a b s t r a c tThe growth of e-commerce in the past decade has opened the door to a new and exciting opportunity for retailers to better target different segments of the customer population. In this paper, we develop an analytical framework to study the impact of an "online-to-store" channel on the demand allocations and profitability of a retailer who sells products to customers through multiple distribution channels. This new channel can help the retailer tap new customer segments and generate additional demand, but may also hurt the retailer by cannibalizing existing channels and increasing operating costs. The analytical model allows us to evaluate these fundamental tradeoffs and provide useful managerial insights regarding the specific product and market characteristics that are most conducive for increasing profitability. Our analysis provides some simple conditions under which adding an online-to-store channel would lead to higher profits for products that are only available online. If the product is also available in-store, the analysis becomes more complex. In this case, we performed numerical experiments to generate insights on when the OS channel should be used. Our results imply that the retailer needs to carefully select the set of products to be offered through the online-to-store channel.Published by Elsevier B.V.
Used goods markets are currently important transaction channels for durable products. For some durable products, such markets first appeared when retailers started buying back used products from “old” customers and selling them to new ones for a profit (). The growth of electronic peer-to-peer (P2P) markets opened up a second, frictionless used goods channel where new customers can buy used products directly from old customers (). Both these markets compete with the original where retailers sell unused products procured from the manufacturer. This paper focuses on understanding the role that the sequential emergence of the above two used goods markets plays in shaping the of the manufacturer and the of the primary market retailer in the context of a decentralized, dyadic channel dealing with a renewable set of consumers. Our analysis establishes that frequent product upgrades and rising retail prices in durable product sectors of our interest are due to the emergence of the P2P used goods market and how the market interacts with the retail used goods source in altering the relative powers of the channel partners. Moreover, contrary to popular belief, we show that the initial introduction of the retail used goods channel actually discourages introduction of new versions and restrains the rise in retail prices. We also comment on how the two used goods markets affect the profits of the channel partners. We then provide empirical support for our theoretical result regarding product upgrades using data from the college textbook industry, a durable product that fits our model setup.used goods markets, product upgrades, retail pricing, customer buybacks, durable products
We analyze the effect of price and order postponement in a decentralized newsvendor model with multiplicative and price-dependent demand, wherein the manufacturer sets the wholesale price, and possibly offers a buyback rate, and the retailer determines the order quantity and retail price. Such postponement strategies can be used by the retailer by delaying his operational decisions (order quantity and retail price) until after demand uncertainty is observed. We show how the equilibrium values of the contract parameters and profits are affected by (i) vertical competition, (ii) type of contract (wholesale price-only or buyback), (iii) demand distribution, (iv) form of the expected demand function, and (v) the timing of the retailer's operational decisions. Although in most cases postponement is quite beneficial for the channel members, we show that for some model parameters, due to vertical competition, the expected value of perfect information about demand for price postponement and order postponement may be negative for the channel and even, surprisingly, for both members. We also show that when a buyback option is offered, neither order postponement nor price postponement has an effect on the equilibrium wholesale price, profit allocation ratio between the manufacturer and the retailer, and channel efficiency, and that the equilibrium wholesale price, expected retail price, profit allocation ratio between the manufacturer and the retailer, and channel efficiency in the model with buyback options under either order or price postponement further coincide with their counterparts in the corresponding deterministic model.
In this paper, we study a decentralized assembly system consisting of a single assembler who buys complementary components from independent suppliers under two contracting schemes: push and pull. In both schemes, the component suppliers are allowed to freely form coalitions (or alliances) among themselves to better coordinate their pricing or production decisions. We show that the sole driver of the inefficiency in a push system, which is due to horizontal decentralization of suppliers, is the number of alliances that were formed. Specifically, it is shown that in a push system, the assembler's profit, the total profit of all suppliers and the consumers' surplus are all decreasing in the number of coalitions, and are thus maximized when the grand coalition is formed. We further carry out a stability analysis of coalition structures to verify to what extent suppliers can reduce or eliminate the inefficiency due to their decentralization by forming alliances. We show that in a push system with more than two suppliers and a power demand distribution, myopic suppliers would act independently, resulting with a least efficient channel, which makes all channel members, as well as the end consumers, worse off. On the other hand, we prove that farsighted suppliers would form the grand coalition and thus be able to completely eliminate the inefficiency stemming from their decentralization. Finally, it is shown that, in contrast to a push system, in a pull system the suppliers can easily coordinate their production quantities to eliminate the inefficiency due to their decentralization.alliance formation, newsvendor model, stable coalitions, push and pull models
Independent parties that produce perfectly complementary components may form alliances (or coalitions or groups) to better coordinate their pricing decisions when they sell their products to downstream buyers. This paper studies how market demand conditions (i.e., the form of the demand function, demand uncertainty, and price-sensitive demand) drive coalition formation among complementary suppliers. In a deterministic demand model, we show that for an exponential or isoelastic demand function, suppliers always prefer selling in groups; for a linear-power demand function, suppliers may all choose to sell independently in equilibrium. These results are interpreted through the pass-through rate associated with the demand function. In an uncertain demand model, we show that, in general, the introduction of a multiplicative stochastic element in demand has an insignificant impact on stable coalitions and that an endogenous retail price (i.e., demand is price sensitive) increases suppliers' incentives to form alliances relative to the case with a fixed retail price. We also consider the impact of various other factors on stable outcomes in equilibrium, e.g., sequential decision making by coalitions of different sizes, the cost effect due to alliance formation (either cost savings or additional costs), and a system without an assembler.alliance formation, demand curvature, pass-through rate, assembly system
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