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"Distribution channel"
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Agency Selling or Reselling? Channel Structures in Electronic Retailing
In recent years, online retailers (also called e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an agency selling format instead of using the more conventional reselling format? We find that agency selling is more efficient than reselling and leads to lower retail prices; however, the e-tailers end up giving control over retail prices to the manufacturer. Therefore, the reaction by the manufacturer, who makes electronic channel pricing decisions based on their impact on demand in the traditional channel (brick-and-mortar retailing), is an important factor for e-tailers to consider. We find that when sales in the electronic channel lead to a negative effect on demand in the traditional channel, e-tailers prefer agency selling, whereas when sales in the electronic channel lead to substantial stimulation of demand in the traditional channel, e-tailers prefer reselling. This preference is mediated by competition between e-tailers—as competition between them increases, e-tailers prefer to use agency selling. We also find that when e-tailers benefit from positive externalities from the sales of the focal product (such as additional profits from sales of associated products), retail prices may be lower under reselling than under agency selling, and the e-tailers prefer reselling under some conditions for which they would prefer agency selling without the positive externalities.
This paper was accepted by Chris Forman, information systems.
Journal Article
Assessing the feasibility of hyperlocal delivery model as an effective distribution channel
PurposeThe successive waves of the Covid-19 SARS-II pandemic and the attendant lockdown imposed by the governments worldwide drove the economic activities to a halt. Offices and factories closed, production of goods and services declined and supply chains got severely disrupted. Many companies were embattled with the grim reality of shrinkage of aggregate demand, first due to supply shock and later due to loss of jobs and wages. Amidst all this, the handling and shipping of commodities became extremely complex. As the pandemic shifted consumer preference in favour of digital platforms, more and more fast-moving consumer goods (FMCG) companies were confronted with multiple strategies and choices of an appropriate distribution channel to ensure smooth delivery of raw materials and products. The present study aims to study this shift and its implications in the Indian context.Design/methodology/approachA mix-method approach, integrating quantitative and qualitative analysis, is employed to investigate the factors influencing the selection of distribution channels amongst general trade, modern trade, e-commerce and hyperlocal for FMCG companies in India. The first phase of the study uses exploratory factor analysis (EFA), followed by the application of analytical hierarchy process (AHP) approach in a fuzzy environment to realise the priority weights and ranking of the identified factors. Finally, sensitivity analysis is performed to confirm the robustness of the fuzzy analytical hierarchy process (FAHP) outcomes.FindingsThe study revealed that modern trade has emerged as the most favoured channel in the post-pandemic Indian economy. It has the potential to disrupt general trade. The study also revealed that the hyperlocal delivery model is not economically viable, and the partnership of FMCG companies with these applications is at best a short-term solution. However, it must be submitted that due to its sheer capability to ensure quick deliveries within a confined geographic area, hyperlocal delivery will gain momentum with the advancement of technology.Originality/valueThis study can be seen as the first attempt to investigate the issues related to the selection of the distribution channels in the FMCG sector of India using multi-criteria decision-making technique (MCDM).
Journal Article
To Share or Not to Share: Demand Forecast Sharing in a Distribution Channel
This paper studies information sharing in a distribution channel where the manufacturer possesses better demand-forecast information than the downstream retailer. We examine three information-sharing formats: no information sharing (i.e., the manufacturer ex ante commits to not sharing its forecast), voluntary information sharing (i.e., the manufacturer makes the sharing decision ex post after receiving the forecast), and mandatory information sharing (i.e., the manufacturer is mandated to share its forecast). We characterize the equilibrium outcomes under the three sharing formats and investigate the firms’ preferences regarding these formats. It is shown that when the retailer is risk-neutral, both firms are indifferent between voluntary and mandatory sharing. Among the three formats, ex ante, the retailer prefers the no-sharing format whereas the manufacturer prefers the mandatory-sharing format. In addition, we find that a more accurate forecast benefits both firms under voluntary- and mandatory-sharing formats, but may hurt both firms under the no-sharing format. Finally, we show that risk aversion plays a critical role in the firms’ sharing decisions and the impact of forecast accuracy. Specifically, when the retailer is risk-averse, the manufacturer may prefer the no-sharing format over the voluntary-sharing format, and improving forecast accuracy may hurt both firms even under voluntary sharing.
Journal Article
Strategic information management in a distribution channel
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•Investigate the interactions between quality advertising and market research tactics.•Explain the variation in arrangements for product-consumer related information transmission.•The retailer prefers to postpone the market research decision after manufacturer's movement.•Either information decision sequence could become manufacturer's preferred scenario.
Two-way asymmetric information frequently hampers performances of manufacturer-retailer distribution channel members. Typically, the manufacturer is better informed about the quality of his product than the retailer while the latter knows more about her consumers’ preference for product quality than the manufacturer. Bridging these information gaps can enable more profitable channel (wholesale and retail) pricing decisions. Specifically, once the manufacturer knows his product quality, he can at some cost advertise it to the downstream retailer and her consumers. Similarly, the retailer can decide to conduct market research at some cost to more precisely determine her consumers’ preference for product quality and share her finding with the manufacturer. In this paper, the authors examine the strategic impacts of two alternative timings of these information gap-filling decisions: In the “Upfront Market Research” (UMR) scenario, the retailer moves first with her market research decision and then the manufacturer makes his product quality advertising decision. Alternatively, in the “Upfront Quality Advertising” (UQA) scenario, the manufacturer first decides about product quality advertising and then the retailer proceeds with her market research decision. This paper analytically investigates and compares the strategic impacts of the UMR and UQA scenarios on the firms’ equilibrium information strategies and payoffs in a two-way asymmetric information setting for the first time. The authors find that the retailer is always better off in the UQA than the UMR scenario while the manufacturer can find either UMR or UQA decision sequence more beneficial depending on the relative costs of market research and product quality advertising. The analyses offer new insights and guidelines for more efficient and profitable information acquisition and coordination in bilateral manufacturer-retailer channels.
Journal Article
Consumer Heterogeneity, Product Quality, and Distribution Channels
This paper shows that the effect of different distribution channel structures on product quality depends on the type of consumer heterogeneity and its distribution in a market. When consumer heterogeneity is uniformly distributed either vertically on willingness to pay or horizontally on transaction costs, a manufacturer may provide the same or lower product quality in a decentralized channel than in a centralized channel. In contrast, when consumer heterogeneity follows a more general distribution on willingness to pay, under certain conditions, the manufacturer may provide higher product quality in a decentralized channel than in a centralized channel. Decentralization also may lead to a higher product quality if consumer heterogeneity is uniformly distributed both vertically and horizontally, but not if consumer heterogeneity is uniformly distributed vertically on each of two product-quality attributes. Additionally, competition at the retail level may amplify these findings.
This paper was accepted by J. Miguel Villas-Boas, marketing.
Journal Article
Café or art exhibition? Which experience is more effective in luxury fashion flagships?
PurposeThe purpose of this study is to investigate the effect of brand experiences through cafés or art spaces in luxury fashion flagships on consumers’ buying behavior toward authorized shopping channels.Design/methodology/approachOnline questionnaires are used by adapting measurements from prior research. We test whether positive relationships exist between multi-faceted (i.e. sensory, emotional, intellectual, and relational) experiences, consumer’s revisiting intention toward the experiential spaces, and the purchase intention of luxury fashion goods from authorized channels, especially focusing on the mediation effect of the intention to revisit. We also include the experiential space type (cafés vs. art exhibitions) as moderator.FindingsThe results confirm that sensory, emotional, intellectual, and relational experiences in cafés or art exhibitions of luxury fashion flagships have a positive impact on the intention to revisit. This revisit intention to experience space has a significant effect on purchase intention from authorized shopping channels. Specifically, sensory experiences in an art space could lead to a positive revisit intention for consumers. Furthermore, relational experiences in cafés could create positive revisit intention in consumers.Originality/valueThis is the first study to compare consumers' perceptions by categorizing extended brand spaces and assessing experiential marketing for authorized shopping channels.
Journal Article
Sustainability challenges of last-mile logistics and transition to online grocery retailing in sparsely populated areas
Purpose This paper focuses on the last-mile logistics (LML) operations in fulfilling online grocery orders and the related sustainability considerations in sparsely populated areas like Australia. It aims to examine how online groceries in sparsely populated areas can benefit from online business. Specifically, this study seeks to investigate whether a centralized order fulfillment approach is better than the existing approach which fulfills online orders from local grocery stores.Design/methodology/approach A multi-method approach is employed to conduct a high level of cost and emission analysis between the existing and the proposed approaches to illustrate the ratios between the two approaches in terms of cost and carbon emissions. Mathematical models are developed with support from the literature. The model is empirically validated with a case study of grocery distribution in the city of Gold Coast, Australia.Findings It finds that the centralized order fulfillment approach in sparsely populated areas can achieve LML sustainability with low cost, high efficiency and less double handling. Meanwhile, the separation of in-store and online retailing processes improves the in-store shopping experience and online shopping visibility, jointly improves customer satisfaction, and consequently achieves a positive effect on long-term sustainability. Additionally, the possibility of automating order picking and dispatching at a central place can make the processes more efficient and help build more sustainable grocery retailing supply chains by using more environmentally friendly systems.Originality/value This paper offers analytical and empirical insights into the sustainability of multi-channel grocery retailing supply chains. The high-level model developed first incorporates the concept of online shopping adoption rates and can serve as a decision-making tool for practitioners to improve supply chain sustainability in LML.
Journal Article
Does it pay to book direct?: Customers’ perceptions of online channel distributors, price, and loyalty membership on brand dimensions
To attract a transient market, hotels primarily use several distribution channels, such as the following: the hotel directly, central reservation offices, travel agents, and online booking systems. Yet, little attention has been paid to the revenue management implications with regard to the focus on distribution channels. The purpose of this study was to examine the effects of channels and prices on brand dimensions and to study the role of hotel loyalty membership in the relationships. A 2 (channel) × 2 (price) × 2 (loyalty membership) quasi-experiment was designed to test the research objectives. Multivariate Analysis of Variance was used to test significant differences. The findings provide implications for the industry.
Journal Article
The developer’s optimal distribution strategy in the differentiated platform: the value of user feedback data and negotiation
As a variety of online game products are released on different platforms, developers actively collect user review data, we explore the optimal distribution channels of the online game considering application platform service level and network externalities, while also assessing the data's value in the context of digital products. In comparison to prior research, our challenge is to examine the distribution strategy of online games across regional and international platforms, and to explore the influence of data value on the distribution strategy. We have drawn some interesting conclusions. Firstly, regardless of data value, the optimal distribution channel is the international application platform when its inadaptability is low. However, when the inadaptability of the international platform is high, the optimal distribution channels are the domestic and foreign platforms. Secondly, developers may distribute a low-profit product and there is a tendency to release products for free. Additionally, the benefits resulting from data value can compensate for the drawbacks caused by the increased inadaptability of international platforms. Thirdly, the platforms and developers will determine whether to implement the data value strategy by analyzing the positive and negative data value. Furthermore, we explore the tripartite negotiation and bilateral negotiation between the developer and the platform. And the role of the platform as a bilateral application platform for developers and customers is analyzed.
Journal Article