Continuous increasing consumer service for multi-item dual-channel retail management

Abstract

Along with the advancement of technology and consumer expectations, online-to-offline retailing is seeking attention in the retailing industries. Online-to-offline retailing is a powerful strategy that bridges the gap between the convenience and reach of online shopping with the tangible experience and service of physical stores. Customer satisfaction and brand loyalty are basic pillars to enhance profit for the retail industry. Providing different services like repairs, exchanges, and home delivery enhances customer satisfaction and builds trust in the particular industry. In e-commerce, the importance of delivery service is emphasized, with fast and reliable delivery being a key factor in customer satisfaction. An online-to-offline retailing system for multiple items is developed in this study by considering consumer service efficiency demand. A pricing strategy that relies on the channel of distribution and the impact of advertising on consumer demand is taken into account. The manufacturer offers complimentary home delivery services for orders surpassing a specified threshold. To implement advanced technologies, a huge budget is required. To make the study realistic, a budget and space are considered. The retailing system's total profit is ultimately maximized by determining the optimal values for selling price, advertisement investment, customer care costs across various channels, ordering quantity, and investment to minimize setup costs for different items. A classical optimization approach is employed to derive a semi closed-form solution for the proposed model. Sensitivity analysis and examination of special cases are provided to demonstrate the practicality of this research. Through numerical illustrations, it is established that the profit maximization occurs when the defective rate adheres to a Chi-square distribution. Imposing budget and space restrictions leads to a 19.91% increase in system profit while offering free home delivery services boosts the profit by 15.77%.