Supply Chain Coordination Between an Existing Retailer and a Newly Launched Retailer in Relation to Customers’ Different Service Quality Preferences

Abstract

　In consumer electronic appliances, furniture, and cosmetics retail, personal customer service by sales staff is considered a strong contributor to increased sales. However, some groups of customers regard face-to-face sales pitches as unnecessary and annoying. Karata [3] has analyzed how retailers can improve business profitability by correctly recognizing a customer type and providing the optimal level of customer service for those groups of customers who feed supersaturated with too much service. As a study of supply chain coordination between an existing retailer with high service quality and a newly launched retailer with moderate service quality, we develop a profit-maximization model in which there are two types of customers with respect to their preferences regarding sales efforts. We find that two different types of retailersfor instance, a traditional family-owned store and a chain storecan coexist when consumers’ preference for personal service are heterogeneous. We present numerical examples to support our analytical results.