Retailer-Driven Blind Boxes in a Decentralized Supply Chain

Blind boxes (also called mystery boxes, gift boxes, or opaque boxes) are relatively recent concepts by retailers such as Birchbox and Stichfix. The distinguishing feature of a blind box is that its content remains uncertain until the customer purchases the box and opens it. This paper examines a blind box strategy in a decentralized supply chain where the retailer can design the box by choosing, with some inclusion probability, from horizontally differentiated products produced by a manufacturer. We find that a determinant factor in whether the retailer should offer a blind box is the ratio of products’ profit potential to consumers’ product preference strength. The blind box is unprofitable if this ratio is too low or too high. Furthermore, we explore how the retailer should manage the manufacturer’s wholesale price response when selling blind boxes. We find that the retailer should preemptively communicate the product inclusion probability before wholesale prices are set. Interestingly, the optimal product inclusion probability is asymmetric even when products have symmetric wholesale prices and production costs