Pricing strategy for B&M store in a dual-channel supply chain based on hotelling model. Issue 18 (17th September 2021)

• Record Type: Journal Article
• Authors: Chai, Limeng; Wu, Desheng Dash; Dolgui, Alexandre; Duan, Yongrui
• Is Part Of: International journal of production research. Volume 59:Issue 18(2021)
• Page Start: 5578
• Page End: 5591
• Publication Date: 2021-09-17
• Subjects: Showrooming -- store-brand strategy -- hotelling model -- pricing theory -- retail supply chain; Factory management -- Periodicals; 658.57
• DOI: 10.1080/00207543.2020.1787536
• Languages: English
• ISSNs: 0020-7543

Abstract

Abstract : We use hotelling model to analyse store brands as a strategy for B&M (brick-and-mortar) retailers to combat showrooming. We investigate how national-brand product mismatch and store-brand awareness affect supply chain's performance. We reach four major conclusions. First, store-brand strategy may be an effective means for B&M stores to mitigate showrooming. However, it's better to introduce premium store brands. Second, the B&M store's profit grows – and the online store's profit declines – as national-brand product mismatch increases in breadth. When many consumers feel the national-brand product does not match their needs, a product positioning strategy for the store brand can help B&M retailers improve profit margins. Third, as national-brand product mismatch increases in depth, the B&M store's profit rises and online store's profit falls. If national-brand products lack many features that consumers need, a product differentiation strategy can be implemented to use store brands to fill in the gaps left by national brands. Finally, the growth of store-brand awareness will not necessarily benefit the B&M store. The impact of store-brand awareness on the B&M store's profit depends on the hassle cost factor t, and a brand promotion strategy will reduce the loss of B&M retailer's profit.