Selling luxury fashion online with social influences considerations: Demand changes and supply chain coordination

Bin Shen, Rongrong Qian, Tsan Ming Choi

Research output: Journal article publicationJournal articleAcademic researchpeer-review

43 Citations (Scopus)

Abstract

In the luxury fashion retailing industry, consumers can be categorized into the groups of fashion leader and fashion follower. These two groups influence one another and create social influences in the market. In this paper, we construct an analytical model to examine the effects of demand changes on a luxury fashion supply chain with social influences. We consider the case when the supply chain consisting of one supplier and one online retailer, provides differentiated services to different groups of consumers. We identify the optimal prices and differentiated online services. To maximize the channel profit, we find that adjusting the retail price alone is enough when a demand change is small, whereas adjusting both the retail price and online retail services are necessary when a demand change is sufficiently big. Furthermore, we investigate the impacts of social influences on online retail services and find that when the impacts of social influences are increasing, the supply chain is more likely to provide better services to the fashion leader group than the fashion follower group. Last but not least, we derive the respective conditions to achieve channel coordination by using three commonly seen policies in the fashion industry, namely the all-unit quantity discount policy, the capacitated linear pricing policy, and the profit sharing policy. A comparison among these policies is made and managerial insights are generated.
Original languageEnglish
Pages (from-to)89-99
Number of pages11
JournalInternational Journal of Production Economics
Volume185
DOIs
Publication statusPublished - 1 Mar 2017

Keywords

  • Demand changes
  • Luxury fashion
  • Online retail service
  • Retail supply chains
  • Social influences
  • Supply chain contracts

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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