Single-online-channel Retailer's Pricing and Service Decision in Showroom Omnichannel Retailing

Abstract

Today, omnichannel retailing has become the norm, while consumer experience has become the core of new retail. The omnichannel offline showroom improves market demand and reduces the online return rate by providing the ultimate experience service. In this study, we identify optimal pricing and experience service decisions as well as the effects of the showroom on demand and profitability when a single-online-channel retailer opens a showroom. Through numerical simulation and analysis, we find that, if the cost factor of an experience service effort reaches a certain threshold, then (1) opening the showroom channel will increase total demand and total profit and reduce online channel demand, and the reduced demand in the online channel will be transferred to the showroom channel; (2) after opening the showroom channel, joint optimization decisions that increase pricing and improve the experience service level can maximize total demand and total profit of the single-online-channel retailer.