The Strategy of Differentiated Products Distribution in a Dual-channel Supply Chain

Since there exists a dual-channel supply chain consisting of a retailer and an e-tailer, a theoretical and analytical framework was constructed to explore the mechanism of firms' preference for different distribution strategies and analyze the effect of different distribution strategies on decisions and profits by firms of the supply chain. The results demonstrate that when consumers are less sensitive to product quality differences, the manufacturer, retailer and e-tailer would prefer the distribution strategy of selling low-end products through offline channel and high-end products through online channel; in contrast, the opposite is true when consumers are more sensitive to product quality differences. When consumers are moderately sensitive to product quality differences, firms have different preferences for distribution strategy. Meanwhile, increasing the degree of online and offline product quality differences will help increase the manufacturer's profit significantly. Expansion analysis verified that the relevant conclusions are still valid in the case that manufacturers build their own online sales channels.