Offline-Channel Planning in Smart Omnichannel Retailing

Manufacturing & Service Operations Management, Forthcoming

32 Pages Posted: 18 Feb 2021 Last revised: 26 Aug 2021

See all articles by Jian Chen

Jian Chen

Tsinghua University - School of Economics and Management

Yong Liang

Hao Shen

Renmin University of China - School of Business

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

Mengying Xue

University of Science and Technology of China

Date Written: June 5, 2019

Abstract

Problem definition: Observing the retail industry inevitably evolving into omnichannel, we study an offline-channel planning problem that helps an omnichannel retailer make store location and location-dependent assortment decisions in its offline channel to maximize profit across both online and offline channels, given that customers’ purchase decisions depend on not only their preferences across products but also their valuation discrepancies across channels, as well as the hassle costs incurred. Academic/practical relevance: The proposed model and the solution approach extend the literature on retail channel management, omnichannel assortment planning, and the broader field of smart retailing/cities. Methodology: We derive parameterized models to capture customers’ channel choice and product choice behaviors, and customize a corresponding parameter estimation approach employing the expectation-maximization method. To solve the NP-hard optimization model, we develop a tractable mixed-integer second-order conic programming (MISOCP) reformulation and explore the structural properties of the reformulation to derive strengthening cuts in closed-form. Results: We numerically validate the efficacy of the proposed solution approach and demonstrate the parameter estimation approach. We further draw managerial insights from the numerical studies using real data sets. Managerial implications: We verify that omnichannel retailers should provide location-dependent offline assortments. In addition, our benchmark studies reveal the necessity and significance of jointly determining offline store locations and assortments, as well as of incorporating the online channel while making offline-channel planning decisions.

Keywords: assortment planning, data analytics, facility location, omnichannel retail, smart-city operations, smart retailing

Suggested Citation

Chen, Jian and Liang, Yong and Shen, Hao and Shen, Zuo-Jun Max and Xue, Mengying, Offline-Channel Planning in Smart Omnichannel Retailing (June 5, 2019). Manufacturing & Service Operations Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3748903 or http://dx.doi.org/10.2139/ssrn.3748903

Jian Chen

Tsinghua University - School of Economics and Management ( email )

Beijing, 100084
China

Hao Shen

Renmin University of China - School of Business ( email )

Beijing
China

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR) ( email )

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

Mengying Xue

University of Science and Technology of China ( email )

No contact information is available for Yong Liang

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