[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v307y2023i1p103-115.html
   My bibliography  Save this article

Are price matching and logistics service enhancement always effective strategies for improving profitability?

Author

Listed:
  • Wei, Jie
  • Chang, Meijing
Abstract
Driven by increasingly fierce market competition, many traditional retailers have started to adopt price matching under which they promise to match competitors’ lower prices for the same product, and many online retailers have started to conduct logistics service enhancement. Motivated by these observations, we use the Hotelling model to develop a duopoly game, in which a traditional retailer and an online retailer sell the same product to consumers, to examine the effectiveness of price matching and logistics service enhancement in improving profitability. The results show that in the scenario where the online retailer does not conduct logistics service enhancement, the traditional retailer benefits from price matching only when the transportation cost to the brick-and-mortar store is high. However, in the scenario where the online retailer conducts logistics service enhancement, when the transportation cost is relatively low, the traditional retailer also has a chance to benefit from price matching. In contrast, regardless of the traditional retailer’s price matching strategy, the online retailer always benefits from logistics service enhancement. We also reveal that regardless of the online retailer’s logistics service enhancement strategy, the traditional retailer’s price matching can lead to Pareto improvement for both retailers as long as the transportation cost is high enough. However, only when the traditional retailer adopts price matching does the online retailer’s logistics service enhancement have a chance to lead to Pareto improvement for both retailers.

Suggested Citation

  • Wei, Jie & Chang, Meijing, 2023. "Are price matching and logistics service enhancement always effective strategies for improving profitability?," European Journal of Operational Research, Elsevier, vol. 307(1), pages 103-115.
    • Handle: RePEc:eee:ejores:v:307:y:2023:i:1:p:103-115
    DOI: 10.1016/j.ejor.2022.08.025
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221722006695
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2022.08.025?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. Hu, Yihong & Qu, Shengnan & Li, Guo & Sethi, Suresh P., 2021. "Power structure and channel integration strategy for online retailers," European Journal of Operational Research, Elsevier, vol. 294(3), pages 951-964.
    2. Yunchuan Liu & Rajeev K. Tyagi, 2011. "The Benefits of Competitive Upward Channel Decentralization," Management Science, INFORMS, vol. 57(4), pages 741-751, April.
    3. Tingliang Huang & Zhe Yin & Ying-Ju Chen, 2017. "Managing Posterior Price Matching: The Role of Customer Boundedly Rational Expectations," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 385-402, July.
    4. Verhoef, Peter C. & Kannan, P.K. & Inman, J. Jeffrey, 2015. "From Multi-Channel Retailing to Omni-Channel Retailing," Journal of Retailing, Elsevier, vol. 91(2), pages 174-181.
    5. Elie Ofek & Zsolt Katona & Miklos Sarvary, 2011. ""Bricks and Clicks": The Impact of Product Returns on the Strategies of Multichannel Retailers," Marketing Science, INFORMS, vol. 30(1), pages 42-60, 01-02.
    6. Yuri Levin & Jeff McGill & Mikhail Nediak, 2007. "Price Guarantees in Dynamic Pricing and Revenue Management," Operations Research, INFORMS, vol. 55(1), pages 75-97, February.
    7. Juzhi Zhang & Qinglong Gou & Feng Yang & Liang Liang, 2016. "Online hot selling period and its impact on e-retailer’s pricing strategies," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1899-1918, April.
    8. Xing, Dahai & Liu, Tieming, 2012. "Sales effort free riding and coordination with price match and channel rebate," European Journal of Operational Research, Elsevier, vol. 219(2), pages 264-271.
    9. 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.
    10. Guoming Lai & Laurens G. Debo & Katia Sycara, 2010. "Erratum to "Buy Now and Match Later: Impact of Posterior Price Matching on Profit with Strategic Consumers"," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 370-370.
    11. Fei Gao & Xuanming Su, 2017. "Omnichannel Retail Operations with Buy-Online-and-Pick-up-in-Store," Management Science, INFORMS, vol. 63(8), pages 2478-2492, August.
    12. Vibhanshu Abhishek & Kinshuk Jerath & Z. John Zhang, 2016. "Agency Selling or Reselling? Channel Structures in Electronic Retailing," Management Science, INFORMS, vol. 62(8), pages 2259-2280, August.
    13. Juncai Jiang & Nanda Kumar & Brian T. Ratchford, 2017. "Price-Matching Guarantees with Endogenous Consumer Search," Management Science, INFORMS, vol. 63(10), pages 3489-3513, October.
    14. Guoming Lai & Laurens G. Debo & Katia Sycara, 2010. "Buy Now and Match Later: Impact of Posterior Price Matching on Profit with Strategic Consumers," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 33-55, December.
    15. Tsan-Ming Choi & T. C. E. Cheng & Xiande Zhao & Xiang Li & Yongjian Li & Xiaoqiang Cai & Jun Shan, 2016. "Service Channel Choice for Supply Chain: Who is Better Off by Undertaking the Service?," Production and Operations Management, Production and Operations Management Society, vol. 25(3), pages 516-534, March.
    16. Chen, Jing & Chen, Bintong, 2019. "When should the offline retailer implement price matching?," European Journal of Operational Research, Elsevier, vol. 277(3), pages 996-1009.
    17. Qin, Xuelian & Liu, Zhixue & Tian, Lin, 2021. "The optimal combination between selling mode and logistics service strategy in an e-commerce market," European Journal of Operational Research, Elsevier, vol. 289(2), pages 639-651.
    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. Chen, Mengmiao & Hu, Qiying & Wei, Hang, 2017. "Interaction of after-sales service provider and contract type in a supply chain," International Journal of Production Economics, Elsevier, vol. 193(C), pages 514-527.
    20. repec:wly:soecon:v:82:4:y:2016:p:1186-1211 is not listed on IDEAS
    21. Bin Dan & Shuguang Zhang & Maosen Zhou, 2018. "Strategies for warranty service in a dual-channel supply chain with value-added service competition," International Journal of Production Research, Taylor & Francis Journals, vol. 56(17), pages 5677-5699, September.
    22. Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Consumer Heterogeneity and Competitive Price-Matching Guarantees," Marketing Science, INFORMS, vol. 20(3), pages 300-314, June.
    23. Li Li & Li Jiang & Liming Liu, 2012. "Service and Price Competition When Customers Are Naive," Production and Operations Management, Production and Operations Management Society, vol. 21(4), pages 747-760, July.
    24. Constantinou, Evangelos & Bernhardt, Dan, 2018. "The price-matching dilemma," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 97-113.
    25. Fernando Bernstein & Awi Federgruen, 2007. "Coordination Mechanisms for Supply Chains Under Price and Service Competition," Manufacturing & Service Operations Management, INFORMS, vol. 9(3), pages 242-262, January.
    26. Yunchuan Liu & Z. John Zhang, 2006. "Research Note—The Benefits of Personalized Pricing in a Channel," Marketing Science, INFORMS, vol. 25(1), pages 97-105, 01-02.
    27. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
    28. Pavel Kireyev & Vineet Kumar & Elie Ofek, 2017. "Match Your Own Price? Self-Matching as a Retailer’s Multichannel Pricing Strategy," Marketing Science, INFORMS, vol. 36(6), pages 908-930, November.
    29. Chen, Bintong & Chen, Jing, 2017. "When to introduce an online channel, and offer money back guarantees and personalized pricing?," European Journal of Operational Research, Elsevier, vol. 257(2), pages 614-624.
    30. Morris A. Cohen & Seungjin Whang, 1997. "Competing in Product and Service: A Product Life-Cycle Model," Management Science, INFORMS, vol. 43(4), pages 535-545, April.
    31. Aleksandr Yankelevich & Brady Vaughan, 2016. "Price‐Match Announcements in a Consumer Search Duopoly," Southern Economic Journal, John Wiley & Sons, vol. 82(4), pages 1186-1211, April.
    32. Kurata, Hisashi & Nam, Seong-Hyun, 2013. "After-sales service competition in a supply chain: Does uncertainty affect the conflict between profit maximization and customer satisfaction?," International Journal of Production Economics, Elsevier, vol. 144(1), pages 268-280.
    33. Arcan Nalca & Tamer Boyaci & Saibal Ray, 2013. "Competitive Price-Matching Guarantees: Equilibrium Analysis of the Availability Verification Clause Under Demand Uncertainty," Management Science, INFORMS, vol. 59(4), pages 971-986, April.
    34. Benny Mantin & Harish Krishnan & Tirtha Dhar, 2014. "The Strategic Role of Third-Party Marketplaces in Retailing," Production and Operations Management, Production and Operations Management Society, vol. 23(11), pages 1937-1949, November.
    35. Xin Liu & Qinglong Gou & Layth Alwan & Liang Liang, 2016. "Option contracts: a solution for overloading problems in the delivery service supply chain," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 187-197, February.
    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. Wei, Jie & Chang, Meijing & Zhao, Jing, 2023. "Price matching and product differentiation strategies considering showrooming," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    2. Chen, Enming & Zhou, Zhongbao & Li, Ruiyang & Chang, Zhongxiang & Shi, Jianmai, 2024. "The multi-fleet delivery problem combined with trucks, tricycles, and drones for last-mile logistics efficiency requirements under multiple budget constraints," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 187(C).

    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. Zheng, Zhijun & Li, Gang & Cheng, T.C.E & Wu, Feng, 2022. "Offline supplementary service strategies for the online marketplace: Third-party service or marketplace service?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    2. Sun, Libo & Jiao, Xiaoting & Guo, Xiaolong & Yu, Yugang, 2022. "Pricing policies in dual distribution channels: The reference effect of official prices," European Journal of Operational Research, Elsevier, vol. 296(1), pages 146-157.
    3. Chen, Ming & Chen, Zhi-Long, 2024. "Stop clicking around and book direct: Impact of best rate guarantee on hotel pricing," European Journal of Operational Research, Elsevier, vol. 313(3), pages 1088-1104.
    4. Zhen, Xueping & Xu, Shuangshuang & Li, Yongjian & Shi, Dan, 2022. "When and how should a retailer use third-party platform channels? The Impact of spillover effects," European Journal of Operational Research, Elsevier, vol. 301(2), pages 624-637.
    5. Chen, Jing & Chen, Bintong, 2019. "When should the offline retailer implement price matching?," European Journal of Operational Research, Elsevier, vol. 277(3), pages 996-1009.
    6. Hu, Yihong & Qu, Shengnan & Li, Guo & Sethi, Suresh P., 2021. "Power structure and channel integration strategy for online retailers," European Journal of Operational Research, Elsevier, vol. 294(3), pages 951-964.
    7. Zhen, Xueping & Xu, Shuangshuang, 2022. "Who should introduce the third-party platform channel under different pricing strategies?," European Journal of Operational Research, Elsevier, vol. 299(1), pages 168-182.
    8. Li, Lin & Li, Guo, 2023. "Integrating logistics service or not? The role of platform entry strategy in an online marketplace," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 170(C).
    9. Peng He & Tong-Yuan Wang & Qi Shang & Jun Zhang & Henry Xu, 2024. "Knowledge mapping of e-commerce supply chain management: a bibliometric analysis," Electronic Commerce Research, Springer, vol. 24(3), pages 1889-1925, September.
    10. Li, Jin & Wang, Haoyu & Shi, Victor & Sun, Qi, 2024. "Manufacturer's choice of online selling format in a dual-channel supply chain with green products," European Journal of Operational Research, Elsevier, vol. 318(1), pages 131-142.
    11. Li, Guo & Li, Lin & Sun, Jiasen, 2019. "Pricing and service effort strategy in a dual-channel supply chain with showrooming effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 32-48.
    12. Jiang, Yuqing & Liu, Fan & Lim, Andrew, 2021. "Digital coupon promotion and platform selection in the presence of delivery effort," Journal of Retailing and Consumer Services, Elsevier, vol. 62(C).
    13. Lei, Bozhuang & Li, Gang & Cheng, T.C.E., 2024. "Friend or foe? Examining local service sharing between offline stores and e-tailers," Omega, Elsevier, vol. 123(C).
    14. Cao, Kaiying & Xu, Yuqiu & Hua, Ye & Choi, Tsan-Ming, 2023. "Supplier or co-optor: Optimal channel and logistics selection problems on retail platforms," European Journal of Operational Research, Elsevier, vol. 311(3), pages 971-988.
    15. Bian, Yiwen & Wang, Hang & Yan, Shuai & Han, Xiaohua, 2024. "Platform channel strategy of selling format: Effect of asymmetric service information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 185(C).
    16. Wei, Yuansheng & Dong, Yuxuan, 2022. "Product distribution strategy in response to the platform retailer's marketplace introduction," European Journal of Operational Research, Elsevier, vol. 303(2), pages 986-996.
    17. Pun, Hubert & Chen, Jing & Li, Wei, 2020. "Channel strategy for manufacturers in the presence of service freeriders," European Journal of Operational Research, Elsevier, vol. 287(2), pages 460-479.
    18. He, Bo & Gupta, Varun & Mirchandani, Prakash, 2021. "Online selling through O2O platform or on your own? Strategic implications for local Brick-and-Mortar stores," Omega, Elsevier, vol. 103(C).
    19. Li, Zonghuo & Wang, Di & Yang, Wensheng & Jin, Hyun Seung, 2022. "Price, online coupon, and store service effort decisions under different omnichannel retailing models," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    20. He, Yi & Xu, Qingyun & Shao, Zhen, 2021. "“Ship-from-store” strategy in platform retailing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).

    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:eee:ejores:v:307:y:2023:i:1:p:103-115. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    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.