis reveals that the optimality of complementing the retail channel with an online channel and the role served by the latter depends critically upon the level of support that the retailer allocates to the manufacturer's product in the absence of the online channel. The level of support allocated by the retailer, in the absence of the online channel, depends upon the retail margins on the manufacturer's product relative to that on rival products in the product category. When the size of the brand loyal segment is small relative to the size of the store loyal segment then in the absence of the online channel, the manufacturer can lower wholesale price and enhance retail support, especially when the retail margins on the rival products are low. In contrast, when the size of the loyal segment is large and the retail margins on rival products are high the manufacturer will find it more profitable to charge a high wholesale price even if that induces the retailer to extend low levels of support. If the manufacturer decides to complement the retail channel with an online channel, some consumers who would have purchased from the retailer might prefer to purchase online. Our analysis reveals that when consumers' sensitivity to price differences across the competing channels exceeds a certain threshold it is not optimal for the manufacturer to complement the retail channel with an online channel. However, this price sensitivity threshold itself depends upon product/market characteristics, suggesting that manufacturers seeking to complement their retail channels with an online channel should look beyond the nature of threat the online channel poses to the retail channel in devising their optimal distribution strategies. When the retail margins on rival products are sufficiently small, complementing the retail channel with an online channel when optimal allows the manufacturer to price discriminate and enhance profits. In contrast when retail margins on rival products are sufficiently high, complementing the retail channel with an online channel serves to enhance retail support. We also identify market conditions under which profits of both the manufacturer and the retailer are greater with the online channel than that without it. This is particularly interesting since the online channel competes with the retail channel.     

考虑零售商销售努力的双渠道供应链定价策略研究

随着电子商务市场的日益成熟,制造商建设线上直销渠道来适应新的商品销售环境成为趋势。制造商线上直销渠道的建立占领了部分原本属于线下零售渠道的市场份额,对线下零售渠道造成冲击。针对双渠道供应链中的竞争,将零售商销售努力行为考虑在内,通过构建博弈模型分别研究了在集中决策模式和分散决策模式下,制造商与零售商的定价策略。研究发现,在集中决策模式下,线下零售渠道与线上直销渠道之间的价格差异随着两个渠道潜在需求量之间差异的增大而增大,并且两个渠道的最优价格分别与其市场潜在需求成正比。在分散决策模式下,两个渠道的最优价格亦与潜在需求成正比,并且线下零售渠道的最优价格随零售商销售努力程度的增加而增加,线上直销渠道的最优价格随着零售商销售努力程度的增加而减少。     

Pricing coordination of a dual-channel supply chain considering offline in-sale service

With the rapid development of e-commerce, the problem of pricing conflicts between online and offline channels has become increasingly prominent. And the in-sale service has become an important factor influencing consumers' purchase decisions. To study the impact of in-sale service, this paper establishes a dual-channel supply chain model considering offline in-sale service. Using Stackelberg's game theory and backward induction, it solves the optimal pricing of supply chain members and makes comparisons in both cooperative and non-cooperative situations. Finally, it coordinates the supply chain through a two-part tariff contract. The results show that (1) The optimal wholesale price and offline retail price are positively correlated with in-sale service quality. And the opposite of the optimal online direct selling price. (2) With the quality of in-sale service improving, the retailer's profit will increase and then decrease but the manufacturer's profit will always decrease under non-cooperation. The total profit of the supply chain will rise and then fall under cooperation. (3) The two-part tariff coordination maximizes profits with the manufacturer reducing the wholesale price and the retailer paying a transfer cost. (4) Cooperative decision is better than the non-cooperative decision in terms of the supply chain as a whole.     

Price and quality decisions in a vertically-differentiated supply chain with an “Online-to-Store” channel

Because of the prevalence of “Online-to-Store (OS)” channel, customers can purchase differentiated products online and pick up in-store. We develop a Stackelberg game-theoretic model to study the impact of an OS channel on quality levels, demands, prices, and profits of a manufacturer and a retailer in a supply chain. We assume that the retailer acts as a Stackelberg leader, and the manufacturer acts as a Stackelberg follower. The manufacturer produces and sells two products with vertically-differentiated quality levels to the retailer who in turn sells the products to customers through a Store channel, an Online channel, or an OS channel. The retailer incurs a handing cost if the OS channel is available, and consumers bear a shipping cost and a transaction cost when the products are purchased from the Online and Store channels, respectively. We find that the manufacturer should reduce both products’ quality levels and wholesale prices, whereas the retailer can increase the selling prices for a relatively small shipping cost and a not too small handling cost. When the products are available both online and in-store, however, the quality levels, wholesale prices and selling prices might increase for a small shipping cost and a not too small handling cost. Compared to the case in which both products are available online only with the OS channel, adding the Store channel is always beneficial for both parties. The intuition behind these results hinges on the trade-off between the handling cost and the increased market demand for the retailer. Moreover, the quality levels, the wholesale prices of both products, and the selling price of the low-quality product would decrease, while the selling price of the high-quality product increases for a sufficiently low transaction cost and a not too small shipping cost.     

Decomposing the effect of advertising: What happens in the retail channel?

The diverging interests of manufacturers and retailers famously give rise to the double marginalization problem but have consequences far beyond pricing. Advertising is another marketing instrument that is under the control of the manufacturer but its ultimate effect on consumer demand also depends on retailers’ pricing decisions. We decompose the effect of advertising in the channel and highlight an additional route through which advertising affects sales, namely via the changes in the retail price that a strategic retailer makes in response to changes in demand following manufacturer advertising. The total demand effect of advertising thus comprises the direct effects of advertising on market shares, and the indirect effects coming through adjustments that the retailer makes to the in-store prices of all the brands in a given product category in response to the shifted demand due to advertising. We match advertising data for four different categories (both food and non-food) to store-level scanner panel data, which also include information on wholesale prices. Controlling for wholesale prices, we establish in a reduced-form model that the retailer reacts to manufacturer advertising by changing retail prices instead of simply imposing a constant markup on the wholesale price. To further explore the role of the strategic response of the retailer in a systematic fashion and quantify the effects derived in the decomposition, we estimate a discrete-choice model of demand and determine the magnitude of the direct and indirect effects. We find that the indirect effect of advertising through retailer prices is about half the size of the direct effect, and thus substantively affects advertising effectiveness.     

Empirical investigation of channel reactions to brand introductions

We investigate how incumbent manufacturers and retailers alter their pricing behavior in response to new product introduction. In performing our analysis, we need to be cognizant of the fact that the observed price changes can be due to entry-induced changes in a) demand conditions or b) costs or, on the other hand, to the competitive behavior of c) manufacturers and/or d) the retailer. In order to separate these four changes, we posit that manufacturer and retailer pricing is an outcome of maximizing a combination of shares and profits. This enhanced objective function allows us to measure competitive conduct benchmarked as less or more competitive than under the Bertrand-Nash framework. Our empirical analysis is based on the toothpaste category for the time period January 1993–February 1995. During this period, there were three brand introductions in two rounds of entry. Using the estimates from the demand and the supply model, we compute the changes in the retail and wholesale prices that are attributable to changes in demand conditions, manufacturer and retailer competitive conduct, and cost changes. These results support our conjecture that inferring the change in conduct solely based on a change in observed prices is likely to be erroneous. For the first new brand entry, we find that the brand introduction did not significantly increase competition between manufacturers. As a result, the balance of channel power between the manufacturers and the retailers remained unaltered. Both retailer and manufacturer profit margins increased after the first entry. However, subsequent to the second entry, retailer share of channel profits increased at the expense of the manufacturers; manufacturers even saw a decline in their absolute profit margins. We believe that this research will provide insight for manufacturers and retailers regarding how the various channel participants are likely to react to new product introduction. Furthermore, policymakers interested in understanding competitive reactions to new product introduction should find this research useful.     

Online and offline retailing: What we know and directions for future research

The fast-paced growth of e-commerce is rapidly changing consumers’ shopping habits and shaping the future of the retail industry. While online retailing has allowed companies to overcome geographic barriers to selling and helped them achieve operational efficiencies, offline retailers have struggled to compete with online retailers, and many retailers have chosen to operate both online and offline. This paper presents a review of the literature on the interaction between e-commerce and offline retailing, highlighting empirical findings and generalizable insights, and discussing their managerial implications. Our review includes studies published in more than 50 different academic journals spanning various disciplines from the inception of the internet to present. We organize our paper around three main research questions. First, what is the relationship between online and offline retail channels including competition and complementarity between online and offline sellers as well as online and offline channels of an omnichannel retailer? Under this question we also try to understand the impact of e-commerce on market structure and what factors impact the intensity of competition /complementarity. Second, what is the impact of e-commerce on consumer behavior? We specifically investigate how e-commerce has impacted consumer search, its implications for price dispersion, and user generated content. Third, how has e-commerce impacted retailers’ key managerial decisions? The key research questions under this heading include: (i) What is the impact of big data on retailing? (ii) What is the impact of digitization on retailer outcomes? (iii) What is the impact of e-commerce on sales concentration? (iv) What is the impact of e-commerce and platforms on pricing? And (v) How should retailers manage product returns across online and offline channels? Under each section, we also develop detailed recommendations for future research which we hope will inspire continued interest in this domain.     

Do channel members value the multiple-cooperation strategy?

When the manufacturer distributes his products through online and traditional channels, what type of innovative marketing strategy can be utilized to solve the channel conflict and improve the performances of all channel members? Our research addresses this important question by initiating a triple cooperative strategy for channel members to employ in a manufacturer – retailer dual-channel supply chain. Our results show that when the product is less compatible with online channel than with traditional channel, channel members can utilize a triple cooperative strategy to improve channel coordination and their individual performances effectively and efficiently. First, the manufacturer can utilize supportive retail sales effort as a valuable coordination mechanism to improve the performances of all channel members in the dual-channel distribution. Second, a channel coordinative price strategy can be utilized to further improve the performance of whole channel. Finally, a profit sharing mechanism is needed to create a Pareto result for both the manufacturer and the retailer. Furthermore, we extend our model to study the value of triple cooperative strategy in a manufacturer – two competitive retailers supply chain and derive the optimum marketing strategy.     

Efficient replenishment in the distribution channel

Efficient replenishment (ER), a business process that involves the reduction of order cost to facilitate deliveries of goods from the manufacturer to the retailer, is becoming increasingly important in distribution channel management. While a well-executed ER program is expected to lower total channel costs and increase channel profit, very little is known about how this incremental channel profit is distributed between the manufacturer and the retailer and how it varies across the two common channel relationship structures, retailer price leadership and manufacturer price leadership.In this paper, we develop the conditions under which the manufacturer and the retailer gain more or less from the adoption of ER based on a game theoretic channel model of bilateral monopoly under the two channel relationship structures. We develop analytic results on the impact of ER on purchase quantity, price and the distribution of profits in three cases, namely, (1) when only the retailer adopts ER, (2) when both the manufacturer and the retailer adopt ER, and (3) when the manufacturer and the retailer are vertically integrated in the distribution channel, which adopts ER.The results, which can be generalized for all demand functions, show that the manufacturer benefits from the retailer's adoption of ER only when the manufacturer's holding cost relative to the retailer's is sufficiently large, relative to its order cost relative to the retailer's. By adopting ER, the retailer gains more than what the manufacturer gains even if the manufacturer is the price leader. Both the parties are likely to gain more if they both adopt ER than if only the retailer adopts ER. The incremental channel profit due to the retailer's ER adoption is highest in a vertically integrated distribution channel and is greater in a retailer-led channel relationship than in a manufacturer-led relationship.     

Distribution Channel Decentralization and Strategic Durability Choice

In a simple two‐period setting we examine a decentralized distribution (marketing) channel consisting of an up‐stream durable‐goods manufacturer and down‐stream retailer. The manufacturer sets the wholesale price and the product’s durability while the retailer selects an output level. We show that in this setting, the profit‐maximizing manufacturer unambiguously selects a higher durability than the socially efficient (cost‐minimizing) level in both uncommitted sales and rental markets. We show this ‘reversed planned obsolescence’ result is due to the strategic benefit of durability in this double‐marginalization (double monopoly mark‐up) setting. This is in stark contrast to the usual integrated channel result where the profit‐maximizing manufacturer will select an efficient level of durability in rental markets and an inefficiently low durability in uncommitted sales markets (due to the selling firm’s commitment problem with potential buyers). Intuitively, with a decentralized distribution channel, the manufacturer faces potential commitment problems with both current buyers and its down‐stream retailer. We show, only in cases where both sources of commitment issues are removed (i.e. the manufacturer can credibly commit to both potential buyers and its retailer), will the profit‐maximizing durability choice be socially efficient.     

Pure Components versus Pure Bundling in a Marketing Channel

This paper examines how channel interactions influence product bundling decisions by channel members. Specifically, what products or bundles should be offered, at what prices, and by which channel members, in equilibrium. To answer this, we analyze Stackelberg games between a manufacturer and retailer, with pricing and bundling as decision variables, under discrete and uniform continuous distributions of reservation prices. We find that selling pure components by both manufacturer and retailer is the equilibrium except in a narrow region of the parameter space. However, if the manufacturer can sell bundles and prevent unbundling, then such a bundling strategy is optimal in many cases. Interestingly, the channel and retailer also benefit from this strategy.     

Why is Price Dispersion Higher Online than Offline? The Impact of Retailer Type and Shopping Risk on Price Dispersion

When physically similar products, of similar quality, are offered by retailers both online and offline, we often observe that the dispersion in prices of these products online is greater than the price dispersion offline. This observation runs counter to early theories that suggested price dispersion online would be smaller than that offline due to the ease of search and information availability online. This paper investigates and provides an explanation for this puzzling phenomenon by examining the impact of two important drivers of price dispersion: retailer type and consumers’ shopping risk. Retailer type refers to whether a retailer is a pure offline, pure online, or dual channel retailer. Shopping risk is defined as the product of consumers’ perceived risk of shopping and the transaction uncertainty related to shopping at different types of retailers.A game-theoretic approach is adopted to model consumers’ price search and product purchase, as well as price competition within and across retailer types in online and offline markets. Equilibrium pricing strategies are derived for different retailer types competing for different consumer segments with different levels of perceived shopping risk. The impact of retailer type and shopping risk on online versus offline price dispersion are quantified, and conditions when price dispersion is greater online than offline are identified.Results indicate that price dispersion is greater online when the number of pure online retailers is sufficiently large and is increasing in the number of pure online retailers. In addition, a reduction in online shopping risk may actually increase online price dispersion. Results further suggest that even without any online sales, dual channel retailers should maintain their online presence for the purpose of information dissemination, which justifies the importance for pure offline retailer to incorporate webrooming strategies, where consumers can search for prices online but purchase offline.     

3PL服务提供商参与下的供应链定价及协调策略

基于单个制造商,单个3PL服务提供商和单个零售商组成的三级供应链系统,将第三方物流服务提供商定量的引入到供应链协调中来,并在物流服务价格由制造商和零售商共同分担的条件下,应用博弈论理论对供应链系统的定价、产量和利润进行了分析。联合定价时,运用相同利润总增长率的协调方式,确定了批发价和物流服务价格的大小;对独立决策和联合协调决策两种情形下均衡解的比较,得出协调定价不仅批发价、零售价和物流服务价都降低,而且还提高了供应链系统的整体利润;通过观察企业定价的大小,可以判断企业是否采取合作的态度,从而为决策者提供理论依据。     

Retailer's decoy strategy versus consumers' reference price effect in a retailer-Stackelberg supply chain

Decoy strategy for bundling is an important marketing option because it can reflect the behavior resulting from consumers' reference price effect. This paper develops a game-theoretic model of a dyadic supply chain to study the joint decisions on pricing and decoy strategies in the presence of consumers' reference price effect. The retailer chooses one of the decoy strategies (phantom decoy-mixed bundling, decoy-mixed bundling) and selling prices to maximize her profit. Our study shows that: under both decoy strategies, the retailer and the manufacturer benefit from consumers' low reference price effect; however, the high reference price effect hurts their profits.     

Manufacturer rebate and channel coordination in O2O retailing

Many manufacturers are opening their own online channels due to the growth of e-commerce leading to intensive channel competition with their offline retailer partners. This research proposes an innovative coordination mechanism to lessen channel competition and help enhance the profits of all parties. First, two strategic mechanisms (i.e. a manufacturer rebate to offline consumers and the quantity discount) are proposed and studied. Our results show that although a manufacturer rebate offered to offline consumers helps mitigate the online-to-offline (hereafter O2O) competition conditionally, a quantity discount, unexpectedly, cannot be used to mitigate channel competition effectively. A new mechanism - the combination of the manufacturer rebate to offline consumers combined with a quantity discount to retailers – is developed to lessen channel competition. We find that compared to the first two mechanisms, the combination mechanism, surprisingly, provides a significant advantage in creating greater profits for the entire supply chain. Furthermore, compared to the benchmark O2O model, the combination mechanism also helps create a Pareto situation and thus is an optimal mechanism to be used to mitigate channel competition effectively.     

供应链成员企业投资RFID技术的激励机制：共享收入与谈判批发价的比较

许多已有研究发现供应链成员投资RFID技术的动机是一致的，它们假定投资前后的批发价能以相同方式制定。然而，供应链成员在投资前可能已达成固定的批发价。考虑包含一个制造商(她)和一个零售商(他)的供应链系统，成员可采用如分享销售收入(RS)、重新谈判批发价格(WR)、二者并用(B)的激励机制。结果发现在WR和B下，当制造商的谈判权力中等且标签成本较小时，投资RFID能实现双赢，但两家企业的投资动机不总是完全一致；当初始批发价足够高时，若制造商的谈判权力足够强，制造商和零售商对WR的偏好都高于N，对B的偏好都高于RS；当初始批发价较低时，若制造商的谈判权力中等，双方对RS的偏好都高于WR。若制造商的谈判权力较强，供应链系统在B下的收益比WR下的高；若制造商的谈判权力中等或较弱，供应链系统在B或WR下的收益都比N和RS下的高。     

Perceptions of price (un)fairness in a channel context

This article extends prior research on perceptions of price (un)fairness by attempting to disentangle where in the marketing channel (un)fairness inferences lie. Extant research in this area overwhelmingly considers (un)fairness perceptions with respect to the pricing action only, ignoring attributions aimed at specific channel actors. This article illustrates differences in (un)fairness inferences with respect to retailers and manufacturers given price increases accompanied by decreased product supply, increased demand, or increased variable costs. We show that a retailer is considered relatively more unfair than a manufacturer given a price increase accompanied by a demand increase, as well as when no explicit reason is given for the price increase. Conversely, a manufacturer is considered relatively more unfair given a price increase accompanied by a supply decrease. Both channel entities are considered equally fair given a price increase accompanied by a channel (both retailer and manufacturer) or manufacturer cost increase, while a retailer is deemed relatively more unfair given a price increase accompanied by a retailer cost increase. This research generally suggests that inferences of causality for specific pricing actions may differentially skew toward upstream or downstream channel entities depending on the particular economic circumstances of the price change.