Maximizing Profit in Omni‐Channel Retailing: A Model for Assortment Planning, Pricing, and Customization Decisions

ABSTRACT Omni‐channel retailing faces major challenges in assortment planning and pricing due to factors like demand substitution and shifts between channels. These challenges become more complex when retailers decide to offer customized products, which are increasingly popular among customers. This study focuses on creating a model to help omni‐channel retailers maximize profits by planning assortments and inventory, setting prices, and determining the point of differentiation (POD)—a threshold that separates standard and customized products. This model helps retailers decide which products to sell in each channel and how much customization to offer for each product while considering pricing strategies. The problem is modeled using the Exogenous Demand model and solved by a heuristic method. The results show that offering product customization can benefit retailers if they carefully consider factors like pricing, customization setup costs, and substitution rates. Substitution rates also play an important role in determining the POD and pricing strategies.