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Research

Channel Competition in Retail

  • Apr 24, 2019
Channel Competition in Retail

The issue of multi-channel competition in retailing is a complex problem for many manufacturer and retailers. Using a mathematical model, Ivey’s Hubert Pun and his colleagues examine how a manufacturer can use the strategy of opening an online channel (selling directly to consumers) to manipulate a retailer’s decision about whether or not to open a discount store (e.g., Nordstrom Rack) to sell a supplier’s off-price product, which would compete with the manufacturer’s product. We find that without the discount store’s threat, the manufacturer would not establish an online channel when the setup cost is large. But a manufacturer should establish an online channel to deter the retailer from introducing a discount store, even if the setup cost is high.

Chen, Jing, Hubert Pun, and Wei Li (2018), “Using Online Channel to Defer the Launch of Discount Retailing Store,” Transportation Research Part E: Logistics and Transportation Review, vol. 120 (December), 96-115.