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A manufacturer distribution issue: how to manage an online and a traditional retailer

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  • Nawel Amrouche

    (Long Island University)

  • Ruiliang Yan

    (Texas A&M University)

Abstract

The Internet’s popularity and success have shaped new relationships in B2B market. The use of dual channels becomes a widespread practice and new challenges face channel members. We assess the benefit of two coordinating mechanisms namely the whole-channel price and the quantity discount when a manufacturer sells his product through a traditional and an online store and uses a single wholesale price for both retailers. Then, we extend the analysis to two-wholesale pricing scenario. Our model suggests that product compatibility to the web is a key factor impacting the decision to coordinate the channel or not and which coordination mechanism to use. We found also that the whole channel is always better-off when coordination is implemented though channel members have different positions with regards to such decision. Hence, a profit-sharing mechanism is required to satisfy all members. Finally, we analyze the effect of varying channel substitutability on channel members’ profitability.

Suggested Citation

  • Nawel Amrouche & Ruiliang Yan, 2016. "A manufacturer distribution issue: how to manage an online and a traditional retailer," Annals of Operations Research, Springer, vol. 244(2), pages 257-294, September.
    • Handle: RePEc:spr:annopr:v:244:y:2016:i:2:d:10.1007_s10479-015-1982-6
    DOI: 10.1007/s10479-015-1982-6
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