Coordinating Multi-Channel Pricing of Seasonal Goods

Advancement in information technology has opened new avenues for traditional retailers to expand their operations. Pricing, which has been a critical issue, is more important than ever before as traditional retailers pursue multi-channel sales. In this paper we study the pricing problem of a monopolistic retailer selling a seasonal product simultaneously in a ‘brick and mortar’ store as well as online. Consumer utility theory is used to model the multi-channel demand. Optimal prices are derived and different product-market conditions are determined under which different combinations of channel adoptions are profitable for the retailer. Influence of various factors like consumers channel preference, seasonality of the product and additional off-line holding and displaying costs on the optimal prices and profits are examined to provide critical managerial insights. Our results indicate that more “seasonal” a product more is the relative efficiency of the online channel. We also find that even if the market strongly favors the ‘bricks and mortar’ store, the profits for the retailer are boosted if he can positively influence the online shopping preference for the customer population. Our analysis also demonstrates that inter-channel and inter-temporal discounts mount as the seasonality of the product increases.