Channel selection and pricing optimization in multichannel e-tailing

Purpose This paper considers an e-tailer planning to distribute a product under one direct sales channel and multiple asymmetric agency platforms. Based on the multinomial logit (MNL) choice model, this study optimizes the pricing strategy and channel selection strategy to maximize the e-tailer’s profit. Design/methodology/approach A two-stage channel selection and pricing problem is formulated, where the profit-maximizing e-tailer first optimally selects a specified number of agency platforms from a set of alternatives to distribute the product and then determines the optimal prices in those channels. Findings An optimal pricing strategy is proposed to maximize the e-tailer’s total profit on multiple asymmetric channels. The results show that the e-tailer can obtain a higher profit by selling products on more asymmetric agency platforms. Moreover, an effective channel selection algorithm is provided to help the e-tailer optimally select the M agency platforms from N alternatives. Originality/value This study enriches the relevant research on multichannel selection and pricing by proposing an optimal pricing strategy and an effective channel selection algorithm. Evaluation results based on real-world industrial data show that the proposed optimal multichannel pricing strategy in this paper can significantly improve the profit of a real-world e-tailer compared to the e-tailer’s actual profit.