Product rollover and direct sales decisions in dual-channel supply chains

Abstract

This study investigates product rollover and direct sales decisions in a supply chain with one fashion manufacturer and one retailer when two style generations are sequentially introduced to the market over two periods. The retailer serves as the exclusive sales channel during the introductory period of a style generation. Both the retailer and manufacturer are capable of selling the old style generation in the second period. The retailer adopts dual rollover if she sells the old style generation, and single rollover if she does not. We develop a two-stage game to explore the chain membersaequilibrium decisions while accounting for the manufactureras cost inefficiency in direct sales and consumersamental account deficit. We find that the manufactureras cost inefficiency has double-edged effects and can offset the negative effect of consumersamental account deficit on the introduction of a new style generation. Furthermore, a wina win outcome can be achieved when the manufacturer with an intermediate level of cost inefficiency engages in direct sales and consumers have high valuations of the old style generation or when the manufacturer with significant cost inefficiency does not engage in direct sales.