Advance Selling Strategies For Retailers

Nowadays,with the rapid development of e-commerce,many industries have im-plemented advance selling for selling new products.Advance selling is a marketing strategy in which consumers are allowed to place orders for a new product(or ser-vice)before it is released.In China,the largest online retailing platform,Taobao.com,launched advance selling on November 11,2009,which triggered the upsurge of con-sumers’ crazy shopping and became the necessary sales mode of Taobao shopping fes-tival every year.Besides,large retailers such as Amazon and Bestbuy also provide new books and video games to consumers in the form of advance selling.As an emerging business model,the advance selling strategy has not only been widely used by firms,but also aroused great inter·est from academic circles.Many schol-ars have conducted indepth discussions on advance selling strategies based on business practices and pointed out the benefits from selling with pre-orders,such as increasing sales,reducing inventory risk,updating demand forecasts,and so on.In addition,they have studied many incentives to attract consumers to buy new products in advance.Based on the previous literature,this dissertation supplements the retailer’s advance selling strategy and pricing strategy.Specifically,this dissertation explores the prof-itability of the retailer when using advance selling strategy with delay in payments and omni-channel pre-ordering strategy,respectively.Then,under such circumstances,this dissertation studies the retailer’s optimal pricing mechanism considering consumers’reference price behavior.Firstly,motivated by this emerging industry practice,this dissertation studies a re-tailer’s advance selling strategy in which pre-ordering consumers are allowed to delay in payments and considers three advance selling strategies for the retailer,namely,free pre-order,deposit pre-order,and deposit expansion pre-order.Under the price com-mitment mechanism,this dissertation first derives not only the thresholds for advance selling strategies but also the retailer’s optimal advance selling price and ordering quan-tity,which are contingent on the relative size of the marginal cost and the lower bound of consumer valuation.Finally,this dissertation extends the model to a fixed pricing mechanism to further elucidate the retailer’s optimal decisions.Next,to address the information transparency for new products launching,this dis-sertation examines the retailer’s profitability from adopting omni-channel pre-ordering.Compared to traditional online pre-ordering,consumers can solve product value un-certainty first and then decide whether to purchase in advance under the omni-channel pre-ordering.Our analysis finds that advance selling is not always an appropriate choice for the retailer,but is contingent on related costs,such as,losses from the costs of returns for retailers and consumers and the hassle cost of solving uncertain value for consumers.Finally,this dissertation incorporates consumers’ reference price behavior into the retailer’s advance selling,and address the effect of reference price on the retailer’s op-timal advance selling strategy and corresponding pricing decisions.This dissertation drives optimal prices and corresponding expected profits of the retailer under the sce-narios of no advance selling,advance selling without considering the reference price effect,and advance selling with considering the reference price effect,respectively.The result is that the advance selling strategy is not always beneficial for the retailer,especially when the procurement cost is relatively high.Besides,the results present that the retailer benefits from considering reference price effects only if the positive refer-ence effect is relatively high.Finally,through numerical studies,this dissertation shows that dynamic pricing and pre-order price guarantee are dominated by price commitment,which reaches the maximum when positive and negative reference effects parameters are both the highest.The contributions of this dissertation are as follows:(i)Combining advance selling strategy with delay in payments,this dissertation fulfills the research gap in the literature of advance selling to strategic consumers;(ii)This dissertation considers the cost of solving valuation uncertainty for consumers,and investigates how physical showrooms impact the advance selling strategy based on consumers’ choices,from the point of view of information leakage;(iii)This dissertation introduces the reference price effects into the study of a retailer’s advance selling practice and simultaneously analyze and compare three different pricing strategies:dynamic pricing,pre-order price guarantee,and price commitment;(iv)This dissertation obtains the thresholds for different advance selling strategies with stochastic demand and product valuation uncertainty.