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

Abstract

More and more online manufacturers collaborate with offline retailers who provide retail services to showcase products in offline retailers’ stores and feature the stores as physical showrooms. Since offline retailers may be noncompeting or competing depending on the product they sell, we investigate two collaboration strategies. Our results show that product competition causes the decreased demand that is realized through physical showroom (negative competition effect) and the increased demand to buy online directly (positive spillover effect) for the online manufacturer. When the positive spillover effect dominates the negative competition effect, the online manufacturer prefers to partner with the competing retailer and strategically sets a high price. Interestingly, the online manufacturer's willingness to partner with the competing retailer may increase with competing product value. Besides, the online manufacturer may benefit from the increased value of the competing product and the increased commission that is paid to the retailer under product competition.

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

“…In this context, where the manufacturer sells only through the retailer, and the retailer sells through both a physical and a digital marketplace, the cross-channel spillover effect can improve the equilibrium for both supply chain members. Other scholars have demonstrated that the spillover effect is a significant feature that must be considered when manufacturers and retailers collaborate in an O2O or showrooming context (Chai et al 2021 ; Dan et al 2021 ). Chai et al ( 2021 ) considered that the service spillover effect (a factor that affects how O2O retailers and manufacturers operate) will increase both total demand and wholesale price for a manufacturer, which will improve its profitability.…”

“…Moreover, they showed how spillover intensity can increase retail prices (online and offline) and significantly affect retailer profit and service strategy. By contrast, Dan et al ( 2021 ) analyzed the online manufacturer’s optimal collaboration strategy for establishing a physical showroom by comparing its profits in different cases. They argued that the competing retailer provides a lower service level than the noncompeting retailer, which leads to a negative competition effect and a positive spillover effect in the competing case; the trade-off between the two effects decides the online manufacturer’s optimal strategy.…”

An analysis of price strategies with price matching in the presence of showrooming

“…They find that adding an online channel is not optimal for the offline retailer. Some scholars have focused on an online‐to‐offline channel strategy, such as buy‐online‐and‐pick‐up‐in‐store (BOPS) (Li et al., 2021; Xu et al., 2021) and physical showrooms (Dan et al., 2021; Fan et al., 2021). Chai et al.…”

Service Sharing Decisions between Channels considering Bidirectional Free Riding Based on a Dual-Equilibrium Linkage Algorithm

“…Some scholars have considered the impact of product competition on O2O supply chain management in the “offline experience, online purchase” model. Dan et al discussed whether online brand owners should cooperate with retailers selling competitive products to open experience stores [ 43 ]; Zhang et al studied the response strategies of online brands when they cooperated with retailers to set up experience stores and retailers introduced competitive products [ 44 ]. Some scholars also considered the influence of competition among suppliers on O2O supply chain management under the mode of “offline experience and online purchase.” For example, Li et al studied whether the offline experience stores with asymmetric information should introduce a new competitive online retailer to meet the differentiated needs of consumers [ 45 ].…”