Channel Selection and Contracting in the Presence of a Retail Platform

Abstract

T his paper studies how a manufacturer should engage with a platform retailer and a traditional reseller. Our work is motivated by the emergence of increasingly powerful retail platforms in China's consumer electronics and appliances markets. The manufacturer pays a slotting fee and a portion of its sales revenue to the platform retailer in exchange for the opportunity to manage its own space within the retailer's store. The manufacturer can also sell its product to a traditional reseller thereby earning its wholesale price. We first formulate a Stackelberg game where the platform retailer leads by setting the revenue-sharing rate while the manufacturer follows by choosing to sell through one or both channels. We derive the equilibrium channel and characterize each party's associated sales quantities, prices, and profits. After confirming, it is always beneficial for the platform retailer to determine the slotting fee and revenue-sharing rate simultaneously, we then formulate two bargaining models between the manufacturer and the platform retailer. In the first model, they can negotiate just the revenue-sharing rate and in the second they negotiate both the revenue-sharing rate and the slotting fee. In the second model, a win-win result for the manufacturer and platform retailer is possible. We find that the slotting fee is neither always beneficial to the platform retailer nor always harmful to the manufacturer; it depends on the demand substitution effect between the two retail channels.

Optimal pricing decisions for an omni‐channel supply chain with retail service

“…As demand grows for in‐store pickup, physical stores play a crucial role in the consumers' shopping process, and they remain a critical component of being the pickup points for online orders. The retailing market today is progressively dominated by premier, centrally managed “power retailers.” For instance, Gome and Suning emerged as the dominant retailers across the whole of China since the early 2000s (Shen et al., 2019a). Similarly, the giant electronic retailer, Best Buy, orders products from upstream suppliers at the wholesale price and then sells them via different channels.…”

Whether a retailer should enter an e‐commerce platform taking into account consumer returns

“…Unlike them, this article explores optimal channel choice of whether or not to enter e‐commerce platforms, which is similar to the study by Wang et al. () and Shen et al. (2019a, 2019b).…”

“…For instance, Shen et al. () studied optimal channel choice between one offline retail channel and two channels (i.e. platform and offline retail channels) of manufacturers.…”

“…Different from the study by Wang et al. () and Shen et al. (2019a, 2019b), this article takes consumer returns into account and investigates the optimal entering platform and return strategies together.…”

Optimal Channel Choice of Firms with New and Remanufactured Products in the Contexts of E-Commerce and Carbon Tax Policy

“…Following Coughlan [11], some scholars further investigated whether a firm should open a direct sale channel [12,13]. Moreover, scholars have studied channel choices from various perspectives, such as collecting channel choice strategies [14,15], channel choice in the two-sided markets [16], optimal channel choice for trade-in services [17], and channel choice regarding entering e-commerce platforms [18,19].…”