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A choice of selling format in the online marketplace with cross-sales supply chain: Platform selling or traditional reselling?

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  • Xiaojing Li

    (Sichuan Normal University)

  • Xingzheng Ai

    (University of Electronic Science and Technology of China)

Abstract

In the online retail market, how to work with upstream suppliers is a key issue for downstream online retailers (e-retailers). Online retailers can choose between functioning either as the “two-sided platforms” (e.g., Taobao.com or eBay.com) allowing suppliers to sell directly to customers by paying a revenue-sharing fee, or as the “resellers” (e.g., Wal-mart.com or JingDong.com) that purchase products from suppliers, and then resell them to customers. Given the rapid growth of e-commerce over past few years, this choice, which is the focus of this article, has become an important practice-based decision. We develop a game-theoretic model for a cross-sales supply chain in which two suppliers deal with two common online retailers. As Stackelberg leaders, online retailers can operate either as a two-sided platform (serving both suppliers and customers) or as a reseller (ordering from suppliers and selling competing products on its own platform). Each supplier adopts either an exclusive-sales strategy, selling products through an exclusive e-retailer, or a cross-sales strategy, selling products through two e-retailers. We analyze the optimal decisions for both e-retailers and suppliers in competing supply chains and describe the system equilibrium for the online marketplace.

Suggested Citation

  • Xiaojing Li & Xingzheng Ai, 2021. "A choice of selling format in the online marketplace with cross-sales supply chain: Platform selling or traditional reselling?," Electronic Commerce Research, Springer, vol. 21(2), pages 393-422, June.
    • Handle: RePEc:spr:elcore:v:21:y:2021:i:2:d:10.1007_s10660-019-09370-7
    DOI: 10.1007/s10660-019-09370-7
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