363 / 2024-04-24 19:17:54

Strategical Impacts of Developing the Physical Showroom by Online Retailers

online retailer; physical showroom; consumer returns; asymmetric information

Most traditional online retailers today develop the physical showroom in addition to online channel. This paper studies a supply chain consisting of one manufacturer and one online retailer which deploys physical showroom. We examine the online retailer’s deployment of physical showroom which mitigates consumer fit uncertainty, apart from this, our analysis also addresses the questions of how the showroom deployment strategy impacts the supply chain equilibrium and the customers' purchase behavior and the supply chain information sharing under asymmetric information. The results show that the effects of the physical showroom on the optimal pricing strategies of both partners are different. The physical showroom can always induce online retailer to improve sales effort and are always beneficial to manufacturer and consumers since they help improve the market demand and reduce the product return rate. As to the profit of the supply chain system, the performance of the physical showroom is influenced by its cost. The negotiations of information sharing between the two partners can be reached under certain conditions.