Optimal advance selling strategy with information provision for omni-channel retailers

Wen Zhang, Yi He (), Qinglong Gou and Weizhe Yang
Additional contact information
Wen Zhang: University of Science and Technology of China
Yi He: Hainan University
Qinglong Gou: University of Science and Technology of China
Weizhe Yang: University of Science and Technology of China

Annals of Operations Research, 2023, vol. 329, issue 1, No 20, 573-602

Abstract: Abstract Demand information and consumer valuation uncertainty of new products have significant impacts on both consumers’ purchasing behavior and retail operations. To address the information transparency for new products launching, this study examines the profitability of omni-channel pre-ordering (i.e., compared to traditional online pre-ordering), a new advance selling strategy for retailers whereby consumers can solve product value uncertainty first and then decide whether to purchase in advance. Our analysis finds that advance selling is not always an appropriate choice for the retailer, but is contingent on related costs (e.g., losses from the costs of returns for retailers and consumers and the hassle cost of solving uncertain value for consumers). Specifically, only when the retailer’s return cost is relatively low and the hassle cost of solving uncertain value is relatively high should the retailer adopt the traditional online pre-ordering strategy. However, when the hassle cost of solving uncertain value is relatively low, the omni-channel pre-ordering strategy is more profitable for the retailer. By contrast, advance selling should not be offered when the retailer’s return cost and the hassle cost of solving uncertain value are both high. Next, we derive the optimal advance selling price and ordering quantity for the regular season for different strategies. Our results reveal that the optimal price varies along with the costs involved in the consumer’s purchasing choice. Finally, we find that the retailer is more likely to order a smaller quantity when the traditional online pre-ordering option is used.

Keywords: Advance selling; Product valuation uncertainty; Strategic consumer behavior; Information provision; Showroom (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10479-020-03896-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:329:y:2023:i:1:d:10.1007_s10479-020-03896-y

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-020-03896-y

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().