One important decision faced by the owners of online marketplaces is whether they should enter the market and sell products directly to customers. In this study, we provide data-driven insights to managers by empirically investigating the impact of a platform owner’s entry on the demand of third-party stores and their potential reactions using transaction level data from a large e-commerce platform. Contrary to previous studies in mobile app platforms, our study shows that the demand of competing third-party stores decreases with the entry of the platform, especially for large third-party stores. We further show that the demand reduction is significant only in the offline channel and the reduction results from third-party stores’ defensive strategy to divert their offline customers away from the platform (i.e., disintermediation). Our findings indicate that platforms should carefully evaluate the nature of their markets before entering the market to compete with complementors, because they may lead third-party sellers to disintermediate from the platform. On the other hand, from the perspective of third-party sellers, disintermediation might be an overreaction to the entry of the platform, because their online demand is not significantly affected by platform entry based on our analyses.
The impacts of product-harm crises on other firms in the same category are complex considering the combined spillover and customer encroachment effects. With responding to both effects, non-focal companies may adjust their social media strategies to attenuate the negative influence from product-harm crises and to exploit the benefit from their competitor's misfortune. Using daily social media activity data on Twitter for 56 major airline companies around the time of the Germanwings Flight 9525 crash, we find that non-focal airlines tend to increase their effort on customer relationship management after the crash with panel data fixed effects negative binomial models. At the same time, while airlines with no direct competition with the focal company appear to decrease their brand marketing effort due to the spillover effect, the tendency is reduced by the customer encroachment effect for the airlines that directly compete with the focal airline.
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