IDEAS home Printed from https://ideas.repec.org/a/spr/elcore/v21y2021i2d10.1007_s10660-019-09386-z.html
   My bibliography  Save this article

The value of offline channel subsidy in bricks and clicks: an O2O supply chain coordination perspective

Author

Listed:
  • Zhisong Chen

    (Nanjing Normal University
    New York University)

  • Li Fang

    (Nanjing Normal University)

  • Shong-Iee Ivan Su

    (Soochow University)

Abstract

This paper aims to explore a rarely studied mutual promotional effects, operational strategies and cross-channel subsidy policies in a two-stage/two-player online-to-offline (O2O) supply chain. The centralized, decentralized and coordination decision models are developed, analyzed and compared for O2O mode without offline subsidy, O2O mode with offline subsidy and the pure online/offline channel mode. The revenue sharing contract (RSC) and two-part tariff contract (TTC) with Nash bargaining game are incorporated into the coordination models as the coordinating mechanisms. The numerical and sensitivity analyses based on an industry representative product (a popular smart phone product) are conducted and the corresponding results are compared to derive managerial insights and practice implications. The key findings show that a coordination strategy with offline subsidy can create the highest value to a two-player O2O supply chain and its members. As far as whether RSC or TTC coordinating mechanism should be undertaken, it depends on the risk-taking attitude and the relative power of both players in the supply chain. With a focus on the O2O supply chain strategy exploration, this study amends the literature shortage problem and broaden the much-needed knowledgebase in the O2O supply chain coordination studies.

Suggested Citation

  • Zhisong Chen & Li Fang & Shong-Iee Ivan Su, 2021. "The value of offline channel subsidy in bricks and clicks: an O2O supply chain coordination perspective," Electronic Commerce Research, Springer, vol. 21(2), pages 599-643, June.
    • Handle: RePEc:spr:elcore:v:21:y:2021:i:2:d:10.1007_s10660-019-09386-z
    DOI: 10.1007/s10660-019-09386-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10660-019-09386-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10660-019-09386-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cai, Gangshu (George), 2010. "Channel Selection and Coordination in Dual-Channel Supply Chains," Journal of Retailing, Elsevier, vol. 86(1), pages 22-36.
    2. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    3. Alberto Sa Vinhas & Jan B. Heide, 2015. "Forms of Competition and Outcomes in Dual Distribution Channels: The Distributor’s Perspective," Marketing Science, INFORMS, vol. 34(1), pages 160-175, January.
    4. Nicholas C. Petruzzi & Maqbool Dada, 1999. "Pricing and the Newsvendor Problem: A Review with Extensions," Operations Research, INFORMS, vol. 47(2), pages 183-194, April.
    5. Ji, Jingna & Zhang, Zhiyong & Yang, Lei, 2017. "Comparisons of initial carbon allowance allocation rules in an O2O retail supply chain with the cap-and-trade regulation," International Journal of Production Economics, Elsevier, vol. 187(C), pages 68-84.
    6. Yunzeng Wang, 2006. "Joint Pricing-Production Decisions in Supply Chains of Complementary Products with Uncertain Demand," Operations Research, INFORMS, vol. 54(6), pages 1110-1127, December.
    7. Martin A. Lariviere, 2006. "A Note on Probability Distributions with Increasing Generalized Failure Rates," Operations Research, INFORMS, vol. 54(3), pages 602-604, June.
    8. Li, Xiang & Li, Yongjian & Cao, Wenjing, 2019. "Cooperative advertising models in O2O supply chains," International Journal of Production Economics, Elsevier, vol. 215(C), pages 144-152.
    9. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475.
    10. Xu Chen & Xiaojun Wang & Xinkuang Jiang, 2016. "The impact of power structure on the retail service supply chain with an O2O mixed channel," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 294-301, February.
    11. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    12. Chen, Jing & Zhang, Hui & Sun, Ying, 2012. "Implementing coordination contracts in a manufacturer Stackelberg dual-channel supply chain," Omega, Elsevier, vol. 40(5), pages 571-583.
    13. Fei Gao & Xuanming Su, 2018. "Omnichannel Service Operations with Online and Offline Self-Order Technologies," Management Science, INFORMS, vol. 64(8), pages 3595-3608, August.
    14. Oliveira, Fernando S. & Ruiz, Carlos & Conejo, Antonio J., 2013. "Contract design and supply chain coordination in the electricity industry," European Journal of Operational Research, Elsevier, vol. 227(3), pages 527-537.
    15. Kay-Yut Chen & Murat Kaya & Özalp Özer, 2008. "Dual Sales Channel Management with Service Competition," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 654-675, June.
    16. Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
    17. Dumrongsiri, Aussadavut & Fan, Ming & Jain, Apurva & Moinzadeh, Kamran, 2008. "A supply chain model with direct and retail channels," European Journal of Operational Research, Elsevier, vol. 187(3), pages 691-718, June.
    18. Wei-yu Kevin Chiang & Dilip Chhajed & James D. Hess, 2003. "Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design," Management Science, INFORMS, vol. 49(1), pages 1-20, January.
    19. Yunzeng Wang & Li Jiang & Zuo-Jun Shen, 2004. "Channel Performance Under Consignment Contract with Revenue Sharing," Management Science, INFORMS, vol. 50(1), pages 34-47, January.
    20. Fuguo Zhao & Desheng Wu & Liang Liang & Alexandre Dolgui, 2016. "Lateral inventory transshipment problem in online-to-offline supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1951-1963, April.
    21. Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
    22. Yugang Yu & Xiaoya Han & Jie Liu & Qin Cheng, 2015. "Supply chain equilibrium among companies with offline and online selling channels," International Journal of Production Research, Taylor & Francis Journals, vol. 53(22), pages 6672-6688, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pei-Ju Wu, 2023. "O2O switching determinants and successful drivers in omnichannel retailing services," Service Business, Springer;Pan-Pacific Business Association, vol. 17(3), pages 771-788, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhisong Chen & Shong-Iee Ivan Su, 2021. "Consignment supply chain cooperation for complementary products under online to offline business mode," Flexible Services and Manufacturing Journal, Springer, vol. 33(1), pages 136-182, March.
    2. Zhisong Chen & Chaonan Tang & Jianhui Peng, 2023. "Nominal effect vs actual effect: overconfidence in a consignment omnichannel," Electronic Commerce Research, Springer, vol. 23(2), pages 843-876, June.
    3. Zhisong Chen & Jianhui Peng, 2022. "Should the assembly system with direct omnichannel introduce integrated management service? A game-theoretical modelling study," Electronic Commerce Research, Springer, vol. 22(4), pages 1307-1350, December.
    4. Liu, Yan & Shi, Hongyan & Petruzzi, Nicholas C., 2018. "Optimal quality and quantity provisions for centralized vs. decentralized distribution: Market size uncertainty effects," European Journal of Operational Research, Elsevier, vol. 265(3), pages 1144-1158.
    5. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    6. Matsui, Kenji, 2020. "Optimal bargaining timing of a wholesale price for a manufacturer with a retailer in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 287(1), pages 225-236.
    7. Xue, Musen & Zhang, Jianxiong & Zhu, Guowei, 2020. "Quantity decision timing with spillover effect and asymmetric demand information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    8. Raza, Syed Asif & Govindaluri, Srikrishna Madhumohan, 2019. "Pricing strategies in a dual-channel green supply chain with cannibalization and risk aversion," Operations Research Perspectives, Elsevier, vol. 6(C).
    9. Zhen-juan Xia & Yong Liu & Qi Zhang, 2022. "A dual supply chain revenue sharing contract considering online reviews and rebate," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(3), pages 321-331, June.
    10. Woonghee Tim Huh & Kun Soo Park, 2013. "Impact of transfer pricing methods for tax purposes on supply chain performance under demand uncertainty," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(4), pages 269-293, June.
    11. Xiang Fang & Jun Ru & Yunzeng Wang, 2021. "The Effect of List Price on Channel Performance with Consignment," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 235-252, January.
    12. Zhang, Guangming & Dai, Gengxin & Sun, Hao & Zhang, Guitao & Yang, Zhilin, 2020. "Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    13. Ciwei Dong & Liu Yang & Chi To Ng, 2020. "Quantity Leadership for a Dual-Channel Supply Chain with Retail Service," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-32, March.
    14. Zhang, Dengfeng & de Matta, Renato & Lowe, Timothy J., 2010. "Channel coordination in a consignment contract," European Journal of Operational Research, Elsevier, vol. 207(2), pages 897-905, December.
    15. Yan, Yingchen & Zhao, Ruiqing & Liu, Zhibing, 2018. "Strategic introduction of the marketplace channel under spillovers from online to offline sales," European Journal of Operational Research, Elsevier, vol. 267(1), pages 65-77.
    16. Subrata Saha, 2016. "Channel characteristics and coordination in three-echelon dual-channel supply chain," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(3), pages 740-754, February.
    17. Wu, Qing & Mu, Yinping & Feng, Yi, 2015. "Coordinating contracts for fresh product outsourcing logistics channels with power structures," International Journal of Production Economics, Elsevier, vol. 160(C), pages 94-105.
    18. Xiao, Tiaojun & (Junmin) Shi, Jim, 2016. "Pricing and supply priority in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 254(3), pages 813-823.
    19. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2019. "Factory encroachment and channel selection in an outsourced supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 73-83.
    20. Xue Chen & Jun Li & Zhongbao Wang, 2023. "Equilibrium Decisions for Fresh Product Supply Chain Considering Consumers’ Freshness Preference," Networks and Spatial Economics, Springer, vol. 23(3), pages 771-797, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:elcore:v:21:y:2021:i:2:d:10.1007_s10660-019-09386-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.