Abstract: The near-field competition has led a growing number of traditional retailers to sell fresh agri-food products with dual-channel sales, which causes a new joint optimization problem of pricing and inventory. Aiming at this problem, assuming that the online channel only sells fresh products, while the offline channel sells both fresh and deteriorating products, a joint decision model of pricing and inventory with demand dependent on price and inventory level is established, using the deteriorating inventory theory, with the objective of maximizing periodic profits. The properties of the existence of the optimal solution are analyzed. Based on the two-part solution method, a heuristic algorithm is designed to solve the optimal freshness period, sales cycle, pricing and profit. Finally, the sensitivity analysis of unit cost, demand rate, fresh-keeping period, deterioration rate is conducted. Results show that the retailer profits increase with the extension of the fresh-keeping period, and fluctuate slightly with the increase of the deterioration cost under dual-channel sales. The basic conditions for retailers to gain higher profits are lower fresh-keeping cost and deterioration cost, higher sales prices and a larger online market share.

Key words: deteriorating inventory, pricing strategy, fresh agri-food, dual-channel sales