Online customized strategy for manufacturers to counter showrooming behavior in a dual-channel supply chain

Abstract

Showrooming refers to a behavior of consumer transferring from offline stores to online purchasing. Consumers’ showrooming behavior would affect not only the offline stores but also manufacturers in the long run. This study aims at putting forward an online customized strategy offered by a manufacturer to defeat the negative of showrooming in the context of a dual-channel supply chain where a manufacturer sells products online to consumers via a direct channel and wholesales products to an offline retailer, then the retailer sells products via an offline channel. Based on game theory and backward induction, optimal pricing decisions for the manufacturer and the retailer are established. It shows that consumers’ showrooming behavior decreases the selling prices and increases sales volumes in both the online direct channel and the offline channel. As further revealed, showrooming behavior would hurt the retailer under certain conditions and always damage the manufacturer. To mitigate the negative effects of showrooming, an online customized strategy is developed for the manufacturer. That is, the manufacturer would provide standard and customized products for online channel, allowing offline channel to sell only standard products. According to the results, online customized strategy would always damage the interests of the retailer, while customized strategy increases the profit of the manufacturer and increases the social welfare of the supply chain under certain circumstances.