The bright side of third‐party marketplaces in retailing

Abstract

A prevalent practice for retailers is to provide a marketplace for third‐party sellers (3P sellers) to sell products directly to consumers, charging the sellers a commission fee. This study investigates the downstream retailer's optimal strategy to introduce a 3P seller who sells a substitutable product. We develop a game‐theoretic model, through which our first result shows that the retailer introduces a 3P seller only when the marginal costs of the products are in a medium range. Second, the retailer's strategy of introducing a 3P seller may benefit the manufacturer, even though the introduction creates downstream competition that may reduce the sales of the manufacturer's product. This happens because the strategy of introducing a 3P seller can mitigate the double marginalization between the manufacturer and retailer. In contrast to the conventional wisdom that introducing a 3P seller always results in a “win–lose” outcome for the retailer and manufacturer, we derive evidence that introducing a 3P seller can lead to a “win‐win” outcome for the retailer and manufacturer and thus improve the channel performance. Lastly, we find that the retailer's 3P seller introduction strategy can also improve the consumer surplus because this strategy increases competition.

Effectiveness of self‐run vs. third‐party sales channels on the consumers' purchase intention: A multi‐method exploration of the moderating role of review volume

“…Under the reselling mode, e‐tailers buy goods from manufacturers and resell them to customers; hence, the e‐tailers control the retail prices and are responsible for order fulfillment costs. Whereas, under the agency selling mode, the suppliers (e.g., manufacturers and agents) sell goods directly to consumers via the platform built by e‐tailers; hence, the suppliers control the retail prices and are responsible for order fulfillment costs, including platform commission fees (Hagiu & Wright, 2015; Yan et al, 2018; Zheng et al, 2022). In theory and in practice, the reselling mode is also called a “reselling channel” or “e‐commerce self‐run channel,” and the agency selling mode is also known as an “agency selling channel” or a “third‐party channel” (Bei & Gielens, 2023; Han & Zhang, 2022; Yan et al, 2018; Zheng et al, 2022).…”

“…Whereas, under the agency selling mode, the suppliers (e.g., manufacturers and agents) sell goods directly to consumers via the platform built by e‐tailers; hence, the suppliers control the retail prices and are responsible for order fulfillment costs, including platform commission fees (Hagiu & Wright, 2015; Yan et al, 2018; Zheng et al, 2022). In theory and in practice, the reselling mode is also called a “reselling channel” or “e‐commerce self‐run channel,” and the agency selling mode is also known as an “agency selling channel” or a “third‐party channel” (Bei & Gielens, 2023; Han & Zhang, 2022; Yan et al, 2018; Zheng et al, 2022). The distinction between the e‐commerce self‐run channel, in which the e‐tailer resells products to customers, and the third‐party channel, in which independent third‐party sellers sell products on the e‐platform, is comprehensible from the perspective of consumers.…”

“…In the reselling mode, e‐tailers (such as e‐commerce platforms) purchase products from manufacturers and then sell the products to clients; in the agency selling mode, suppliers (such as manufacturers and agents) sell products directly to clients via the platforms built by e‐tailers and pay them commission fees (Zhang & Hou, 2022). These two sales modes correspond to two different electronic channels: The reselling mode is a “self‐run channel,” and the agency selling mode is a “third‐party channel” (Han & Zhang, 2022; Yan et al, 2018; Yan et al, 2019; Zheng et al, 2022).…”

“…In other words, the standard of the goods and services in the self‐run channel is guaranteed by the e‐tailers. Additionally, e‐tailers enable tens of thousands of independent sellers to offer their products directly to customers via their websites (Cao et al, 2020; Shi et al, 2021; Zheng et al, 2022). For instance, JD.com hosted 250,000 third‐party stores in 2019 (JD, C 2021).…”

Manufacturer Encroachment Strategic Analysis with Platform Service Inputs: An Agent-Based Scenario

“…For example, Amazon re-evaluates its referral fee annually in line with revenue and seller feedback [3]. In real life, such a mode has been widely embraced, like Taobao in China, Flipkart in India, Newegg.com in the United States, and Darty in France [4,5]. Obviously, agency selling is becoming increasingly important in commerce strategies.…”