Impact of information delivery capability and behavior of research shoppers on distribution channel decision

Abstract

In the past decades, advances in information and communication technology have enhanced the ability of firms to deliver product information and to sell their products. With the advent and growing popularity of the Internet, firms are using the online channel to advertise, promote, and sell their products. The modern prevalence of mobile devices and the ubiquity of available networks provide firms with yet more options for reaching customers. Having access to multiple distribution channels allows firms to take advantage of the unique characteristics of each channel. However, market competition also affects distribution channel selection, complicating the process substantially. This study assesses competing firms’ optimal distribution channel strategies, based on the information delivery capability (IDC) of a channel, consumer channel preferences, the level of product differentiation (or competition), and price rigidity across channels. Conceptually, this thesis is concerned with determining under what conditions firms adopt which channel(s) for which purpose(s).

If consumers were uniformly smart consumers who gather all available product information and purchase the product at the lowest price across channels, then a firm would not adopt a hybrid strategy if the IDC of either channel were sufficiently high. If a channel provides enough product information to consumers, and consumers explore every possible channel to exploit the lowest pricing, then the firm should not employ multiple channels, because of the associated costs. Furthermore, if channel costs are not too high, (1) both firms are likely to choose a hybrid strategy if the IDC of either channel is low, but, if the IDC of the channel is high, than (2) firm 1 is likely to adopt a hybrid strategy, but firm 2 is likely to choose either channel. These patterns are consistent when consumers are not only uniformly smart consumers, but also one-stop shoppers who research a channel and purchase the product w...