Operational Decisions And Coordination Strategy Of Retailer-sponsored Gift Card In Supply Chain

Due to fierce market competition, businesses take a variety ways of promotions. Among them, gift card is widely used in major businesses, and its promotion model is also different. In this paper, we consider retailer-sponsored gift card in supply chains for the following research.First, we studied the operational decisions of retailer-sponsored gift card. We develop different models depending on whether the wholesale price is fixed or endogenous, the gift card redemption is constant or increasing in gift card value. We explore the optimal wholesale price, the optimal retail price and the optimal gift card value and get the profits of retailer, manufacturer and the supply chains. Finally, we do a comparative static analysis to explore the implications of taking gift card to manufacturer, retailer and consumers. We found that when the gift card redemption is constant, the consumer’s final valuation of the gift card and the average return on sales of all goods retailer is the key to make decisions. When the gift card redemption is increasing in gift card value, take gift card promotion is always profitable.Second, we studied the coordination strategy of retailer-sponsored gift card. At this point, the retailer and the manufacturer are as a whole one for joint decisions. We explore the optimal retail price and the optimal gift card value to compare with decentralized supply chains. We studied the supply chain coordination strategy, and then gives incentive schemes to coordinate supply chains. We found that whether the gift card redemption is constant or increasing in gift card value, centralized supply chain’s profit are always more than decentralized supply chain’s. At this point we proposed a coordination strategy based on profit sharing contract, making the the same profit between centralized and decentralized supply chain.