Recently, the article "The optimal channel structure with retail costs in a dual-channel supply chain", jointly studied by Professor Zhang Jianghua and his team from the School of Management and Professor Long Zhuoyu from Chinese University of Hong Kong, was officially published in the international journal "International Journal of Production Research (IJPR)". Professor Zhang Jianghua is the corresponding author and Shandong University is the first author unit.

This paper focuses on the dual-channel operation strategies in the context of the rapid development of e-commerce globally, and innovatively explores the influence of retail costs in different channels on the supply chain structure, firms' profits, consumer surplus and social welfare. It finds that: First, both the form and the size of retail cost significantly affect the manufacturer's channel strategy. When the variable costs are large enough, the manufacturer will abandon the online channel while the retailer will adopt the "dual-channel" mode. In this way, the manufacturer could mitigate its cost pressures as well as avoiding the fierce competition with the retailer in the online channel. When the online retail cost is much higher than offline, the manufacturer and the retailer will not introduce their own online channels, but focus on the lower-cost offline markets. Second, regardless of whether retail costs are fixed costs or variable costs, the manufacturer’s channel selection often fails to maximize consumer surplus and social welfare. In most cases, the optimal channel structure for consumers and social welfare is that the manufacturer develops its own online channel. This result reflects the “offline try-on and online purchase” phenomenon prevailing in the apparel industry. For consumers, they can experience the product in the retailer’s physical store and then buy it from the manufacturer’s online store at a lower price; for the manufacturer, since the retailer’s physical store acts as a “showroom” that eliminates consumers’ product uncertainty, the total demand might increase; for the retailer, the role of "showroom" could bring more customer traffic and boost sales.

This research provides important management implications for decision makers, which can guide the entrants to make the most favorable channel strategy under different market conditions, and help the incumbents choose the optimal selling mode according to products’ costs. Due to the generality of the model, the results in this paper can be applied to industries with multiple channel structures such as apparel, electronic products, and food.

Established in 1961, "International Journal of Production Research" is a leading journal in the areas of manufacturing, industrial engineering, operations research and management science and belongs to the first district of JCR. It aims to disseminate research on decision aid in manufacturing, operations management and logistics.