Optimal inventory and dynamic admission policies for a retailer of seasonal products with affiliate programs and drop‐shipping

Abstract

This article investigates the optimal inventory and admission policies for a "Clicks-and-Bricks" retailer of seasonal products that, in addition to selling through its own physical and online stores, also sells through third-party websites by means of affiliate programs. Through postings on partners' webpages, an affiliate program allows a retailer to attract customers who would otherwise be missed. However, this retailer needs to pay a commission for each sale that originates from the website operators participating in the program. The retailer may also refer online orders to other sources (such as distributors and manufacturers) for fulfillment through a drop-shipping agreement and thus earns commissions. This would be an option when, for example, the inventories at the physical stores were running low. Therefore, during the selling horizon, the retailer needs to dynamically control the opening/closing of affiliate programs and decide on the fulfillment option for online orders. On the basis of a discrete-time dynamic programming model, the optimal admission policy of the retailer is investigated in this paper, and the structural properties of the revenue function are characterized. Numerical examples are given to show the revenue impact of optimal admission control. The optimal initial stocking decisions at the physical stores are also studied.

A New Form for a Hotel to Collaborate with a Third-Party Website: Setting Online-Exclusive-Rooms

“…The length Dt is assumed to be short enough to make the probability of more than one customer arriving in any interval negligible (Feng & Xiao, 2000;Xiao, Chen, & Chen, 2009). Thus l h Dt and l e Dt represent the probability of arriving one customer in a time interval Dt from the hotel's front desk and the website, respectively.…”

Dynamic pricing for e-tailers with two B2C platform online-stores

“…Frank, Chen and Xiao study the optimal admission policy for retailers with two physical stores and one online store, where the demands from online store are fulfilled by two physical stores through Drop-shipping [10]. Xiao, Chen F Y and Chen J extended this model with affiliate program [11]. Then Chen F Y, Chen J, Parlar and Xiao study the situation in which two physical stores are owned by different retailers and one e-tailer, and the priority of two physical stores are different in order fulfillment for demands from online-store [12].…”

“…So the revenue function also has the same properties as theorem 2. And optimal pricing policies will be formulated the same as equation (10) and (11).…”

Operations Research (OR) in Service Industries: A Comprehensive Review

“…Tan and Mookerjee () investigated the spending allocation in electronic retailing between marketing (advertising); such an allocation could seriously affect the customer demand and website processing capacity. Xiao et al () investigated the optimal inventory and admission policies for seasonal products sold by owners and through third‐party websites by means of affiliate programmes.…”