Dual sales channel management with price competition

Official URL: http://192.168.1.20/record=b1301499 (Table of Contents)

A significant number of manufacturers have started to sell their products through company-owned stores as well as through independent retailers. More interestingly, many do so in direct competition with their retailers. In addition, growth in the use of the Internet for commerce and developments in logistics have increased the ways a manufacturer might reach its end customers. In this thesis, we study a manufacturer's problem of managing its direct sales channel alongside an independently-owned bricks-and-mortar retail channel, when the channels compete in price. We develop multi-stage game theoretical models of the relation between the manufacturer and the retailer. We study two different dual channel models: In Model 1, the manufacturer's direct channel is online, whereas the retail channel is traditional. In this model, we assume a population of consumers that are heterogeneous in their channel preferences. Our focus is on understanding how consumer valuation and the relative attractiveness of the channels affect the manufacturer's dual channel strategies. In Model 2, we did not specify particular channel formats. In this model, our focus is on the interaction of the dual channel strategy with the double marginalization issue. To this end, we compare the results in centralized and decentralized scenarios under different price sensitivity combinations in the two channels. We also illustrate our findings in the two models through numerical examples.