Omnichannel retail move in a dual-channel supply chain

A growing number of retailers are now moving to omnichannel sales and adopting new technologies to integrate the store and the web to offer customers a seamless shopping experience. We develop a stylized model where a manufacturer distributes products through two separate retailers in two market segments, e.g., online vs. offline. The aim of this study is to investigate the impacts of competing retailers' omnichannel moves on supply chain performance. Our model combines pricing interactions and channel move strategies from a supply-side perspective. We obtain three main results. First, though it is suitable for the traditional brick-and-mortar retailer to adopt an omnichannel strategy, it may not be always good for the e-tailer. Second, omnichannel retail does not always lead to lower retail prices and enhanced consumer welfare. It may result in a lower price for the offline segment, but for the online segment, a higher price will be charged. Finally, omnichannel retail may not be good for the manufacturer. An equilibrium { Omnichannel, Digital channel only } strategy outcome of the retailers' channel move game results in a higher demand and more profits for the manufacturer. However, the manufacturer is indeed hurt by the { Omnichannel, Omnichannel} equilibrium. Our study provides useful managerial insights into retailers' omnichannel moves in a supply chain. (c) 2020 Elsevier B.V. All rights reserved.

Automated summary

The study suggests that adopting an omnichannel strategy may benefit traditional brick-and-mortar retailers but not necessarily e-tailers, omnichannel retail does not always lead to lower retail prices and enhanced consumer welfare, and manufacturers may be negatively affected by omnichannel retail.