This paper studies how multichannel retailers choose the product quality level and decide which attribute to make prominent in their physical store in a competitive environment.
This paper develops a game theoretic model, in which multichannel retailers' decisions are made in three stages. Using prominent experiential attributes (e.g. functionality) in their offline store and product quality decisions, multichannel retailers are capable of transferring the sales between different channels.
This analysis shows that making different attributes prominent in their physical store may be an equilibrium, and each multichannel retailer chooses the highest quality level for the prominent attribute. However, the prominent attribute of the highest quality level is not always optimal. Under certain conditions, multichannel retailers may make the experiential attribute prominent in their respective physical stores, which can result in equilibrium.
The results indicate that multichannel retailers should avoid blindly highlighting high-quality attributes in a competitive environment, or falling into price completion.
From the perspective of prominent attributes, this study designs the optimal product line based on channel characteristics. The results of the research can provide practical implications for multichannel retailers to increase sales.
