Optimal Omnichannel Development Strategy in O2O Supply Chain under the Impact of Webrooming

Abstract

This study analyzes how webrooming affects the O2O supply chain of an e-tailer and a brick-and-mortar store. Two types of brick-and-mortar stores are considered: self-owned and franchised. We first determine via game theory the optimal pricing and service decisions for the e-tailer and brick-and-mortar store when prices are uniform or nonuniform online and offline. The results indicate that webrooming benefits both the e-tailer and brick-and-mortar store when prices are nonuniform. For self-owned stores, the online market share and consumer traveling costs weaken the positive webrooming effect on the e-tailer’s profit when the price is nonuniform. For the franchised store, webrooming weakens the positive role of online market share and reinforces the negative effect of traveling costs for the e-tailer. The positive effect of webrooming on franchised stores in the case of nonuniform pricing is more significant than in the case of uniform pricing when online market share or traveling costs are lower. These results have important implications for management and should help e-tailers develop an omnichannel strategy.