296 / 2024-04-24 10:57:41

New Product Introduction in Omnichannel Retailing: Inventory and Channel Configuration

Omnichannel Retailing,New Product Introduction,Inventory Decision,Channel Configuration

In this paper, we bulid a theoretical model to explore the retailer's optimal inventory decisions and the choice of omnichannel configuration (product rollover) strategies. Also, we investigate the influence of omnichannel consumer behavior and channel features on the retailer's new and old product channel configuration strategies.  Our work demonstrates the significant effects of consumers' channel transfer behavior and offline store inventory availability risk on the retailer's omnichannel configuration strategies. Also, we confirm the interaction between the market expansion effect of old products and the cannibalization effect on new products with omnichannel features as well as the impact on omnichannel configuration (product rollover) strategies. We find that when the retailer adds old products to the online channel for sale and thus implements a dual-rollover strategy, it will, on the one hand, drive consumers to the online channel and attract low-value customers to the old products, thus increasing total demand; on the other hand, it will lead to a cannibalization effect of the old products on the new products, thus reducing the demand for the new products. In this case, when the marginal profit of the old product is not high enough or the offline store is not attractive enough (i.e., the hassle cost of customer travel to the store is relatively high), the retailer should adopt a single-rollover strategy to prevent consumers from moving to the online channel and the cannibalization effect of the old product on the new product. Interestingly, it is not always beneficial for the retailer to sell new products in both online and offline channels. This is because adding an online channel to sell new products when the offline channel is relatively unattractive will lead to channel transfer behavior among consumers and, consequently, loss of profit.