Channel Selection Decision in a Dual-Channel Supply Chain: A Consumer-Driven Perspective

Abstract

In a supply chain, customers have heterogeneity preferences due to channel stickiness and brand stickiness. The complicated behaviors of different customers (i.e., target customers and experience customers) results can lead to channel cannibalization, which increases the difficulties of manufacturers choosing between traditional channel and dual-channel supply chain. Therefore, to examine this claim more carefully, we develop Stackelberg game models to analyze channel selection decisions under the monopoly competition and the duopoly competition. The equilibrium pricing and quality strategies are compared in the dual-channel supply chain with that in the traditional channel and the single online channel. Results show that the channel cannibalism is mainly brought on by the behaviors of the target customers. The corresponding negative effects will be reduced through the flexible pricing and quality strategies, which depend on the consumer types, channel preferences, and brand preferences. Under the monopoly competition, the single online channel is not the dominant option for the monopolistic manufacturer since the expected profits of the experiential customers cannot be obtained to the utmost. When the commissions of the e-commerce platform commissions are low, the manufacturer prefers to the low-quality strategy to prevent the experience customers hemorrhaging from the physical retail channel. With the commissions increasing, the manufacturer adopts the high-quality strategy to attract the customers to the e-commerce platforms, and decrease the channel cannibalization. When the efficiency of the direct online sale is high or the commissions of the e-commerce platforms are lower than the given threshold, the manufacturer prefers to the dual-channel supply chain. Moreover, the less customers the brand stickiness, the greater the value of profits of the manufacturer in the dual-channel supply chain.

Research on the Sales Strategy of Online Brand Owners Expanding to Offline Channels Based on The Online Agent Mode

“…Cai [2] noted that the dual-channel structure is superior to any single-channel structure without competition. Yong-Shi Hu [3] points out that under the monopoly competition, the expected profits of experiential customers cannot be maximized, and a single online channel is not the dominant choice of monopolies. Based on industry data, some scholars have found that dual-channel retailers can improve customer satisfaction compared to single-channel retailers, so multichannel retail is a useful strategy to build customer loyalty [4], which also helps improve the "barriers" to new market entry and enhance the competitive position of retailers.…”