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Allocating a hybrid retailer's assortment across retail stores: Bricks-and-mortar vs online

Authors
Journal
Journal of Business Research
0148-2963
Publisher
Elsevier
Volume
67
Issue
6
Identifiers
DOI: 10.1016/j.jbusres.2013.03.003
Keywords
  • Retail Assortment
  • Integer Programming
  • Hybrid Retailing Models
  • E-Commerce

Abstract

Abstract This paper develops an IP model to determine item allocation for a hybrid retailer's store network, comprising bricks-and-mortar and online stores. Products with low carrying costs are distributed between the bricks-and-mortar stores and the online store. Products with high carrying costs can be withdrawn from the bricks-and-mortar stores and made available exclusively at the online store where the inventory carrying costs are comparatively lower. This strategy assists the hybrid retailer to not only improve the profitability of its bricks- and-mortar stores but also to retain the custom of the market segment that is loyal to the items withdrawn from the traditional stores. In this framework, the online channel complements rather than competes with traditional channels. This model is used to conduct an extensive simulation study to analyze the impact of important business factors on system profitability.

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