Abstract: The wide application of mobile Internet enables consumers to shop seamlessly through Omni-channel including mortar-and-brick, virtual store and information media. Although the online store has provided the rich commodity choice for the consumer, it is difficult to attract the consumer flow. How to further strengthen the bonds between online stores and customers, attract consumers to recognize online stores and implement purchase behaviors, are important issues faced by online stores. On the other side, the product category of convenience store often cannot meet the diverse needs of consumers which causes consumers loss. Therefore, we aim to combine online store's and convenience store's advantages to find an optimal solution for both sides.
In this paper, a stylized model is developed, where cooperation of product diversity based on consumer utility theory under the condition that E-tailer display virtually products in the convenience store is proposed. The influence of virtual display cooperation on retailers' decision making, market equilibrium and profits is analyzed. The results show that product diversity has a positive effect on the price, but virtual display products competes with the products in the store fiercely, resulting profits loss of convenience store. Thus, there is no natural possibility of cooperation between network store and convenience store. Hence, it is found a profit sharing coordination mechanism with Nash bargaining model to improve the profits of both retailers. In this average distribution mechanism, both stores increase the same profit as before the cooperation. Finally, the numerical simulation shows the intuitive managerial insights of the above conclusions.

Key words: product diversity, virtual display, coordination, cooperative game