Decision and Coordination of an O2O Supply Chain With Market Segmentation and Showrooming Effect

Decision and Coordination of an O2O Supply Chain With Market Segmentation and Showrooming Effect

Guohu Qi, Xuemei Zhang, Jiawei Hu, Haoran Chen
DOI: 10.4018/IJISSCM.287129
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Abstract

This paper investigates impacts of market segmentation and showrooming effect on the decision-making of an O2O supply chain, and puts forwards a contract to coordinate the O2O supply chain. Results show that, the showrooming effect is beneficial to the manufacturer, retailer and the supply chain, and the retailer will offer offline showrooming service. Under the influence of market segmentation, O2O supply chain is not necessarily better than single-channel supply chain structure. But adopting advertising and other means to improve consumers’ online channel acceptance, it can realize transformation from single-channel to O2O structure. The benefits of showrooming effect can eliminate the disadvantage of market segmentation. Moreover, a service cost sharing contract is put forward, which can perfectly coordinate the O2O supply chain with market segmentation and showrooming effect. These findings help managers to understand which channel structure is optimal by considering market segmentation and showrooming effect and identify possible pathways for them to perfectly cooperation.
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1. Introduction

With the rapid development of mobile internet and e-commerce, online shopping is the main mode of consumer shopping (Gajewska et al., 2020). Manufacturers have opened up online channels and formed dual channels on the basis of the original offline channels, such as Nike, Apple, and Cisco Systems (Matsui, 2016). The emergence of online channels poses immense challenges for the traditional retailers. In order to deal with the threat of manufacturers’ online channels, retailers use their offline channels to provide offline services for consumers to promote market sales (Li et al., 2019; Bell et al., 2018). In order to alleviate the conflict between the two channels and encourage retailers to provide offline services, more and more manufacturers entrust online channels to retailers to realize the integration of online and offline channels, namely O2O mode (Wu et al., 2021). In the O2O supply chain, some consumers may transfer to online channels through online price comparison after receiving services in offline stores, which is called showrooming effect (Li et al., 2020). The showrooming effect not only affects the overall demand in the market (Basak et al., 2020), but also increases retailers’ offline service cost. Hence, retailers need to weigh costs and benefits to decide whether to provide offline showrooming service by considering showrooming effect in different supply chain structures.

For heterogeneous consumers, market segmentation strategy is a reasonable and accurate adjustment of products and marketing efforts to meet different customer needs and bring benefits to enterprises (Lin et al., 2020). Market segmentation is widely used as a means of enterprise competition (Liu et al., 2019). But, consumers belonging to different segments have different preferences, and thus have different substitution behaviors (Lee and Eun, 2020), which is called consumer choice behavior (Khan and Mohsin, 2017). Consumer choice behavior under market segmentation strategy has been investigated from many perspectives (Wang and Wang, 2017; Zhang et al., 2017; Yang et al., 2019; Hwang ang Park, 2016; Aviv et al., 2019), such as supply chain decisions and coordination (Buell and Kalkanci, 2021; Kabul and Parlaktürk, 2019; Wang et al., 2020; Farshbaf-Geranmayeh and Zaccour, 2021). They found that, because of consumer choice behavior, dual-channel supply chain structure is not always better than single-channel supply chain structure (Zhang et al., 2017). In this paper, the applicable conditions of different supply chain channel structure modes by considering both market segmentation and showrooming effect will be investigated.

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