Do channel members value supportive retail services? Why?

When a manufacturer opens an online channel to compete with its retailer, how can the channel conflict be resolved and the relationship between channel members be improved? Our research proposes supportive retail services as an effective incentive to coordinate the dual-channel distribution and govern the relationship between channel members. We use a profit-maximization model to show that supportive retail services can be utilized to alleviate dual-channel competition and achieve a Pareto result for all channel members. As product compatibility with the web changes, the manufacturer's financial support for retail services also changes. When the product is more compatible with the web, the manufacturer would like to offer more financial support as an effective incentive to the retailer to improve its retail services. However, the value of supportive retail services always increases for the manufacturer but first increases and then decreases for the retailer as product compatibility with the web increases. (C) 2014 Elsevier Inc. All rights reserved.