The underexplored impacts of online consumer reviews: Pricing and new product design strategies in the O2O supply chain

Abstract

Abstract In recent years, online consumer reviews have become popular in platform sellers to increase product sales, and the literature has widely recognized those reviews positive impacts. Nevertheless, this paper identifies online consumer reviews negative impacts on the intra-brand competition (multi-product), and aims to study such effect on wholesale prices and product design strategies of players in the FMCG (Fast Moving Consumer Goods) O2O (online to offline) supply chain. We model the decentralized O2O supply chain facing intra-brand competition that consists of a platform seller (follower) and a manufacturer (leader) when the new product entries. We find that the intra-brand competition driven by the reviews increased-sales effect on the incumbent product causes the conflict. The platform seller prefers to limit such an effect if the new product s consumer valuation is not sufficiently high, but the manufacturer benefits from it. Manufacturers can reduce the product line s wholesale prices or lower down the new product quality to pre-empt the platform seller from limiting RE-I to coordinate the channel. This study contributes to O2O supply chain management literature by examining the possible negative impacts of online consumer reviews. Also, this study presents a new perspective to combine consumer reviews, pricing and product design strategies to coordinate the O2O channel.