Strategic introduction of logistics retail and finance under competition and channel spillover

Some novel operation modes of third-party logistics providers (3PLs) have been arising. 3PLs run retail businesses (i.e., logistics retail) and provide financial assistance to capital-constrained product suppliers (i.e., logistics finance). However, introducing logistics retail brings the effects of competition and channel spillover, which further affect logistics finance. This intrinsic connection raises key questions about whether and under what conditions the 3PL firm should cooperate with the supplier by integrating logistics services, retail, and financing. In this paper, we consider four scenarios to analyze this problem: logistics service, logistics finance, logistics retail, and logistics retail–finance. Interestingly, compared with the former two scenarios, the retail competition existing in the latter two scenarios will not consistently lower down sales prices and raise sales quantities, especially when the spillover effect, either positive or negative, is significant. Moreover, we find that the 3PL firm prefers the logistics retail–finance scenario in most cases because the intersection of selling and financing roles enables the 3PL firm to increase financing income by affecting two parties’ sales margins (diversion effect). However, the supplier prefers the logistics retail–finance scenario when the spillover effect is relatively small even negative and the unit logistics cost is relatively lower. Otherwise, with the increasing positive spillover effect, the supplier prefers the logistics retail scenario because the enhanced diversion effect enlarges competition losses. Finally, we find that a lower 3PL firm’s interest rate facilitates achieving a win-win result, especially when the spillover effect becomes negative.