Retail reimagined: pricing optimization in single channel, multi-channel and omni-channel retailing

This study examines two consequences when a producer adds a new digital channel. The first is the channel’s interest effects between the newly added digital and the existing channel. The second is the rivalry effects between a producer and retailer. We analytically develop four models for four different channel strategies to optimize the price of channels. The present research informs the producer that if customers are very heterogeneous, then the producer may propose a multichannel strategy. If customers become homogenous, then the producer will acquire an omni-channel strategy. The producer provides a brick-and-mortar approach if the target customers are neither diverse nor comparable. We discuss the channel interest for market leadership. The producer employs the digital channel when the impact of rivalry becomes severe. The retailer might limit its market leadership when this independently constructed rivalry in the retail market helps to mitigate the optimization problem of channel pricing.