Effects of customer response to fashion product stockout on holding costs, order sizes, and profitability in omnichannel retailing

Abstract

In retailing practice, customers may actively respond in one of the following ways after experiencing stockout of a preferred brand: switch to a substitutable brand, switch to another store (where the preferred brand could be available), or delay purchase (backlogging). This paper presents a model of active customer responses to stockout of fashion products. In the single-period model, a retailer maximizes profit by selling two substitutable brands through two different stores. Analytical results and numerical experiments suggest that active response to stockout increase the retailer's profitability due to (a) additional revenue from backlogging and brand and store switching and (b) decrease in optimal order size resulting in lower holding costs. Omnichannel fulfillment offers additional opportunities for retailers to benefit from active responses to stockout.

Effect of the buy‐online‐and‐pickup‐in‐store option on pricing and ordering decisions during online shopping carnivals

“…Since omnichannel retailing was proposed (Rigby, 2011), some scholars have begun to study the connotation and evolution process of omnichannel retailing (Brynjolfsson et al., 2013; Bell et al., 2014). A few studies have focused on order fulfillment in the omnichannel retailing context (Bernon et al., 2016; Hübner et al., 2016a; Hübner et al., 2016b; Ovezmyradov and Kurata, 2019; Arslan et al., 2021). Based on the operational data of enterprises, some scholars empirically explored the impact of different omnichannel retailing modes on operation efficiency, such as BOPS (Gallino and Moreno, 2014), showrooming (Bell et al., 2017; Sun et al., 2020; Zhang et al., 2021), ship‐to‐store mode (Gallino et al., 2017), “buy online and return to store” (Yan et al., 2020a), and ship‐from‐store (He et al., 2021).…”

Cold chain investment and pricing decisions in a fresh food supply chain

“…In the empirical study of Loureiro and Umberger (2003), consumers pay considerable attention to the country‐of‐origin labeling. After experiencing a stockout of a preferred brand, customers may switch to a substitutable brand, switch to another store, or delay purchases (Ovezmyradov and Kurata, 2019). Extensive research has emphasized the significant influences of prices on consumers' decisions.…”

Should an online manufacturer partner with a competing or noncompeting retailer for physical showrooms?

“…(2020a), Kumar et al. (2019), and Ovezmyradov and Kurata (2019). They show that offline channel establishments are synergistic with existing online channels and would increase product demand.…”