Online reviews and spillover effects in the dual-channel supply chain: A choice strategy of sales format

Abstract

We investigate strategy choice of sales format considering online reviews and the spillover effect in a dual-channel supply chain. Generally, online and offline consumers read online reviews before purchasing, and thus offline retailers will be subjected to the spillover effect of online reviews. We develop joint product quality and service level decision models in reselling and agency selling with online reviews and the spillover effect. There are some interesting findings: first, the optimal service level and product quality increase with online reviews and spillover effect. Second, counterintuitively, the spillover effect of online reviews benefits not only the offline retailer and manufacturer but also the online retailer in some circumstances. Moreover, the win-win sales format for the manufacturer and online and offline retailers exists in some circumstances. Finally, it is interesting to find that consumers’ channel preference in the agency sales format is more important than in the resales.