Optimal strategy for selling on group-buying website
Abstract: The purpose of this
paper is to help business marketers with offline channels to make decisions on
whether to sell through Group-buying (GB) websites and how to set online price
with the coordination of maximum deal size on GB websites.
Design/methodology/approach: Considering the deal structure of GB
websites especially for the service fee and minimum deal size limit required by
GB websites, advertising effect of selling on GB websites, and interaction
between online and offline markets, an analytical model is built to derive
optimal online price and maximum deal size for sellers selling through GB
website. This paper aims to answer four research questions: (1) How to make a
decision on maximum deal size with coordination of the deal price? (2) Will
selling on GB websites always be better than staying with offline channel only?
(3) What kind of products is more appropriate to sell on GB website? (4)How
could GB website operator induce sellers to offer deep discount in GB deals?
Findings and Originality/value: This paper obtains optimal strategies for
sellers selling on GB website and finds that: Even if a seller has sufficient
capacity, he/she may still set a maximum deal size on the GB deal to take
advantage of Advertisement with Limited Availability (ALA) effect; Selling
through GB website may not bring a higher profit than selling only through
offline channel when a GB site only has a small consumer base and/or if there
is a big overlap between the online and offline markets; Low margin products are
more suitable for being sold online with ALA strategies (LP-ALA or HP-ALA) than
high margin ones; A GB site operator could set a small minimum deal size to
induce deep discounts from the sellers selling through GB deals.
Research limitations/implications: The present study assumed that the
demand function is determinate and linear. It will be interesting to study how
stochastic demand and a more general demand function affect the optimal
strategies.
Practical implications: This paper provides a very useful model framework
and optimal strategies for sellers’ selling on GB website. It takes advantage
of the analytical model to explain much typical practical phenomenon for
E-commerce like free sale with limited availability and so forth. It also helps
GB website operator to induce deep discount from sellers.
Originality/value: This paper is a first attempt to examine the seller's
GB sale decision problem regarding to price and bounds on deal sizes. It
analyses how the minimum deal size set by the GB website affect the optimal
decision of sellers’. Moreover, it also discusses the impact of the
interactions between online and offline markets on sellers’ decision.
Author: Xuan Jiang, Shiming
Deng
Journal Code: jptindustrigg140082
