Dual-channel decision in a shopping complex when considering consumer channel preference

Abstract

In practice, dual-channel structures are commonly adopted by manufacturers to reach a wider range of customers. This paper investigates a manufacturer’s dual-channel (“direct” + “indirect”) decision in a shopping complex, considering consumer channel preference between the direct and indirect channels, with the choices for the indirect channel being reselling and agency selling. We develop an analytical framework to study this problem. Our result demonstrates that the dual-channel structures should be adopted when there exists a significant channel preference gap between channels, which in turn could help the manufacturer reduce the substitution effect between channels. Besides, our analysis discloses that consumer channel preference plays a significant role when the manufacturer leverages different indirect selling formats. In the case of reselling, the manufacturer should adopt a dual-channel structure if consumers show a much higher preference for the direct channel. In the case of agency selling, a dual-channel structure should be adopted when consumers significantly prefer either the direct channel or the indirect (agency) platform. Finally, exact conditions are provided in this paper to help manufacturers make optimal dual-channel decisions in shopping complexes.

Keywords:

• Dual-channel
• platform-based supply chain
• agency selling
• platform retailing
• direct channel
• channel selection

Notes

Acknowledgments

The authors would like to thank the anonymous referees and the editors for their constructive suggestions on earlier drafts of this manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The floorplans and shop lists were retrieved from http://www.landmarknorth.com.hk/en/shopping.php and https://www.vivocity.com.sg/business-directory-category/ on November 28, 2018.

2 In a traditional two-echelon supply chain, the product sales monotonically decrease in the wholesale price.

3 To be consistent with Section 5.1, we has amplified ${\tilde{\Pi }}_m^{\mathit{DR}*}$ a little bit than its actual value by assuming the reseller is naïve enough so that the manufacturer can set the direct price lower than the wholesale price.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China (NSFC) [grant number 71520107002], [grant number 71871207], [grant number 71771201]; the Fundamental Research Funds for the Central Universities [grant number WK2040160028]; and the financial support of the USTC Research Institute of Modern Logistics Engineering.