Coordination of the traditional and the online channels for a short-life-cycle product

The study considers a retailer that sells a short-life-cycle product and uses the online channel as a supplement to its traditional channel. The inventory of the product is finite. The sales season is split into two periods: the premium period and the discount period. The study investigates how the retailer coordinates two channels with proper pricing strategies and channel mix. We introduce a new strategy to address channel conflict, in which two channels are introduced at different periods and the retailer employs different pricing mechanisms for two channels. We also explore the effects of return rate, service difference, and the retailer's risk attitude. Numerical examples are used to compare the solutions with other channel selection and pricing strategies, and further investigate the situations when some assumptions are not satisfied. The study suggests that the benefits of introducing the online channel are contingent on the potential demand of the online channel, the inventory level of the product, and the time of introducing the online channel. The retailer could adjust price difference between two channels to reduce channel conflict. Its risk attitude also influences the pricing strategies and sales revenue. Managerial implications of the study are discussed.