876. Pricing and Delivery Lead Time Policies for Online Retailers
Invited abstract in session TC-47: E-commerce, stream Retail Operations.
Tuesday, 12:30-14:00Room: Parkinson B08
Authors (first author is the speaker)
| 1. | Bartu Arslan
|
| Industrial Engineering and Innovation Sciences, Eindhoven University of Technology |
Abstract
Consumers' purchasing decisions from online channels mainly depend on two critical factors; the selling price and the delivery lead time. The retailers face a major challenge of setting options which trigger enough demand and ensure high profitability. In this study, we tackle this challenge. We consider a retailer selling a product through its online channel. The demand is random and customers' purchasing behavior is characterized by their reservation prices. We characterize policies, which specify the options to be offered to customers. Each option has two specifications; a selling price and a delivery lead time. We propose two policies; the static M-option policy and the dynamic single-option policy. In the former, the retailer has M options to offer. The specifications of these options are set at the beginning of the planning horizon and the decisions on when to offer which options are made dynamically over the periods. In the latter policy, the retailer offers a single option but its specifications can differ in every period. We develop value iteration algorithms, analyze the structural properties of both policies. We propose exact and heuristic algorithms to optimize them. We evaluate the benefits of introducing additional options and the benefits of using the dynamic single-option policy over the static M-option policy. We conclude that both benefits are more prominent when the selling season is long and when the unit holding and loss of goodwill costs are high.
Keywords
- E-Commerce
- Revenue Management and Pricing
- Stochastic Optimization
Status: accepted
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