Price matching and product differentiation strategies considering showrooming |
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| Affiliation: | 1. School of Economics and Management, Hebei University of Technology, Tianjin 300401, PR China;2. School of Mathematical Sciences, Tiangong University, Tianjin 300387, PR China;1. School of Business Administration, Northeastern University, Shenyang, Liaoning, 110819, China;2. Northeastern University at Qinhuangdao, Qinhuangdao, 066004, China;3. College of Mathematics and Informatics, Fujian Normal University, Fuzhou, Fujian, 350117, China;4. Digital Fujian Internet-of-Things Laboratory of Environmental Monitoring, Fujian Normal University, Fuzhou, Fujian, 350117, China;1. Ozyegin University, Nisantepe, Orman Sk. No:13, 34794, Cekmeköy, İstanbul, Turkey;2. Cardiff University, Aberconwy Building, Colum Drive, Cardiff, Wales, CF10 3EU, United Kingdom;3. Sabanci University, Orhanli-Tuzla, Istanbul, Turkey;1. Graduate School of Economics, Osaka University, Japan;2. School of Business Administration, Kwansei Gakuin University, Japan;3. Robert H. Smith School of Business, University of Maryland, USA;1. Department of Business Administration, Myongji University, Seoul, South Korea;2. College of Business Administration, Inha University, Incheon, South Korea;3. College of Business Administration, Inha University, Incheon, South Korea;1. Department of Human Studies, LUMSA University of Rome, Piazza delle Vaschette, 101, 00193, Rome, Italy;2. Department of Management and Quantitative Studies, University of Naples Parthenope, Via Generale Parisi, 13, 80132, Naples, Italy;3. Department of Communication and Social Research (CORIS), Sapienza, University of Rome, Via Salaria 113, 00198, Rome, Italy |
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| Abstract: | Showrooming, a phenomenon in which customers use brick-and-mortar stores to assess products and then purchase them from online retailers (o-retailers) for lower prices, is considered a great threat to traditional retailers (t-retailers). To combat showrooming, many t-retailers have executed price matching which enables customers to pay o-retailers' lower prices for the identical product. To avoid direct competition with t-retailers who execute price matching, many o-retailers have begun to sell differentiated products from t-retailers, which weakens the information advantage to customers from practicing showrooming. Motivated by these observations, we construct a duopoly game, where a t-retailer and an o-retailer sell products in a same category, to study the profitabilities of product differentiation and price matching in the context of showrooming. The results show that in the scenario without price matching, the o-retailer is likely to benefit from product differentiation only when the o-retailer's differentiated product is more popular with customers than the t-retailer's product. However, in the price matching scenario, the o-retailer also has the opportunity to benefit from product differentiation when the o-retailer's differentiated product is less popular with customers than the t-retailer's product, and product differentiation can be a win-win strategy for the two retailers under certain conditions. Considering the o-retailer's product differentiation decision, the t-retailer is only likely to execute price matching if the non-digital attributes of the product category sold by two retailers are not very obvious. |
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| Keywords: | Showrooming Price matching Product differentiation Channel competition Game theory |
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