Competitive Strategies for E-tailers in the Presence of Showrooming Caused by Match Uncertainty
With the glorious development of ecommerce and mobile Internet related information technology,more and more consumers tend to purchases online.Products match uncertainty acts as a major barrier for consumers purchasing online directly,indirectly affects demands as well as profits of both offline and online channels.Consumer showrooming behavior arises from their evaluation uncertainty about product attribute.For selecting proper items,consumers prefer to visit offline stores to touch and fell products.To counteract product match uncertainty,two practical strategies are proposed for the online retailers,i.e.,introducing a virtual showroom and offering the complimentary return-freight insurance.After experiencing products through the virtual showroom,consumers can update their beliefs about product's suitability according to Bayes'rule.And then consumers can select suitable products more precisely.Four duopoly competitive models consisting of a physical store and an online retailer are constructed.By solving the profit-maximized problems,the optimal prices of two players are obtained.Further,through comparing the online retailer's profit among four scenarios,the roles of the two strategies in mitigating product match uncertainty and whether it is profitable to adopt them are explored.Results show that both introducing a virtual showroom and offering the complimentary return-freight insurance induce the online retailer to raise its price.And the former generates growth in e-channel's demand,but the latter causes a reduction.Generally,introducing a virtual showroom and offering the complimentary return-freight insurance are two complementary methods.And in the condition when the cost for building a virtual showroom is not too large,it is advisable for the online retailer to adopt both of them.Further,the smaller the proportion of consumers with low travel cost is,the more willing to adopt the two counteractive strategies the online retailer is.Additionally,introducing a virtual showroom compels the physical store to reduce its retail price and leads to a reduction in its demand.As a result,the physical store's profits are hurt.On the contrary,offering the complimentary return-freight insurance even motivates the physical store to raise its pricing and brings in growth in the demand.Therefore,the physical can benefit from this return police.
product match uncertaintyvirtual showroomBayes'rulere turn-freight insurancepricing
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