Cannibalization and competition effects on a manufacturer's retail channel strategies: Implications on an omni-channel business model

This paper shows the manufacturer's channel strategies: (i) if customers are very heterogeneous with regard to their receptiveness to online shopping, the manufacturer may use a multi-channel strategy. (ii) if the customer sector becomes homogeneous, the manufacturer will become more willing to adopt an omni-channel strategy. (iii) if customers are neither similar nor very different, the manufacturer uses a brick-and-mortar strategy. This paper also shows results on the issue of channel conflict in terms of market power: (i) the retailer may voluntarily limit its market power and thus, self-created competition in the retail market alleviates the problem of double-markup to some extent. (ii) the manufacturer can use an online channel when inter-competition effect becomes severe.