Shopping guide investment in new retail: A newsvendor problem with capital constranit

Abstract

This paper examines effect of shopping guide investment from new retail perspective with capital constraint retailer sourcing from trade credit. Apart from existing stochastic demand, there is efficacious demand stimulated by shopping guide investment in the market. This stimulating demand mainly depends on sale price and stochastic expected value of consumers. We consider effect of sale price and capital constraint on supply chain operational decision, like order decision and shopping guide investment strategy, etc. In our model, sale price has income effect and demand effect conversely on retailer's decision. When sale price is in a low level, income effect is dominant, making retailer improve inventory and shopping guide investment dramatically. On high sale price condition, demand effect is obvious, making order quantity keep robust and leading to decreasing of shopping guide investment. Besides, sale price has positive impact on wholesale price and can improve profit of retailer and manufacturer. We consider in influences of initial capital. With increase of initial capital, order quantity decreases and investment of shopping guide increases. This is risk shifting mechanism for manufacturer to improve wholesale price for response to retailer's bankruptcy risk. We find there exists shopping guide benefits to supply chain when retailer is extremely capital constraint. Numerical examples are given to demonstrate the impact of sale price and initial capital on optimal decision.