Manufacturer's selling mode choice in a platform-oriented dual channel supply chain

Tong Yuan Wang, Zhen Song Chen*, Kannan Govindan, Kwai Sang Chin

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This paper considers a platform-oriented dual channel supply chain (PDCSC), in which the online retailer resells products in a marketplace provided by the platform and the manufacturer chooses a selling mode to introduce a dual channel. Three possible selling modes for the manufacturer are considered: (1) Reselling mode (Mode R); (2) Agency selling mode (Mode A); and (3) Direct selling mode (Mode D). We examine the manufacturer's equilibrium strategy and how this choice affects the other supply chain members’ preferences. By comparing equilibrium profits in the three selling modes, we demonstrate that the manufacturer prefers Mode D when the direct operating cost is relatively low. Otherwise, either Mode R or Mode A is optimal, largely depending on the interaction between competition intensity and commission rate. More specifically, if both the competition intensity and commission rate are low, Mode A is the optimal choice; if the competition intensity is low but commission rate is high, Mode R is optimal; if the commission rate is relatively high, the manufacturer should choose Mode R. Finally, we further characterize the influences of the different selling modes on the profits of the online retailer, the platform, and the whole supply chain. We also extend the model by considering the case where the online retailer and platform have equal channel power and set prices simultaneously, the case of Cournot competition, and the case where the platform acts as the channel leader.

Original languageEnglish
Article number116842
JournalExpert Systems with Applications
Volume198
Number of pages12
ISSN0957-4174
DOIs
Publication statusPublished - 15. Jul 2022

Keywords

  • Game theory
  • Online retailing
  • Platform-oriented supply chain
  • Selling mode choice

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