Showcasing optimization in omnichannel retailing

With recent breakthroughs in technology and digitalization, omnichannel retailing has now become the norm, and shoppers are able to seamlessly make the switch between different channels for one purchase. Retailers can leverage the blurred lines between the channels and adopt a business model that best suits the industry, such as having a virtual online showcase and letting the customers pick up the products in person or having an offline showroom and having products delivered to customers. The latter concept, in which information about products is gathered in a store or a showroom and fulfillment is made via delivery to customers, is particularly suitable when the customers prefer to experience the products in person to gain sufficient confidence in their potential purchase. This is often the case for high-value large products with high shipping costs. In this context, we propose a quantitative approach to optimize the showcasing portfolio for a given retailer to maximize the exposure of the features that customers expect to experience from a visit to a showroom. The problem is formulated as a mixed-integer optimization problem to maximize the expected customer showcasing utility through module and product showcasing and product testing. To demonstrate the practicality of our approach, we conduct a case study based on real data obtained from 17 dealerships of our industrial partner, a manufacturer of recreational vehicles. The numerical results of this case study show that the expected showcasing utility for a retailer can significantly increase, even in the presence of spatial and/or budget constraints.