Pricing and quality level decisions of substitutable products in online and traditional selling channels: game‐theoretical approaches

Motivated by the emergence of dominant physical stores utilizing a buy‐online‐and‐pickup‐in‐store (BOPS) channel, we examine the interaction of such a stronger retailer and a manufacturer's strategies on the pricing and service value. The dominant retailer provides an added service value to end consumers by the traditional channel and BOPS option, which has a positive influence on the market demand. The manufacturer makes the channel selection decision between a dual channel and an omni‐channel. We formulate a retailer Stackelberg game and characterize the equilibrium pricing and service solutions under centralized and decentralized cases. Our results indicate that the service value of a physical store strongly influences the players' pricing strategies. The sensitivity analysis reveals that the total revenue of the supply chain increases with the market scale expansion coefficient of the BOPS option. Furthermore, the result suggests that offering the BOPS channel is always an effective initiative to boost supply chain performance, especially in the centralized structure.

Section: Literature Reviewmentioning

confidence: 99%

Optimal pricing decisions for an omni‐channel supply chain with retail service

Jiang

Liu

Lim

2020

“…Taleizadeh et al. () focus on the pricing of substitutable products in a two‐echelon supply chain, which comprises one retailer and two manufacturers selling their products via traditional and online channels. Additionally, Ailawadi and Farris () present incidences of stockout and cross‐channel conversions (the number of visitors served by a retailer that subsequently buys the brand elsewhere) as key metrics of omnichannel.…”

Section: Review Of the Literaturementioning

confidence: 99%

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

Ovezmyradov

Kurata

2018

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.

“…Taleizadeh et al. () proposed pricing inventory model with traditional selling channel and online selling channel. Taleizadeh () introduced a lot‐sizing model under advance payment pricing and disruption.…”

Section: Introductionmentioning

confidence: 99%

Price discount facility in an EOQ model for deteriorating items with stock‐dependent demand and partial backlogging

Shaikh

Khan

Panda³

et al. 2019

All-units discount facilities are one of the attractive features in the competitive business situation. Due to the globalization of the marketing policy, all-units discount facilities play an important role in the competitive business. Typical economic order quantity (EOQ) models are cloistered by considering as constant not only the purchase cost (irrespective of the order size of the product) but also the carrying cost during the entire cycle period. However, the unit purchase cost has an antagonistic relationship with the order size, and the carrying cost has a commensurate relationship with the storage time-period of the product, that is, the higher the order size, the lower the unit purchase cost, and the longer the storage time-period, the greater carrying cost per unit. Also deterioration is another imperative issue in inventory analysis as it has a huge impact on profit or cost of the inventory system. Considering all of the above-mentioned factors, we study two different inventory models, namely (a) inventory model for zero-ending case and (b) inventory model for shortages case. The demand for both models is considered as price and stock dependent, whereas shortages are partially backlogged at a rate with the length of the waiting time to the arrivals of the next lot. The existence and uniqueness of the optimal solution for both models are examined theoretically and the solution procedures are discussed along with two proposed algorithms for minimizing the total cost. Finally, we perform sensitivity analyses for both models and make a fruitful conclusion regarding the proposed work.