Omnichannel Inventory,Pricing And Order Fulfillment Decisions For A Retailer

Facing increasingly complex consumer demands and fierce market competition,retailers are gradually moving towards an omni-channel retail model that integrates online and offline,and are constantly exploring and innovating omni-channel operation strategies to provide consumers with seamless online and offline shopping experience.In the new era,more complex and diverse consumer characteristics and the growth gridlock in the traditional and electronic retail industry have driven retailers to transform and upgrade to an omni-channel model.The development of technology and the improvement of infrastructure have also provided strong support for the retail industry’s transformation and upgrade.Omni-channel retailing is characterized by the integration of online and offline channels and inventory sharing,and emerged to adapt to the changing needs of consumers in the e-commerce era.Different from the traditional retail environment,in the omni-channel environment,consumers can freely choose purchasing channels and can strategically transfer channels according to their needs.Retailers are sharing inventory across channels and exploring innovative omnichannel strategies to meet consumer demand more conveniently and quickly.The strategic behavior of consumers and the new characteristics of the omnichannel business model make the existing business logic and theoretical approaches inapplicable.Meanwhile,the impact of innovative omnichannel strategies that retailers are exploring in business practice on their operational decisions and all parties involved is also unknown and worth exploring.Based on the strategic consumer behavior and omnichannel characteristics in the omnichannel environment,this paper firstly explores the retailer’s innovative omni-channel offline store inventory sharing strategy;further,the retailer’s new and old products omnichannel configuration and inventory strategy are considered.Finally,an effective solution is provided to solve the omnichannel dynamic pricing and order fulfillment joint optimization problem of a retailer.The specific research contents are as follows:First,we explore the optimal inventory strategy for retailers with respect to the offline store inventory sharing strategy(SIS)implemented by the online retailer and offline retailer in cooperation to achieve fast delivery in real practice.We build a stylized model to analyze the impact of SIS strategy on retailer operations and consumer behavior,and then examine if and when the strategy is beneficial to these two competing,complementary channel retailers.We find that the SIS strategy has channel transfer incentive and market expansion effect.Also,online and offline retailers can always benefit from the SIS strategy by adjusting operational capabilities(store density of the offline retailer and distribution efficiency of the online retailer)and revenue sharing coefficients to achieve a win-win outcome.While the SIS strategy will encourage more customers to choose the online channel.However,in terms of the parameter domain dominated by the SIS strategy,this strategy is more valuable to the offline retailer than the online retailer.When considering the availability information that online retailers can provide,we find that the SIS strategy and the availability information strategy do not have complementary effects.However,the availability information provided by online retailers did not harm the omnichannel system.In addition,we find that it was more profitable for the offline retailer to prioritize offline demand when implementing an inventory sharing strategy.Second,considering the influence of consumer behavior and channel features on retailers’ new and old products channel configuration strategies in an omnichannel environment,a game model is constructed to explore retailers’ optimal inventory decisions and the choice of omnichannel configuration strategies.This paper demonstrates the significant effects of consumers’ channel shift behavior and offline store inventory availability risk and old product cannibalization effects on the retailer’s omnichannel configuration strategies.We find that when the retailer adds old products to the online channel for sale and thus implements a dual-rollover strategy,it will,on the one hand,drive consumers to the online channel and attract low-value customers to the old products,thus increasing total demand;on the other hand,it will also lead to a cannibalization effect of the old products on the new products,thus reducing the demand for the new products.In this case,when the marginal profit of the old product is not high enough or the offline store is not attractive enough(i.e.,the hassle cost of customer travel to the store is relatively high),the retailer should adopt a single-rollover strategy to prevent consumers from moving to the online channel and the cannibalization effect of the old product on the new product.In addition,it is not always beneficial for the retailer to sell new products in both online and offline channels because adding the online channel to sell new products when the offline channel is relatively unattractive can lead to channel shifting behavior among consumers and,consequently,loss of profit.Finally,with the omnichannel features,we study the omnichannel dynamic pricing and cross-channel order fulfillment joint optimization problem of a retailer with a network of physical stores and fulfillment centers facing limited initial inventory and no replenishment opportunity in a finite selling season.The classical multinomial logit(MNL)choice model is used to characterize the customers’ channel choice and product choice.Then,the omni-channel joint dynamic pricing and order fulfillment policy(OPFP)is identified based on the optimal solution of the deterministic relaxation to the stochastic control formulation of the original problem.Theoretically,we demonstrate that the proposed approximation policy is asymptotically optimal.We examine some variants of the OPFP to address the problem under various practical constraints and show that they maintain sufficiently good performance.In addition,we show that the proposed OPFP can yield a lower average order fulfillment cost than the heuristic order fulfillment policy that chooses the brick-and-mortar store with the lowest fulfillment cost.We also find that when the problem size is large,the re-optimization step does not necessarily increase the retailer’s profit.