Information provision under showrooming and webrooming

• Published in: Omega (Oxford) 2023-01, Vol.114, p.102724, Article 102724
• Main Authors: Zhong, Yuyun, Shen, Wenjing, Ceryan, Oben
• Format: Article
• Language: English
• Subjects: Match uncertainty; Product information; Retailing; Showrooming; Webrooming
• ISSN: 0305-0483; 1873-5274
• DOI: 10.1016/j.omega.2022.102724

•We consider a setting in which a brick-and-mortar store and an online retailer carry the same product. We model asymmetries across the information content available at each channel and allow consumers to strategically choose from which channel to collect information and in which to complete their purchases in order to maximize their expected utilities.•Within this setting, we endogenize the online retailer’s information provision decision, which in turn influences consumers’ showrooming and webrooming behaviors.•We characterize the optimal information provision decision and find that the online retailer provides a lower information level as the fraction of consumers who consider showrooming or webrooming increases and that, under optimal information provision, a certain level of showrooming may be beneficial to the brick-and-mortar store but that webrooming always hurts the online retailer. We also extend our work to investigate a price matching policy and show that the online retailer prefers to reduce its information provision under price matching except for settings where showrooming is prevalent. Deviations between consumers’ information gathering and purchase channels may lead to showrooming and webrooming, where the former refers to obtaining product information in a brick-and-mortar (BM) store but purchasing online while the latter corresponds to the reverse. In this paper, we endogenize consumers’ information gathering and purchase decisions and characterize the optimal information provision decision for an online retailer in the presence of a rival BM store. For instances where showrooming can arise, we find that the optimal information level decreases with the fraction of consumers who consider showrooming. Despite the popular belief that showrooming is always detrimental to the BM store, our results suggest that showrooming may increase the profit of the BM store and decrease the profit of the online store. In instances with webrooming, we again find that the optimal information level decreases with the fraction of consumers who consider webrooming but that the profit of the online retailer always decreases with the fraction of consumers who consider webrooming. In addition, we consider the price matching strategy of the BM store and its interplay with the online retailer’s information decisions. Lastly, we briefly extend our work to study settings with return cost, heterogeneity in online shopping cost, all consumers evaluating the product onl