ESD Distinguished Speak Seminar by Prof. Giri Kumar Tayi

25 Mar 2015 11.00am to 12noon SUTD Think Tank 20 (BLDG 2 Level 3 Room 2.305)

Modern consumers frequently switch between online and offline channels when they navigate through various stages of the purchase process, which motivates multi-channel sellers to develop omni-channel strategies that optimize their overall profit. Our study examines the important role of consumer “pseudo-showrooming”, or the consumer behavior of inspecting one product at a seller’s physical store before buying a related but different product at the same seller’s online store, in driving a profitable omni-channel product placement strategy under which the multi-channel seller carries a larger product assortment at the online store than at the physical store.

We develop a stylized game-theoretic model in which a multi-channel firm offers two horizontally differentiated but related products and consumers are uncertain about their fit with either product. A consumer’s fit uncertainty with a particular product can be fully resolved after the consumer has inspected that product in person, or be partially resolved after the consumer has inspected the other related product. Our analysis shows that compared to selling both products through the dual channel, the firm obtains a greater profit by selling only one product through the dual channel and the other through the online channel exclusively, by inducing consumer pseudo-showrooming for the online exclusive product, if the fit probability of products and consumers’ cost for returning a misfit product are both in the intermediate range. Moreover, we find that over a large range of parameter values, consumers also enjoy a greater total surplus when the firm adopts the product placement strategy that induces consumer pseudo-showrooming, suggesting an interesting “win-win” situation. Moreover, we show that when the firm offers two products of different vertical qualities, it garners the most benefit from consumer pseudo-showrooming by selling the higher-quality product through the online channel exclusively. Collectively, our study offers a compelling demand-side justification of the commonly witnessed practice of multi-channel sellers to offer products online exclusively even when offline selling is feasible.

Speaker Bio:
Giri Kumar Tayi is a Professor of Management Science and Information Systems at the School of Business, SUNY at Albany. His research interests are interdisciplinary and cover IS, OM and OR. His papers have appeared in Operations Research, Management Science, MIS Quarterly, IEEE Transactions, Networks, Naval Research Logistics, Journal of Combinatorial Optimization, INFORMS Journal of Computing, Journal of Computer Security, CACM and ISR. He serves on the editorial boards of ISR, Decision Sciences and IEEE Computing Now, among others.