Competition Between Customization-Enabled Offline Retailer and Online Retailer

Ananto, Prasasti Karunia Farista (2021) Competition Between Customization-Enabled Offline Retailer and Online Retailer. Masters thesis, Institut Teknologi Sepuluh Nopember.

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With the rapid development of the retailer and internet, customers switch from the offline to the online purchase channels, which has caused the offline retail to lose many potential customers. As online sales increase, customers worldwide have different tastes, preferences, and lifestyles. But the online retailer such as eBay and Zalando can present a significantly higher risk of a post-purchase product taste mismatch, and more customers want to purchase customization products to meet their taste. To further increase the offline retail’s profit, the offline retail can start to implement mass customization, which means each customer can purchase what product they want, so the offline retailer can provide products according to the preferences of heterogeneous tastes customers and can take over the online retail customers. Mass customization enables the offline retailer to satisfy heterogeneous customer taste preferences.
We extend the Hotelling model to analyze mass customization as a strategy for the offline retailer to compete with the online retailer that sells the same product. We investigate how customer’s heterogeneous taste preferences affect the supply chain’s performance. The Hotelling model is used to demonstrate the offline retailer and the online retailer differentiation in their geographic location. Besides, we incorporate a vertical line to represent customer’s heterogeneous taste preferences for certain product characteristics. We aim to find when the offline retailer can implement mass customization. We reach two major conclusions. First, a mass customization strategy may be an effective means for the offline retailer to mitigate the development of the online retailer. Second, the offline retailer’s profit grows, which means the mass customization strategy can lead to higher profit than the non-mass customization strategy under consideration of customer taste preference. The impact of mass customization on offline retailer’s profit depends on the mismatch cost factor T, and mass customization cost cm will reduce the loss of the offline retailer’s profit.

Item Type: Thesis (Masters)
Uncontrolled Keywords: Competition retailer, Mass Customization, Hotelling Model, Customer Taste Preferences
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HB Economic Theory > Economic forecasting--Mathematical models.
H Social Sciences > HD Industries. Land use. Labor > HD30.23 Decision making. Business requirements analysis.
H Social Sciences > HF Commerce > HF5416.5 Pricing
T Technology > T Technology (General) > T58.6 Management information systems
Divisions: Faculty of Intelligent Electrical and Informatics Technology (ELECTICS) > Information System > 59101-(S2) Master Thesis
Depositing User: Prasasti Karunia Farista Ananto
Date Deposited: 19 Aug 2021 13:27
Last Modified: 19 Aug 2021 13:27

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