Online versus offline encroachment? Channel selection and information sharing strategies in a multichannel supply chain considering consumer webrooming behavior

Abstract

This paper develops a three-party game model comprising a supplier, an online retailer, and an offline retailer, where the supplier wholesales the product to retailers. Considering webrooming (i.e., consumers experience and purchase offline after evaluating products online) and information leakage, we examine the supplier encroachment channel (i.e., online or offline) and retailers' information sharing strategies. We find that the channel selection of encroachment depends on the cost difference between online and offline encroachment. Information sharing by a retailer can result in another retailer not sharing. Webrooming influences encroachment strategy by altering cost thresholds, prompting the supplier to encroach on the offline channel as webrooming increases. However, a strong preference for online shopping will lead the supplier to forgo encroachment despite webrooming. We identify a “win-win-win” situation where all stakeholders benefit from webrooming. Finally, we discuss consumer surplus and social welfare and extend the model based on differential pricing and information confidentiality.