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Differentiation and pricing power of online retailers

Author

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  • Zhenjie Wang

    (Renmin University of China)

  • Chunling Zhu

    (Renmin University of China)

  • Shanwu Tian

    (Renmin University of China)

  • Ping Li

    (Renmin University of China)

Abstract

This study aims to contribute to marketing theory by applying monopolistic competition theory to investigate how differentiation affects online retailers’ pricing power. We examine the intermediary effect of customer loyalty on the relationship between differentiation and pricing power of online retailers. We assume that customers have different preferences for the differentiated characteristics of online retailers, and thus different degrees of willingness to pay premiums, which gives online retailers pricing power. Structural equation modeling (SEM) is employed to test the hypothesized relationships between differentiation, customer loyalty, and pricing power. The statistical results of the empirical data indicate that some of the differentiation characteristics of online retailers can cultivate their pricing power indirectly. Logistics quality followed by commodity assortment and transaction security produces profound effects on the buildup of pricing power with customer loyalty as an intermediary factor. Results further reveal that commodity quality is positively related to pricing power. This study expands the definition of differentiation by combining corporate strategic positioning with commodity pricing. Implications for practice and directions for future research are provided.

Suggested Citation

  • Zhenjie Wang & Chunling Zhu & Shanwu Tian & Ping Li, 2019. "Differentiation and pricing power of online retailers," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-20, December.
    • Handle: RePEc:spr:fobric:v:13:y:2019:i:1:d:10.1186_s11782-019-0051-4
    DOI: 10.1186/s11782-019-0051-4
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    2. Yang Yang & Jianming Yao, 2021. "Resource integration optimization of convenience service platforms adopting dynamic service modes in new retail," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-19, December.

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