Channel quality competition and hybrid contract strategies in multichannel retail supply chains

Purpose In today’s intensely fiercely contested market, supply chain participants emphasize enhancing channel quality to attract and retain customers. As channel quality becomes a strategic differentiator, understanding its role in supply chain dynamics is increasingly vital. Design/methodology/approach This study develops a competitive supply chain model involving two manufacturers, two retailers and one online platform, explicitly incorporating channel quality as a strategic decision variable. The manufacturers select one of three contract types to sell their products: exclusive partnerships with individual retailers, fully nonexclusive partnerships with both retailers and hybrid non-exclusive partnerships involving individual retailers and a common online platform. Customer demand in each channel is modeled as a function of selling price and channel quality. A Nash game framework determines the optimal strategic decisions of all supply chain participants under each contractual scenario. Findings The results indicate that when supply chain members compete to sell the same product, they are compelled to offer higher levels of channel quality to remain competitive. Furthermore, participants engaged in nonexclusive contractual arrangements consistently outperform those in exclusive agreements in terms of profitability. Manufacturers can enhance their profits by adopting a hybrid nonexclusive strategy combining retail and online platform channels, rather than relying solely on traditional retail distribution. Originality/value The study is novel in its integration of channel quality as a central element in supply chain competition and in expanding nonexclusive contracts to include both online and offline sales channels. This dual-platform approach provides deeper insights into modern supply chain strategies in a multichannel retail environment.