Cooperate or Not? A Service Cooperation Strategy for Products With Service Attributes Considering Showrooming Behavior

Abstract

In the face of competitive pricing pressure from online retailers and high-quality service pressure from physical retailers, are retailers in these two channels willing to establish a service cooperation (SC) strategy? If so, then will they support or avoid consumer showrooming behavior? To address these questions, we use a game theoretic model to examine three strategic configurations: nonservice cooperation (SN), SC, and nonshowroom cooperation (NC). We recommend the optimal strategy based on factors influencing the service-level threshold, such as market information coverage factors and service characteristics. Our results show that the SC strategy is the best for physical retailers when their market coverage is low or the threshold requirement for service is high; however, when the service level is low, physical retailers should avoid supporting consumer showrooming behavior; that is, the NC strategy is their best choice. In contrast, online retailers are always willing to choose the SC strategy and support showrooming to reflect their lower price advantage. Finally, we explore the optimal strategies of the two retailers in the endogenous service-level scenario. The optimal strategy selection of online retailers remains unchanged. However, physical retailers prefer the SN strategy because of their dominance in service; these retailers have the incentive to choose the NC strategy when their markets have a high degree of information coverage.

Keywords

• Showrooming
• cooperation strategy
• consumer behavior