Free riding in a multi-channel supply chain

Free riding in a multichannel supply chain occurs when one retail channel engages in the customer service activities necessary to sell a product, while another channel benefits from those activities by making the final sale. Although free riding is, in general, considered to have a negative impact o...

Full description

Saved in:
Bibliographic Details
Published in:Naval research logistics 2009-12, Vol.56 (8), p.745-765
Main Authors: Bernstein, Fernando, Song, Jing-Sheng, Zheng, Xiaona
Format: Article
Language:English
Subjects:
Channels
competition
Consumers
Logistics
multi-channels
Naval
Retail stores
Riding
Stores
Supply chains
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Free riding in a multichannel supply chain occurs when one retail channel engages in the customer service activities necessary to sell a product, while another channel benefits from those activities by making the final sale. Although free riding is, in general, considered to have a negative impact on supply chain performance, certain recent industry practices suggest an opposite view: a manufacturer may purposely induce free riding by setting up a high‐cost, customer service‐oriented direct store to allow consumers to experience the product, anticipating their purchase at a retail store. This article examines how the free riding phenomenon affects a manufacturer's supply chain structure decision when there are fixed plus incremental variable costs for operating the direct store. We consider factors such as the effort required to find and buy the product at a retail store after visiting the direct store, the existence of competing products in the market, and the extent of consumer need to obtain direct‐store service. © 2009 Wiley Periodicals, Inc. Naval Research Logistics, 2009
ISSN:0894-069X
1520-6750
DOI:10.1002/nav.20379