Reserach Of The Pricing Strategy Of Large Retailers

In the last 30 years, the retail industry developed rapidly. Large retailers have become one of the hot topics of research. Since large retailers face suppliers and consumers at the same time, they should take both sides of users into account when developing pricing strategy. Two-sided markets theory provides a new way to analysis large retailers'pricing strategy. Because foreign large retailers are swarming into China, domestic retailers face severe challenges. Effective pricing strategy is a powerful weapon of competition; therefore research on large retailer's pricing strategy is of great importance.Base on two-sided markets theory, this paper establishes pricing models to study pricing strategy of large retailers. Firstly, two-sided markets theory is used to identify large retailers as two-sided platform firms. Suppliers and consumers are taken as the users of the platform. After that this paper studies the two-sided markets features of large retailers, such as cross-group network externalities, positive feedback, lock-in, etc. This is necessary for the analysis of the pricing strategy. This paper divides the business progress of the retailers into two stages, initial stage and stable stage, and cross-group network externalities are different in the two stages. Then pricing models of large retailers are established. After analyzing the model, it is found that cross-group network externalities play an important role in large retailers'pricing in initial stage. Large retailers offer a low price to the one who provides larger cross-group network externalities. For suppliers provide larger externalities than consumers, large retailer offer a low price to suppliers in initial stage. In stable stage, it is found that large retailer is not only a monopolist but also a competitor. So when pricing, retailers should take more factors into consideration. In this stage, large retailers offer a lower price to the user who provides larger cross-group network externalities or receives smaller externalities. This just meets the rule of internalizing the externalities. Large retailers also offer a lower price to the side with higher demand elasticity, lower unit cost and switching cost. Otherwise, large retailers would set a higher price to the side.