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Optimizing Retailer Ordering Strategies: a Comparative Analysis of Membership and Non-Membership Systems

Author

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  • Lina Xu

    (Zhejiang University of Technology
    Keyi College, Zhejiang Sci-Tech University)

  • Zhiqing Meng

    (Zhejiang University of Technology)

Abstract

In today’s evolving retail landscape, traditional competitive tactics have given way to a focus on service quality and operational efficiency. Paid membership systems have emerged as a strategic tool, bolstering immediate revenue streams and fostering long-term customer engagement and data-driven insights. This paper investigates the dynamics of paid membership systems within the retail industry, shedding light on their impact on ordering decisions and expected profits. Drawing from a theoretical foundation and empirical analysis, it unravels key determinants influencing retailer choices in membership and non-membership contexts. Underpinning the study is a comprehensive review of retailer ordering decisions, considering factors such as demand, cost, and lead time. For retailers, implementing a paid membership system introduces a distinctive “secondary payment” characteristic, creating dual revenue streams and heightening the significance of user experience. A mathematical model is constructed to explore the ordering behaviors of retailers embracing this system, filling a notable gap in academic discourse. Theoretical implications highlight how retail price, salvage income, and shortage loss impact optimal order quantities for member and non-member retailers. The research underscores the nuanced interplay between expanding customer bases and maximizing profits, offering critical insights for retailers navigating the complexities of paid membership implementation. Practical implications emphasize the pivotal role of accurate demand estimation in driving higher profits, particularly in the face of market demand fluctuations. This comparative analysis provides invaluable guidance for retailers considering or currently operating within paid membership systems, offering a roadmap for optimizing ordering strategies and maximizing profitability.

Suggested Citation

  • Lina Xu & Zhiqing Meng, 2024. "Optimizing Retailer Ordering Strategies: a Comparative Analysis of Membership and Non-Membership Systems," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13027-13048, September.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:3:d:10.1007_s13132-023-01638-6
    DOI: 10.1007/s13132-023-01638-6
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