Coordinating Multi-Channel Pricing of Seasonal Goods

Advancement in information technology has opened new avenues for traditional retailers to expand their operations. Pricing, which has been a critical issue, is more important than ever before as traditional retailers pursue multi-channel sales. In this paper the author studies the pricing problem of a retailer selling a seasonal product simultaneously in a ‘brick and mortar’ store as well as online. Optimal prices are derived and different product-market conditions are determined under which different combinations of channel adoptions are profitable for the retailer. Impact of various factors such as consumers channel preference, seasonality of the product and additional off-line holding and displaying costs on the optimal prices and profits are examined to provide critical managerial insights. Their results indicate that more “seasonal” a product more is the relative efficiency of the online channel. The author also finds that even if the market strongly favors the ‘bricks and mortar’ store, the profits for the retailer are boosted if the online shopping preference for the customer population are positively influenced. The author’s analysis also demonstrates that inter-channel and inter-temporal discounts increase as the seasonality of the product increases.