Dual sales channel management with service competition

Chen, Kay-Yut and Kaya, Murat and Özer, Özalp (2008) Dual sales channel management with service competition. Manufacturing and Service Operations Management, 10 (4). pp. 654-675. ISSN 1523-4614 (Print), 1526-5498 (Online)

[thumbnail of msom-10-04-p0654-0675.pdf] PDF
Restricted to Repository staff only

Download (770kB) | Request a copy


We study a manufacturer’s problem of managing his direct online sales channel together with an independently owned bricks-and-mortar retail channel, when the channels compete in service. We incorporate a detailed consumer channel choice model in which the demand faced in each channel depends on the service levels of both channels as well as the consumers’ valuation of the product and shopping experience. The direct channel’s service is measured by the delivery lead time for the product; whereas, the retail channel’s service is measured by product availability. We identify optimal dual channel strategies that depend on the channel environment described by factors such as the cost of managing a direct channel, retailer inconvenience and some product characteristics. We also determine when the manufacturer should establish a direct channel or a retail channel if he is already selling through one of these channels to begin with. Finally, we conduct a sequence of controlled experiments with human subjects to investigate whether our model makes reasonable predictions of human behavior. We determine that the model accurately predicts the direction of changes in the subjects’ decisions as well as their channel strategies in response to the changes in the channel environment. These observations suggest that the model can be used in designing channel strategies for an actual dual channel environment.
Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD0028 Management. Industrial Management
Divisions: Faculty of Engineering and Natural Sciences > Academic programs > Manufacturing Systems Eng.
Faculty of Engineering and Natural Sciences
Depositing User: Murat Kaya
Date Deposited: 13 Nov 2008 09:28
Last Modified: 26 Apr 2022 08:25
URI: https://research.sabanciuniv.edu/id/eprint/10667

Actions (login required)

View Item
View Item