Online Review Service Strategy of Offline Retailer with Spillover Effect
Online review can relieve consumers of concerns about product fit,thus many offline retailers try to introduce the online review service,which costs a lot for firms.Moreover,in the context of offline and online channel retailing,the spillover effect of online channels has an important influence on the channel competition.Spillover effect refers to the fact that for every unit sold online,the sales volume in offline channel changes.In particular,a positive(negative)spillover effect indicates that the sales volume of online channel increases(decreases)the demand of offline channel.Therefore,the offline retailer has a trade-off between product reve-nue and service cost when introducing online review service.Motivated by the above business practices,we study whether the offline retailer provides online review service at the brick-and-mortar store and the influence of the spillover effect on equilibrium results.According to different spillover effect cases,i.e.,non-spillover effect(N)and spillover effect(S),and online review service strategies in offline channel,i.e.,non-online review service(N)and online review service(R),we develop four different Stackelberg game models in a dual-channel supply chain consisting of one online retailer and one offline retailer.Thus,there are four models:NN,NR,SN,SR,respectively.Then,we obtain equilibrium results in different models and discuss the impact of equilibrium strategies and spillover effect on optimal decisions and profits.Furthermore,we verify how the effect of critical factors has on equilibrium strategy.The results reveal that(1)the equilibrium introduction strategy of online review service depends on consum-ers'preference for positive reviews and spillover effect.When consumers'preference is high and the negative spillover effect is salient,the online review service will achieve a win-win result between the two retailers,whereas the optimal online review service level and offline retail price may be lower.However,the prominent difference in channel information effectiveness makes both retailers better off.As the positive spillover effect is more salient,the motivation that the offline retailer provides review service declines,and the market demand and retail price in both channels increase.(2)Without online review service at the offline store,the consumers'preference for positive comments would hurt the offline retailer but benefit the online retailer,whereas the result is opposite in the presence of online review service.That is,with online review service at the brick-and-mortar store,there are lower online retail price and fierce channel competition.Thus,the online retailer may be worse off when the positive spillover effect is low.Specially,if the offline retailer does not provide the online review service,the retail price of the two products is directly proportional to the market demand.(3)The interaction between spillover effect and consumer preference for positive reviews affects retail price and market demand.In the presence of online review service,when the consumer preference for positive reviews is low,the offline retailer will set higher retail price,and positive spillover effect will make the market demand of offline channel worse off.By contrast,when the consumer preference is high,even though the retail price at the brick-and-mortar store is high and the price at the online store is low,more consumers will prefer to experience goods and purchase them from offline channel.(4)If the product popularity degree is high,the offline retailer will improve online review service level to expand market demand.However,as the accuracy degree of online review or the unit misfit cost increases,the retail price and profit of both retailers also increase.
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