Cooperation Strategy And Contract Design In An Online-to-offline Supply Chain Under Competition

With the rapid development of mobile technology and the widespread popularity of e-commerce,more and more emerging manufacturers are willing to distribute product through online channels first,including the eyewear manufacturer Warby Parker,the mattress manufacturer Endy.However,consumers cannot examine products through online channels,which causes product fit uncertainty.This further leads to not only demand loss from the low willingness of consumers buying online,but also product handling costs for manufacturers from product return.To simulate product demands and reduce product return,some manufacturers begin to cooperate with retailers who provide retail service to establish offline channels for consumers to examine products and enjoy services.Under the online-to-offline cooperation,retailers also distributes other products in store which may compete with manfuacturers' products.This would affect manufacturers' products realized through offline channels,and cause a complex cooperation between supply chain members.In addition,the retailer's retail service cost information generally cannot be observed by the manufacturer,which increases the complexity and difficulty of effective operation for the online-to-offline supply chain.Thus,the case where a manufacturer cooperates with a retailer to establish an offline channel is investigated.On this basis,this thesis studies the cooperation strategy with contracting in an online-to-offline supply chain under information symmetry and information asymmetry,and investigates the impacts of critical factors,including product fit probabililty,product competition,and channel competition,on the optimal decisions and profits of supply chain members.First,we consider that a manufacturer cooperates with a retailer who provides retail service in store allowing consumers to inspect product,in which the retailer's store plays the role of physical showroom for the manufacturer's products.The retailer could be a non-competing or a competing retailer according to the product it sold in store.By comparing the manufacturer's profit under the case where the manufacturer cooperates with a non-competing retailer with that under the case where the manufacturer cooperates with a competing retailer,we obtain the manufacturer's optimal cooperation strategy.The results show that the offline hassle cost and the degree of product differentiation determine the manufacture's optimal cooperation strategy.Under certain conditions,the manufacturer benefits more from cooperating with the competing retailer,and its willingness to cooperate with the competing retailer increases in the competing product value and decreases in the product fit probability.Besides,the manufacturer decides different pricing strategies when cooperating with different retailers.More specifically,the manufacturer should strategically set a high price when cooperating with the competing retailer.Second,we consider that the manufacturer cannot observe the retailer's retail service information.By comparing the manufacturer's expected profits under the cases where the manufacturer cooperates with a non-competing retailer and with a competing retailer,we obtain the manufacturer's optimal cooperation strategy under information asymmetry.Then,the impacts of product characteristics and information asymmetry on the manufacturer's optimal cooperation strategy and profit are analyzed.The results show that product competition does not always cause profit loss for the manufacturer,this is determined by product return cost and competition intensity.Under the optimal strategy,with the increases of product return cost,the manufacturer's optimal contract would change from high transfer payment with high commission rate,to low transfer payment with high commission rate,and then to high transfer payment with low commission rate if the retailer owns a high efficiency in providing retail service.Although the manufacturer suffers from information asymmetry,product competition would reduce the manufacturer's profit loss under certain condition.Then,we consider the case where the retailer's retail service cost information is unobservable and the retailer has the right to decide whether to introduce a competing product in store under the physical showroom partnership with the manufacturer who owns an online channel.After comparing the cases where the retailer introduces and does not introduce the competing product,we obtain the impacts of competing product introduction on the manufacturer' and the retailer's profits.On this basis,we propose incentive contracts for the manufacturer to confront the retailer's competing product introduction strategy and to realize Pareto improvement for supply chain members.The results show that the impacts of competing product introduction on the profits of supply chain members are determined by product characteristics under physical showroom partnership.Under the case where the manufacturer's preference on competing product introduction is consistent with that of supply chain while is inconsistent with that of the retailer,the manufacturer could change contracts to force the retailer changing product introduction strategy and to realize Pareto improvement.Although the manufacturer always suffers loss from information asymmetry,the introduction of competing product could reduce its loss under certain conditions.Finally,we consider the case where the retailer could provide retail channel or physical showroom for the manufacturer who distributes product through online channel,in which the retailer provides retail service with unobservable cost information.After comparing the profits of supply chain members,we obtain the manufacturer's and the retailer's preference on cooperation modes.On this basis,we propose incentive contracts for the manufacturer to force the retailer to choose the cooperation mode that benefits both of them.In addition,we investigate the value of physical showroom partnership under information asymmetry.The results show that the manufacturer's and the retailer's preferences on cooperation mode are affected by return cost and delivery cost.If their preferences are inconsistent,the manufacturer could change contracts to force the retailer changing cooperation mode and to realize Pareto improvement.Although information asymmetry causes profit loss for the manufacturer,physical showroom could lower the manufacturer's profit loss when implementing the online-to-offline channel strategy.