A Collaboration strategy for Complementary Products in Dual-channel Supply Chains
Direct sales channels are proliferating along with the rapid development of the Internet because they allow manufacturers to reduce transaction costs and manage channels.Direct sales channels are weakening the traditional retail channels and inviting competition from them.It is important for manufacturers to receive support from retailers by addressing the needs of retailers and dealing with channel conflicts. If direct sales channels and retail channels have complementary relationships and channel products can complement with each other,conflicts between the two sides can be mitigated.Channel conflicts can be reduced if direct sales and retail channels can collaborate and complement with each other.For instance,direct sales channels can help promote ancillary products,such as software,peripheral devices,and portable computer bags,for computer retailers. We adopt Bertrand's game model of channel-product complementary cooperation to analyze complementary strategies for channel products.The model assumes that manufacturers and retailers are of equal size.We discover that if consumers are sensitive to target product's channel price,target product's channel price will drop,the price of complementary goods will increase,and the demand and benefits of direct sales channels will decrease.The same logic can be applied to increasing the sales of retailer's complement products and profits if customers are sensitive to price of complementary goods. We further provide numerical evidence showing that an effective channel product complementary strategy is for retailers to choose right complementary products to sell in traditional retail channels.We also find that the higher the substitution coefficient of a manufacturer's products the more mutual benefits channels of both target and complementary products can realize.This study is concluded with further research directions on information asymmetry,as well as complementary and alternative products.