How to choose online sales formats for competitive e‐tailers

Abstract

Currently, many e‐tailers can sell manufacturers' products on their online platforms through reselling or agency selling formats. However, how to choose the optimal online sales formats has puzzled competitive e‐tailers with different channel roles. This paper uses stylized theoretical models to study this problem by considering the combined effects of e‐tailers' channel roles, each e‐tailer's referral fees, and the difference in e‐tailers' market shares. Our results show that if two e‐tailers sell the common manufacturer's products on their online platforms, no matter what sales format one e‐tailer adopts, the other e‐tailer's best choice depends on the two e‐tailers' referral fees and the difference in the two e‐tailers' market shares, whereas the manufacturer's best action is always to let the other e‐tailer adopt agency selling format regardless of the two e‐tailers' referral fees and channel roles and the difference in the two e‐tailers' market shares. Moreover, if two e‐tailers sell the common manufacturer's products on their online platforms, it is most profitable for the manufacturer when both e‐tailers adopt agency selling format and charge equal referral fees to the manufacturer, and the same is true for the whole supply chain, which is independent of the two e‐tailers' channel roles and the difference in the two e‐tailers' market shares.

Should an online manufacturer partner with a competing or noncompeting retailer for physical showrooms?

“…This result is inconsistent with Wei et al. (2021, 2020). They show that the increased commission is detrimental to the manufacturer's profit.…”

“…The results show that the online manufacturer always suffers a loss from the increased competing product value and the increased commission under the noncompeting case, but may benefit from these factors in the competing case. Previous literature shows that the manufacturer always suffers a loss from the increased commission that is paid to the retailer under product competition (Wei et al., 2021, 2020). However, our results show that the manufacturer may benefit from the increased commission in the competing case.…”

“…For each demand of the manufacturer's product realized through the physical showroom, the manufacturer pays the corresponding retailer unit commission , which is adopted by Amazon and many other retailers when cooperating with manufacturers (Jiang et al., 2011). Besides, the commission is exogenous because it is usually associated with an industry standard (Chen et al., 2020; Wei et al., 2021, 2020).…”

Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition

“…Zhang and Zhang [27] examine the e-tailer's demand information sharing strategy with the manufacturer who may operate brick-and-mortar stores offline, they also compare the impacts of two prevailing retailing including agency selling and reselling. Wei et al [28] investigate two competitive e-tailers' selling format choices (reselling or agency selling) for the common manufacturer's products on their online platforms, and they also model the effects of e-tailers' referral fees and the difference in e-tailers' market shares. In the context of the hotel industry, Liao et al [29] and Ye et al [30] study the different strategic effects between reselling and agency selling in a monopolistic and competitive environment, respectively.…”

Cooperation strategy for an online travel platform with value‐added service provision under demand uncertainty

“…As one of the largest global OTPs, Expedia chooses one of the two models to cooperate with hotels (Liao et al, 2019). The pricing powers and the profit-sharing arrangements under the two cooperation models are different (Abhishek et al, 2016;Wei et al, 2020). Specifically, under the agency model, an OTP does not obtain tourism services' pricing power and charges TSP commission fees for profits.…”