Impact of green retail operations on the profit of the manufacturer and the retailer under different pricing strategies
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Impact of green retail operations on the profit of the manufacturer and the retailer under different pricing strategies T. M. Rofin1 · Maheswar Singha Mahapatra2 · Biswajit Mahanty2 Accepted: 26 August 2020 © Operational Research Society of India 2020
Abstract The increasing customer awareness of environmental sustainability has motivated retailers to engage in green practices. In this paper, we consider a retailer involved in green retailing operations under a dual-channel supply chain framework under which the manufacturer is selling through an e-marketplace and a retailer. We investigate the impact of green retailing operations on the profit of the supply chain members for consistent pricing strategy and inconsistent pricing strategy using a nonlinear demand function. We resort to a bi-level genetic algorithm for the solutions. Through a numerical example, we have quantified the profit of the chain members and assessed the impact of the retailer’s engagement in green retail operations on the profit of the chain members. We have also carried out a sensitivity analysis of the profit of the chain members for the rapidly evolving customer preference for e-marketplace. From the numerical illustration, we found that (1) it is beneficial for the retailer to engage in green retail operations irrespective of the pricing strategy (2) retailer’s engagement in green retail operations reduces the profit of the manufacturer regardless of the pricing strategy of the retailer. Keywords Green retailing · Dual-channel supply chain · Pricing strategy · Stackelberg game · Bi-level GA
* T. M. Rofin [email protected] Maheswar Singha Mahapatra [email protected] Biswajit Mahanty [email protected] 1
School of Management, National Institute of Technology Karnataka, Surathkal, Karnataka 575 025, India
2
Department of Industrial and Systems Engineering, Indian Institute of Technology, Kharagpur, West Bengal 721 302, India
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1 Introduction Increasing customer sensitivity towards environmental sustainability and government regulations are impelling firms to reduce their carbon footprint [47, 59]. For instance, the US retailer Target plans to completely switch to renewable sources of energy for its US operations by 2030. Similarly, Walmart has set a goal of substituting 50% of its energy consumption from renewable sources of energy by 2025, and it was at about 28% as per the sustainability report published in 2018 [48]. IKEA produces more power from renewable sources of energy than they consume at their stores and owns 415 wind turbines [40]. Such commitments to environmental sustainability can enhance their green image [9, 31], resulting in favorable customer sentiments leading to higher demand for their products. [56]. Nevertheless, the firms incur a significant investment cost for engaging in green operations [39], depending upon the kind of green operation. Considering the pros and cons, we can say that the adoption of green operations is a crucial decision for any firm. In this study
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