Self-matching guarantees in a brand omni-channel retailer

Retailers are increasingly adopting omni-channel structures to offer customers a seamless cross-channel shopping experience, which has created complex economic challenges, particularly in strategic pricing. This paper investigates optimal pricing strategies and the effectiveness of self-matching guarantees, where a retailer allows customers to purchase a product at the lower of its online or in-store prices. We develop mathematical and simulation models to explore these pricing decisions and additionally, to examine how inventory limitations impact self-matching profitability. We identify conditions under which self-matching enhances profitability, particularly in scenarios with varying levels of price-awareness and channel preferences among customers as well as insufficient inventory levels. Our findings also indicate that self-matching is more effective when customers have a low to moderate preference for online shopping, but its profitability diminishes as customer preference for online shopping intensifies. These insights offer practical guidance and actionable strategies for brand/luxury omni-channel retailers and managers handling private-label products to optimize their pricing decisions and improve profitability.