Impacts of Platform’s Omnichannel Coupons on Multichannel Suppliers

Abstract

While coupons that can be redeemed only in online channels have been issued by e-commerce platforms for decades, a new type of platform’s coupons, i.e., omnichannel coupons, which can be redeemed in both online and store channels, is gaining popularity with the rise of the omnichannel retail mode. It is interesting to explore the conditions under which omnichannel coupons are more advantageous to platforms and multichannel suppliers that sell products through platforms and physical stores. Two game models are developed in two cases where an e-commerce platform offers single channel coupons or omnichannel coupons for a multichannel supplier. Two scenarios are considered: one in which a consumer’s valuation of a product that fits his or her need is homogeneous and another in which the valuation is heterogeneous. Equilibrium outcomes show that under the homogeneous scenario, the product price and coupon face value in both coupon modes increase with the product’s fit probability when the cross-selling revenue is high, while decrease with the product’s fit probability when the cross-selling revenue is low. However, under the heterogeneous scenario, the price in both modes increases with the product’s fit probability only when the supplier’s loss from returns is low and the cross-selling revenue is high, and the coupon face value always decreases with the product’s fit probability. Compared with single channel coupons, omnichannel coupons may lead to a higher product price under certain conditions. Furthermore, omnichannel coupons can lead to higher total demand and benefit both the platform and the supplier if and only if the product’s fit probability is low and the supplier’s loss from returns is high. An extension shows that the platform’s preference for omnichannel coupons is weakened when the supplier offers a partial refund policy.

Keywords

Omnichannel / coupon promotion / e-commerce platform / game theory

References

[1] Abhishek V, Jerath K, Zhang Z J. Agency selling or reselling? Channel structures in electronic retailing. Management Science, 2015, 62(8): 2259-2280.

[2] Bell D R, Gallino S, Moreno A. Offline showrooms in omnichannel retail: Demand and operational benefits. Management Science, 2017, 64(4): 1629-1651.

[3] Berman B, Thelen S. A guide to developing and managing a well-integrated multi-channel retail strategy. International Journal of Retail & Distribution Management, 2004, 32(3): 147-156.

[4] Cao L L, Li L. The impact of cross-channel integration on retailers’ sales growth. Journal of Retailing, 2015, 91(2): 198-216.

[5] Chen B T, Chen J. When to introduce an online channel, and offer money back guarantees and personalized pricing?. European Journal of Operational Research, 2017, 257: 614-624.

[6] Chen P P, Zhao R Q, Yan Y C, Li X. Promotional pricing and online business model choice in the presence of retail competition. Omega, 2020, 94: 102085.

[7] Chen P P, Zhao R Q, Yan Y C, Zhou C. Promoting end-of-season product through online channel in an uncertain market. European Journal of Operational Research, 2021, 295(3): 935-948.

[8] Feng N, Chen J, Feng H, Li M. Promotional pricing strategies for platform vendors: Competition between first- and third-party products. Decision Support Systems, 2021, 151: 113627.

[9] Gallino S, Moreno A. Integration of online and offline channels in retail: The impact of sharing reliable inventory availability information. Management Science, 2014, 60(6): 1434-1451.

[10] Gao F, Su X M. Omnichannel retail operations with Buy-Online-and-Pick-up-in-Store. Management Science, 2016, 63(8): 2478-2492.

[11] Geng S D, Li W L, Qu X F, Chen L R. Design for the pricing strategy of return-freight insurance based on online product reviews. Electronic Commerce Research and Applications, 2017, 25: 16-28.

[12] Goraya M S, Zhu J, Akram M S, Shareef M A, Malik A, Bhatti Z A. The impact of channel integration on consumers’ channel preferences: Do showrooming and webrooming behaviors matter?. Journal of Retailing and Consumer Services, 2020, 65: 102130.

[13] Hu J L, Chiou Y H, Hwang H. Coupons and price discrimination in vertically-correlated markets. Managerial and Decision Economics, 2004, 25(1): 29-40.

[14] Hu M, Xu X L, Xue W L, Yang Y. Demand pooling in omnichannel operations. Management Science, 2021, 68(2): 883-894.

[15] Jiang Y Q, Liu F, Lim A. Digital coupon promotion and platform selection in the presence of delivery effort. Journal of Retailing and Consumer Services, 2021, 62: 102612.

[16] Kwark Y, Chen J Q, Raghunathan S. Platform or wholesale? A strategic tool for online retailers to benefit from third-party information. MIS Quarterly, 2017, 41(3): 763-785.

[17] Li G, Zhang T, Tayi G K. Inroad into omni-channel retailing: Physical showroom deployment of an online retailer. European Journal of Operational Research, 2020, 283(2): 676-691.

[18] Li Y M, Li G, Tayi G K, Cheng T C E. Return shipping insurance: Free versus for-a-fee?. International Journal of Production Economics, 2021, 235: 108110.

[19] Li Z H, Wang D, Yang W S, Jin H S. Price, online coupon, and store service effort decisions under different omnichannel retailing models. Journal of Retailing and Consumer Services, 2022, 64: 102787.

[20] Li Z H, Yang W S, Chen X T. Omnichannel inventory models accounting for Buy-Online-Return-to-Store service and random demand. Soft Computing, 2021, 25(17): 11691-11710.

[21] Li Z H, Yang W S, Jin H S, Wang D. Omnichannel retailing operations with coupon promotions. Journal of Retailing and Consumer Services, 2021, 58: 102324.

[22] Li Z H, Yang W S, Liu X H, Si Y Y. Coupon promotion and its two-stage price intervention on dualchannel supply chain. Computers & Industrial Engineering, 2020, 145: 106543.

[23] Li Z H, Yang W S, Si Y Y. Dynamic pricing and coupon promotion strategies in a dual-channel supply chain based on differential game. Kybernetes, 2021, 51(11): 3201-3235.

[24] Lin X G, Chen C Y, Lin Z Z, Zhou Y W. Pricing and service strategies for two-sided platforms. Journal of Systems Science and Systems Engineering, 2019, 28(3): 299-316.

[25] Melero I, Sese F J, Verhoef P C. Recasting the customer experience in today’s omni-channel environment. Universia Business Review, 2016, 50: 18-37.

[26] Montazeri S, Tamaddoni A, Stakhovych S, Ewing M. Empirical decomposition of customer responses to discount coupons in online FMCG retailing. Journal of Retailing and Consumer Services, 2021, 58: 102340.

[27] Narasimhan C. A price discrimination theory of coupons. Marketing Science, 1984, 3(2): 128-147.

[28] Nayal P, Pandey N, Paul J. Examining m-coupon redemption intention among consumers: A moderated moderated-mediation and conditional model. International Journal of Information Management, 2021, 57: 102288.

[29] Osuna I, Gonzclez J, Capizzani M. Which categories and brands to promote with targeted coupons to reward and to develop customers in supermarkets. Journal of Retailing, 2016, 92(2): 236-251.

[30] Pauwels K, Leeflang P S H, Teerling M L, Huizingh K R E. Does online information drive offline revenues? Only for specific products and consumer segments!. Journal of Retailing, 2011, 87(1): 1-17.

[31] Qin X L, Liu Z X, Tian L. The strategic analysis of logistics service sharing in an e-commerce platform. Omega, 2020, 92: 102153.

[32] Reimers I, Xie C. Do coupons expand or cannibalize revenue? Evidence from an e-market. Management Science, 2018, 65(1): 286-300.

[33] Swoboda B, Winters A. Effects of the most useful offline-online and online-offline channel integration services for consumers. Decision Support Systems, 2021, 145: 113522.

[34] Tian L, Vakharia A J, Tan Y L, Xu Y F. Marketplace, reseller, or hybrid: Strategic analysis of an emerging e-commerce model. Production and Operations Management, 2018, 27(8): 1595-1610.

[35] Verhoef P C, Kannan P K, Inman J J. From multichannel retailing to omni-channel retailing: Introduction to the special issue on multi-channel retailing. Journal of Retailing, 2015, 91(2): 174-181.

[36] Wang P, Du R, Hu Q Y. How to promote sales: Discount promotion or coupon promotion?. Journal of Systems Science and Systems Engineering, 2020, 29(4): 381-399.

[37] Wang T Y, Li Y L, Yang H T, Chin K S, Wang Z Q. Information sharing strategies in a hybrid-format online retailing supply chain. International Journal of Production Research, 2021, 59(10): 3133-3151.

[38] Yoo W S, Lee E. Internet channel entry: A strategic analysis of mixed channel structures. Marketing Science, 2010, 30(1): 29-41.

[39] Zhang S C, Zhang J X. Agency selling or reselling: E-tailer information sharing with supplier offline entry. European Journal of Operational Research, 2020, 280(1): 134-151.