Product distribution and coordination strategies in a multi-channel context

Channel coordination plays a strategically important role in a multi-channel context. In this study, we focus on the strategic roles played by product distribution and coordinative structure with profit sharing in the multi-channel context. We use an analytical model to show that the brand differentiation is not a dominant distribution strategy to coordinate the channel conflict and improve channel performance; the manufacturer can sell identical brands through its online and traditional channels and actively employ a cooperative structure with profit coordination to maximize the entire distribution of channel profit and create a win-win channel strategy for each channel member. In addition, we also investigate the impact of an online channel on the whole distribution channel performance under the different structures. Our results show that coordinative market structure provides competitive advantages for the manufacturer to open an online channel, particularly for these manufacturers whose products are weakly compatible with the online marketing. Based on our results, we derive optimal market strategies for the multi-channel manufacturer and retailer.