IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v67y2024ipas0275531923002155.html
   My bibliography  Save this article

The role of membership fees in online retail market competition

Author

Listed:
  • Xu, Lina
  • Meng, Zhiqing

Abstract

In the rapidly growing yet fiercely competitive online retail industry, the prevailing trend of adopting a paid membership system appears to be contradictory to the commonly observed principles of free and subsidized services over the Internet. Thus, this study proposes a competition model based on the assumption of heterogeneity in consumers’ online shopping search costs, in order to elucidate the underlying mechanism of this phenomenon. The findings reveal that e-commerce platforms that implement a paid membership system are best equipped to navigate marketing campaigns. Meanwhile, as long as a certain degree of promotional and discounted activities are present in the online market, retailers seeking profit maximization will find this system to be most effective for generating profits that surpass the market level. Furthermore, the comparative static analysis and numerical simulations in this study offer valuable insights to managers in their decision-making regarding membership fees and retail pricing.

Suggested Citation

  • Xu, Lina & Meng, Zhiqing, 2024. "The role of membership fees in online retail market competition," Research in International Business and Finance, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:riibaf:v:67:y:2024:i:pa:s0275531923002155
    DOI: 10.1016/j.ribaf.2023.102089
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531923002155
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2023.102089?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhen Fang & Yi-Chun (Chad) Ho & Xue (Jane) Tan & Yong Tan, 2021. "Show Me the Money: The Economic Impact of Membership-Based Free Shipping Programs on E-Tailers," Information Systems Research, INFORMS, vol. 32(4), pages 1115-1127, December.
    2. Demoulin, Nathalie T.M. & Zidda, Pietro, 2009. "Drivers of Customers’ Adoption and Adoption Timing of a New Loyalty Card in the Grocery Retail Market," Journal of Retailing, Elsevier, vol. 85(3), pages 391-405.
    3. Robert J. Dolan, 1987. "Quantity Discounts: Managerial Issues and Research Opportunities," Marketing Science, INFORMS, vol. 6(1), pages 1-22.
    4. Lina Xu & Zhiqing Meng & Daqing Gong, 2021. "Dynamic Analysis of Retailers’ Paid Membership Strategy," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-9, July.
    5. Carmen Acatrinei & Teodora Viviana Puiu, 2012. "The Loyalty Card: Issues in Evaluating Loyalty Program Effectiveness," International Journal of Economic Practices and Theories, Academy of Economic Studies - Bucharest, Romania, vol. 2(3), pages 153-164, July.
    6. So Yeon Chun & Anton Ovchinnikov, 2019. "Strategic Consumers, Revenue Management, and the Design of Loyalty Programs," Management Science, INFORMS, vol. 65(9), pages 3969-3987, September.
    7. Balakrishnan, Janarthanan & Foroudi, Pantea & Dwivedi, Yogesh K., 2020. "Does online retail coupons and memberships create favourable psychological disposition?," Journal of Business Research, Elsevier, vol. 116(C), pages 229-244.
    8. Li Hu & Shaofu Du & Lei Wang & Wenzhi Tang, 2023. "Differentiated premium membership mechanism in platform competition," International Journal of Production Research, Taylor & Francis Journals, vol. 61(2), pages 649-667, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Wenjie & Sun, Chaojing & Li, Yan & Ertz, Myriam, 2024. "Effects of business to business e-commerce platform-governance mechanisms on seller firms’ performance," Research in International Business and Finance, Elsevier, vol. 67(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Yanyan & Mandler, Timo & Meyer-Waarden, Lars, 2021. "Three decades of research on loyalty programs: A literature review and future research agenda," Journal of Business Research, Elsevier, vol. 124(C), pages 179-197.
    2. Lina Xu & Zhiqing Meng, 2024. "Optimizing Retailer Ordering Strategies: a Comparative Analysis of Membership and Non-Membership Systems," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13027-13048, September.
    3. Hu, Li & Ma, Hoi-Lam & Wang, Li & Liu, Yang, 2023. "Hiding or disclosing? Information discrimination in member-only discounts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 171(C).
    4. Wang, Le & Luo, Xin (Robert) & Li, Han, 2022. "Envy or conformity? An empirical investigation of peer influence on the purchase of non-functional items in mobile free-to-play games," Journal of Business Research, Elsevier, vol. 147(C), pages 308-324.
    5. Mutlu, Fatih & Çetinkaya, Sıla, 2020. "Supplier–carrier–buyer channels: Contractual pricing for a carrier serving a supplier–buyer partnership," International Journal of Production Economics, Elsevier, vol. 230(C).
    6. Faramarzi, Ashkan & Bhattacharya, Abhi, 2021. "The economic worth of loyalty programs: An event study analysis," Journal of Business Research, Elsevier, vol. 123(C), pages 313-323.
    7. Albert Y. Ha & Lode Li & Shu-Ming Ng, 2003. "Price and Delivery Logistics Competition in a Supply Chain," Management Science, INFORMS, vol. 49(9), pages 1139-1153, September.
    8. Min, Taeki & Kim, Sang Yong & Shin, Changhoon & Hahn, Minhi, 2002. "Competitive nonlinear pricing with product differentiation," International Review of Economics & Finance, Elsevier, vol. 11(2), pages 155-173, May.
    9. Tine Bock & Iris Vermeir & Patrick Kenhove, 2013. "“What’s the Harm in Being Unethical? These Strangers are Rich Anyway!” Exploring Underlying Factors of Double Standards," Journal of Business Ethics, Springer, vol. 112(2), pages 225-240, January.
    10. Nesset, Erik & Bergem, Ola & Nervik, Bjørn & Schiøll Sørlie, Even & Helgesen, Øyvind, 2021. "Building chain loyalty in grocery retailing by means of loyalty programs – A study of ‘the Norwegian case’," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    11. Bhukya, Ramulu & Paul, Justin, 2023. "Social influence research in consumer behavior: What we learned and what we need to learn? – A hybrid systematic literature review," Journal of Business Research, Elsevier, vol. 162(C).
    12. Hwang, Joon Ho & Chung, Jaiho & Kim, Jae Wook & Lee, Dongwon & Yoo, Weon Sang, 2016. "Antecedents to loyalty point redemption: Implications for customer equity management," Journal of Business Research, Elsevier, vol. 69(9), pages 3731-3739.
    13. Matti J. Haverila & Kai Haverila & Caitlin McLaughlin & Hailey Tran, 2022. "The impact of tangible and intangible rewards on online loyalty program, brand engagement, and attitudinal loyalty," Journal of Marketing Analytics, Palgrave Macmillan, vol. 10(1), pages 64-81, March.
    14. Kevin Weng, Z., 1995. "Modeling quantity discounts under general price-sensitive demand functions: Optimal policies and relationships," European Journal of Operational Research, Elsevier, vol. 86(2), pages 300-314, October.
    15. Schotanus, Fredo & Telgen, Jan & de Boer, Luitzen, 2008. "Unfair allocation of gains under the Equal Price allocation method in purchasing groups," European Journal of Operational Research, Elsevier, vol. 187(1), pages 162-176, May.
    16. Pinar Keskinocak & Seçil Savaşaneril, 2008. "Collaborative procurement among competing buyers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(6), pages 516-540, September.
    17. Jue Wang & Yuri Levin & Mikhail Nediak, 2019. "Selling Passes to Strategic Customers," Operations Research, INFORMS, vol. 68(4), pages 1095-1115, July.
    18. Valeria Stourm & Scott A. Neslin & Eric T. Bradlow & Els Breugelmans & So Yeon Chun & Pedro Gardete & P. K. Kannan & Praveen Kopalle & Young-Hoon Park & David Restrepo Amariles & Raphael Thomadsen & Y, 2020. "Refocusing loyalty programs in the era of big data: a societal lens paradigm," Marketing Letters, Springer, vol. 31(4), pages 405-418, December.
    19. Youkyung Won, 2016. "Dominance Relationship Among the Retailer’s Strategies Under the Semi-Stackelberg Newsvendor Situation with Quantity Discounts," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(02), pages 1-20, April.
    20. Chenxu Ke & Bo Yan & Jingna Ji, 2023. "Pricing new and remanufactured products under patent protection and government intervention," Annals of Operations Research, Springer, vol. 324(1), pages 131-161, May.

    More about this item

    Keywords

    Paid membership system; Membership fees; Online retailers; E-commerce platform; Market competition;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:67:y:2024:i:pa:s0275531923002155. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.