Retailers' multichannel and price advertising strategies

Research output: Journal article publicationJournal articleAcademic researchpeer-review

73 Citations (Scopus)

Abstract

Online retailing boasts two major advantages: convenience of home shopping and easy access to information. In this paper, I argue that these two features have important implications for retailers' channel and advertising decisions. Two major questions are addressed: When should a conventional bricks-and-mortar retailer adopt a multichannel strategy? When should a multichannel retailer use its website to advertise offline prices? Analysis shows that the answers hinge on the nature of the product, the retailer's costs, and the competitors' strategies as well as the competitiveness of the market. Multichannel retailing is not necessarily the best strategy for all retailers; no adoption, asymmetric adoption, and symmetric adoption of the strategy are all possible equilibria. Advertising the in-store prices online is not always optimal. Price advertising in multichannel retailing has a different effect when compared with conventional single-channel retailing. It helps coordinate the channels by shifting the sales from online to offline, which is particularly useful when margins online are relatively low. The finding that multichannel retailers can benefit from drawing consumers back to physical stores highlights the risk of boosting online sales without considering the adverse effect on the offline channel and indicates a shifting role of the Web in retailers' businesses.
Original languageEnglish
Pages (from-to)1080-1094
Number of pages15
JournalMarketing Science
Volume28
Issue number6
DOIs
Publication statusPublished - 1 Nov 2009

Keywords

  • Channel coordination
  • Distribution channel
  • Game theory
  • Internet
  • Multichannel retailing
  • Price advertising

ASJC Scopus subject areas

  • Business and International Management
  • Marketing
  • Economics and Econometrics

Cite this