The competitive strategies between the traditional and online retailers

Abstract

The advent of e-commerce has prompted many retailers to sell product by online channel. In this paper, we study the competitive strategies between a traditional retailer and an online retailer. We investigate how the changes of the degree of customer acceptance of the online channel and the traditional channel inconvenience affect the strategies of the two retailers under two different Stackelberg competition scenarios: online retailer-Stackelberg competition and traditional retailer-Stackelberg competition. We get that whether the price and profit of the traditional retailer is higher than the online retailer mainly depends on the traditional retailer's inconvenience under the different competition scenarios. Furthermore, The two retailer's total profit is higher in the TC-Stackelberg setting than in the OC-Stackelberg setting when the customer acceptance of the online retailer is relative small, otherwise, is lower in the TC-Stackelberg setting than in the OC-Stackelberg setting when the customer acceptance of the online retailer is relative large. Under the Stackelberg settings, when the customer acceptance of the online retailer is relative small, the two players both like to work as a leader; otherwise, they would like to work as a follower.