Pricing and Distribution Strategies in a Dual-Channel Supply Chain

Abstract

Internet has revolutionized distribution channels. Online orders are forwarded to the brick-and-mortar store to make the fulfillment, which is a new distribution strategy in a dual-channel supply chain. However, there is little research on the value of using such distribution strategy in dual-channel setting. To fill this gap, this article considers a manufacturer marketing a product through a dual-channel supply chain, comprised of an online channel and an offline retail channel. We develop a game theory model to investigate the pricing decisions and the distribution strategies, as well as to examine the impacts of the new distribution strategy on price competition and the dual-channel supply chain member's profits. By comparing the results of the traditional distribution strategy and the new distribution strategy, we find that the new distribution strategy can soften price competition when the proportion of the revenue generated by the direct channel is high enough, while if the proportion is low enough, it may intensify price competition. We also find that the supply chain members can achieve a win-win situation when the wholesale price is higher, and the proportion is greater under the new distribution strategy.

Pricing and Financing Strategies in a Dual-Channel Low-Carbon Supply Chain for Bilateral Capital-Constrained Retailers

“…The aforementioned literature primarily focuses on the pricing strategies of retailers establishing dual channels, while some scholars have also examined the development of online direct sales channels by manufacturers. Xu et al [5] investigated pricing and distribution strategies in a dual-channel supply chain comprising traditional offline retail channels and online direct sales channels, and the impact of distribution strategies on price competition and the profits of supply chain members. Wang et al [6][7] examined the optimal pricing decisions in the distribution model of online direct sales and offline retailers, based on differences in consumers' perceptions of online and offline product quality.…”

E-commerce channel management on the manufacturers’ side: ongoing debates and future research pathways

“…In specific contexts (as noted in the previous section), the manufacturer may decide to outsource the fulfilment of products sold on its online channel to its retailer, who receives a percentage of sales. Beyond the cost efficiency argument, scholars argue that if the market share of the online channel is high enough, besides mitigating channel conflict, it can lessen the retailer’s tendency to lower prices on the product and thus prevent excessive price erosion for the whole market (Xu and Qiu 2020 ). Finally, the recent study by Fu et al ( 2021 ) analyses the variation of a manufacturer’s retail price according to the type of e-commerce platform it uses.…”

Channel competition in omni‐channel supply chain considering social media advertising

“…Generally, in supply chain studies, much of the literature sets up a two‐stage structure for game analysis, which includes a manufacturer providing the same product to one or more retailers and examining competitive behavior such as Cournot, Stackelberg, and Nash (Yang & Zhou, 2006). Significant amount of research has been done in the area of supply chain, most of it is still focused on dual‐channel supply chain, with mixed researches on both channel models (Kumar & Ruan, 2006; Pu et al, 2019; Xu & Qiu, 2020; Zhang et al, 2012). Yao and Liu (2005) studied the equilibrium pricing strategies under the Bertrand and Stackelberg (manufacturer as leader and retailer as follower) price competition models of traditional retail channels and online channels, and compared the profit and benefits under these two types of competition.…”