Optimal Ordering Strategy for Goods at Multiple Retail Prices under Simultaneous Sales

Abstract

To stimulate purchases from consumers, retailers nowadays use the multiple retail prices strategy (MRPS), i.e., selling the products at multiple prices simultaneously. The paper extends the current newsboy model and proposes an optimal ordering model for MRPS corresponding to uncertain consumer demands. The Lagrangian multiplier method is applied to solve the problem, and an algorithm for finding the approximate optimal total order quantity is designed. Numerical results show that MRPS is better than the single retail price strategy (SRPS). It further reveals that when there is an order quantity constraint, the retailer needs to control the number of retail prices; that is, retailer’s MRPS is affected by order quantity constraint; sensitivity analysis demonstrates that MRPS is also affected by the price discount coefficient in the case of no order quantity constraint while it is not affected by demand volatility. The research work provides some useful managerial inspirations for retailers.

Research on Two-Level Price-Fluctuation Supply Chain Ordering Strategy Problem

“…Federgruen and Heching [8] studied the ordering problem when retail prices change in monotonic decline direction or unknown direction by assuming that retail price is a function of time which satisfies a Markov process, the retailer determines the price and the ordering strategy at each stage. Others concern varied price strategies, such as gift coupons and quantity discounts, i.e., the same product is sold at different retail prices [9][10][11]. For example, Mu et al [11] considered a multiple retail price strategy where products are sold at multiple prices simultaneously and proposed an optimal ordering model corresponding to uncertain consumer demands.…”

“…Others concern varied price strategies, such as gift coupons and quantity discounts, i.e., the same product is sold at different retail prices [9][10][11]. For example, Mu et al [11] considered a multiple retail price strategy where products are sold at multiple prices simultaneously and proposed an optimal ordering model corresponding to uncertain consumer demands. In sum, no matter what ordering problems are studied, either under a given price strategy or under price adjustments, the retail price is fixed rather than fluctuates at each sales stage, although price changes are taken into account as time flows.…”

Identifying the factors of China's seasonal retail sales of consumer goods using a data grouping approach–based GRA method

“…It is found that the demand of the two products depends on the retail price, the quality of the products and the sales strength of the retailers, and the retailers who adopt the cooperative scheme can obtain more profits by reducing the price, improving the quality and sales level. Mu et al (2019) established the newsboy model, solved it with the Lagrangian multiplier method and formulated the multiple retail prices strategy (MRPS), which could better stimulate consumers' purchase. Xiao and Yang (2016) believed that when designing perishable food retail chains, food prices, shelf space allocation and quality should be taken into consideration to maximize profits.…”