A new business mode for FTs chain in an e-commerce environment

Abstract

With the rise in the online demand for fashion and textiles (FTs) along with the development of e-commerce, a business mode called drop-shipping mode has emerged. Despite the fact that the drop-shipping mode has many merits, this method has less earning power compared with the traditional business mode. This study proposes a mix business mode for FTs chains in an e-commerce environment. Traditional and drop-shipping modes are special cases of the mix mode. In addition, a generalized model is built to analyze the profitability of FTs chains. Our study shows that, in most cases, the mix mode improves overall profit of FTs chain. Moreover, we consider the seasonality and the short life cycle of fashion items in analyzing the relationship between the e-retailer's optimal inventory level and demand distribution parameters. The numerical example shows that, by changing their inventory level, e-retailers can address the demand fluctuation using the mix mode. The proposed mix mode employs both business modes to enhance the profitability of a FTs chain. As such, the mix mode is an effective method to address demand fluctuation for FTs in an e-commerce environment. © 2014 Xihui Wang et al.