Agency Selling or Reselling? Channel Structures in Electronic Retailing

In recent years, online retailers (also called e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an agency selling format instead of using the more conventional reselling format? We find that agency selling is more efficient than reselling and leads to lower retail prices; however, the e-tailers end up giving control over retail prices to the manufacturer. Therefore, the reaction by the manufacturer, who makes electronic channel pricing decisions based on their impact on demand in the traditional channel (brick-and-mortar retailing), is an important factor for e-tailers to consider. We find that when sales in the electronic channel lead to a negative effect on demand in the traditional channel, e-tailers prefer agency selling, whereas when sales in the electronic channel lead to substantial stimulation of demand in the traditional channel, e-tailers prefer reselling. This preference is mediated by competition between e-tailers—as competition between them increases, e-tailers prefer to use agency selling. We also find that when e-tailers benefit from positive externalities from the sales of the focal product (such as additional profits from sales of associated products), retail prices may be lower under reselling than under agency selling, and the e-tailers prefer reselling under some conditions for which they would prefer agency selling without the positive externalities

Service selection strategic analysis for selfoperated e-commerce platforms under settlement

In order to study whether e-commerce platforms carry out service cooperation after settlement in-depth, this paper focuses on service selection strategic analysis for agent channels on some self-operated e-commerce platforms settled in hybrid e-commerce platforms. We present multi-leader-follower models in two different scenarios with the platforms as leaders and the manufacturers as followers and give some numerical experiments to analyze the impacts of service selection strategies for self-operated platforms on all supply chain members. Our finding shows that if the service cost efficiency is moderate or low, the self-operated platform prefers to provide its service for the agent; otherwise, its selection mainly depends on the unit product service fee. In addition, fierce service competition and high unit service fee are unfavorable to all members, while high service cost efficiency may hurt both the platform and the manufacturer

Online and Offline Information for Omnichannel Retailing

This paper studies how retailers can effectively deliver online and offline information to omnichannel consumers who strategically choose whether to gather information online or offline and whether to buy products online or offline. Information resolves two types of uncertainty: product value uncertainty (i.e., consumers realize valuations when they inspect the product in store, but may end up returning the product when they purchase online) and availability uncertainty (i.e., store visits are futile when consumers encounter stockouts). We consider three information mechanisms: physical showrooms allow consumers to learn valuations anytime they visit the store, even during stockouts; virtual showrooms give consumers online access to an imperfect signal of their valuations; availability information provides real-time information about whether the store has a product in stock. Our main results follow. First, physical showrooms may prompt retailers to reduce store inventory, which increases availability risk and discourages store patronage. Second, virtual showrooms may increase online returns and hurt profits, if they induce excessive customer migration from store to online channels. Third, availability information may be redundant when availability risk is low and may render physical showrooms ineffective when implemented jointly. Finally, when customers are homogeneous, these mechanisms may not exhibit significant complementarities and the optimal information structure may involve choosing only one of the three

Economic Perspective Of Omnichannel: A Preliminary Analysis

Recent advancements in technology have not only transformed how people lead their lives, but also how they shop. Traditional single or multichannel retailing models fall short of meeting the changing customer behaviours and expectations. Many in the retailing industry believe that evolving towards seamless omnichannel model is the only way forward for the retailers. However, merely ‘going omnichannel’ does not guarantee success. Lack of understanding of its underlying economic rationale might render a retailer unsuccessful in the face of intense competition and a heightened need for operational efficiencies. The omnichannel strategy might even prove to be unsustainable in certain contexts. We make an attempt to explore the determinants of an omnichannel retailer’s success in a competitive retail environment. Given a market currently served by traditional retailers, our analysis tries to figure out the market share an omnichannel aspirant can expect to acquire and its dependence on the price that it needs to charge for providing the additional set of services through omnichannel

Coordination mechanism of dual-channel supply chains considering retailer innovation inputs

In response to the online channels established by manufacturers, physical retailers are starting to offer innovative services, which will intensify conflicts between manufacturers and retailers. Considering that the conflict will affect the operation efficiency and sustainable development of the supply chain, the coordination mechanism of a dual-channel supply chain has been established. In this study, we construct the Stackelberg game model based on consumer utility theory to analyze the complex mechanism of retailers' innovation input level affecting supply chain operation and design the double coordination mechanism. The results show that: (1) an optimal combination of wholesale prices, retail prices and innovation input levels can optimize the operational efficiency of the supply chain, (2) Noncooperation among channel members affects the retailer's product pricing, decreases the market share of the physical channel and increases the market demand of manufacturers, (3) The dual coordination mechanism can alleviate channel conflicts, which can improve the operational efficiency of the supply chain. This study provides several insights on the theory of organizational coordination and sustainable development in conflicts of dual-channel supply chains

Optimal Retailing mode for Content Platforms\u27 E-commerce

In recent years, content platforms have expanded their operations into e-commerce by leveraging short videos or live-streaming and collecting commissions. This paper examines the optimal operational modes that content platforms should adopt when launching e-commerce businesses. Specifically, we analyze the content platforms’ choices between building a joint channel with e-commerce platforms (joint mode), building a self-operated channel independently (self-operated mode), or operating both channels simultaneously (dual-channel mode). Using a game-theoretic model, we find that the content platform tends to choose the self-operated mode (or joint mode) when all sellers have high (or low) conversion ability, and the dual-channel mode when sellers have differentiated conversion abilities. Additionally, our analysis shows that the content platform\u27s mode selection switches from joint mode to dual-channel mode and to self-operated mode with a decrease in e-commerce platform\u27s commission rate or a weaker spillover effect from the content platform to the e-commerce platform

Drop-Shipping – A Business Model Without Holding Inventory: A Case Study of Online Store

Drop-shipping is a recently new, commonly used fulfilment method, especially in e-commerce sites. By applying dropshipping, many businesses and e-commerce sites have the possibility to reach a much greater customer base, as well as manage their business without holding, in most cases, any product as stock. This order fulfilment method has made possible the existence of drop-shipping as a business model, people from all over the world being able to sell items internationally, without ever seeing them. Also, the start-up cost for such a business is rather low, since there is no need for deposit means, a physical store, or even employees. However, the low barrier of entry this business model determines many people to try it, which is why the competition is very high. Even though the business looks easy, the low barrier of entry and the great competition means that only a small fraction of the new drop-shipping businesses get profitable. This paper will analyze what are the odds of turning such a business profitable while also looking at which are the pillars of drop shipping and most importantly, how the people who succeed are doing it. The proposed theoretical model is illustrated through a case study conducted at a dropshipping store that is selling back posture correctors. The results of the study are useful both, for practitioners and scholars interested in the topic of drop-shipping