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This study presents a theoretical framework to explore the mechanism of firms' preference for different distribution strategies. The results indicate that the manufacturer, retailer, and e-tailer would prefer the distribution strategy of selling low-end and highend products through offline and online channels, respectively, when consumers are minimally sensitive to the product-quality differentiation. By contrast, supply-chain firms would prefer the distribution strategy of selling high-end and low-end products through offline and online channels when consumers are significantly sensitive to the product-quality differentiation. Firms demonstrate different preferences for distribution strategy when consumers are moderately sensitive to product-quality differentiation.

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