Pricing and Physical Channel Choice Strategies for a Multi-channel Retailer Under Consumer Showrooming and Webrooming

The competition between multi-channel and online retailers is increasingly influenced by consumer behaviors like showrooming (browsing offline, purchasing online) and webrooming (browsing online, purchasing offline). Despite its significance, the impact of these behaviors on multi-channel retailers has not been thoroughly studied. This paper addresses this gap by analyzing the pricing strategies and profits of multi-channel retailers considering these behaviors. We introduce the concept of a "showroom" (where consumers can evaluate but not purchase products) as an alternative offline channel. Our findings suggest that deploying a showroom can lead to higher prices and profits for the retailer, especially when showrooming costs are high or webrooming benefits are low. Additionally, lower online purchase costs encourage greater investment in showrooms. Although the goals of retailers and consumers may differ, the showroom deployment can enhance both retailer profits and consumer surplus, offering strategic insights for retailers and policymakers.