Brick-and-mortar or brick-and-click? The influence of online customer reviews on a retailer’s channel strategy

Many problems regarding channel conflicts exist in the pricing process of a manufacturer‐led dual‐channel supply chain. By considering the fact that online reviews and channel preferences are the important factors that influence consumer purchasing behaviors and the decision‐making of the supply chain, this paper deals with these problems through the development of a model involving online reviews and channel preferences. It then analyzes optimal decisions under either decentralized or centralized decision‐making scenarios. The impact of online review service input and consumer channel preference on optimal supply chain decisions and profits is further analyzed. Finally, based on the developed model, a revenue sharing contract coordination scheme is designed to achieve Pareto improvements in the supply chain. The results show that the degree of consumer preference for online channels affects the best consumer decisions and the overall profit of the supply chain. The impact coefficient of online reviews is positively correlated with the manufacturer's direct selling price, the level of input to online review services, and the profit of the entire supply chain. The provision of online review services can significantly increase channel prices, market sales, and profits compared to channel preferences. The overall profit of the supply chain under centralized decision‐making is significantly greater than that under decentralized decision‐making, and the coordination model can effectively coordinate the supply chain and alleviate conflicts.

Section: Literature Reviewmentioning

confidence: 99%

Pricing decision making and coordination of a dual‐channel supply chain considering online reviews and channel preferences

Liu

Ren

et al. 2023

“…Furthermore, online retailers may selectively disclose product information, such as concealing product defects, which can hinder consumers from accurately evaluating the quality of products (Baek et al, 2012). Therefore, consumers are often faced with uncertainty when making online purchases and tend to rely on online reviews to comprehensively evaluate the valuations of a product (Chen & Xie, 2008; Kwark et al, 2017; Ye, Liang, Tong, Xu, & Xie, 2022). Online reviews are created by prior consumers over multiple periods and can update consumers' valuations of products by providing additional information about products' quality and fit, which may significantly affect consumers' purchasing decisions (Li & Hitt, 2010; Ye, Liang, Tong, Xu, & Xie, 2022).…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, consumers are often faced with uncertainty when making online purchases and tend to rely on online reviews to comprehensively evaluate the valuations of a product (Chen & Xie, 2008; Kwark et al, 2017; Ye, Liang, Tong, Xu, & Xie, 2022). Online reviews are created by prior consumers over multiple periods and can update consumers' valuations of products by providing additional information about products' quality and fit, which may significantly affect consumers' purchasing decisions (Li & Hitt, 2010; Ye, Liang, Tong, Xu, & Xie, 2022). Take, for example, apparel; consumers always have personalized needs and diversified situations.…”

Section: Introductionmentioning

confidence: 99%

To commit or not? The impact of online reviews on retailers' price commitment strategy in competing supply chains

Cai,

Liang

2024

Self Cite

Online reviews can effectively mitigate consumers' uncertainty about product valuations, thus affecting firms' pricing decisions. This paper develops a two‐period game model to investigate the impacts of online reviews on the retailer's price commitment strategies in two competing supply chains, each consisting of one manufacturer and one retailer. In the first period, the retailers strategically set prices and decide whether to commit to prices for their products. In the second period, the retailers adjust product prices in response to online reviews, if they choose not to commit to a price. We show that the retailers' price commitment strategies depend on consumers' perceived uncertainty about product valuations, the information value of online reviews and the unit misfit cost. Interestingly, the retailers can benefit from the information value of online reviews by implementing flexible pricing strategies. Furthermore, if the information value of online reviews is sufficiently high, both retailers will choose not to commit to a price in equilibrium. However, if the information value of online reviews is relatively low, the equilibrium in price commitment is asymmetric, that is, the retailer A commits to a price and its competitor chooses not to commit.

Contract preference of an online intermediary in the presence of online reviews and cross‐channel spillover

Tong,

Li,

et al. 2024

In e‐commerce, online intermediaries give suppliers ready access to consumers and have thereby become an important distribution channel. They can operate as resellers (under a reselling contract) or marketplaces (under an agency contract) for suppliers. This study analyzes the most effective contract arrangement between an online intermediary and two competing suppliers. The suppliers receive online reviews of their products and also be affected by the spillover effect of the intermediary's channel on their own direct sales channels. The intermediary can offer a reselling contract to one supplier and an agency contract to the other or offer the same contract type to both suppliers. We find that when the cross‐channel spillover is positive or only moderately negative, the intermediary offers different contract types if the difference in the review ratings of the two suppliers' products is considerable; otherwise, a reselling contract is offered to both. However, when the cross‐channel spillover is highly negative, the intermediary may offer an agency contract to both suppliers. Our research provides practical guidance for intermediaries on the most effective contract strategies to use when collaborating with suppliers who receive varied online reviews, depending on the cross‐channel spillover scenarios.