Online retailer’s optimal financing strategy in an online marketplace

This paper studies an e-commerce supply chain, where a capital-constrained online retailer sells products through an e-commerce platform and may finance from the commercial bank, the upstream supplier as well as the e-commerce platform to relieve its capital distress. In the presence of bankruptcy risk for the online retailer, we establish a three-echelon Stackelberg game model, and characterise the optimal decision for each supply chain player. We examine the retailer’s financing strategy by comparing profits under three different financing schemes. Compared with existing literature, we find that in contrast to trade credit and e-commerce platform financing, the retailer has an incentive to finance from the bank. Also, the e-commerce platform is not always willing to provide financing service to the retailer when the commission rate is high. Furthermore, we investigate the impacts of the commission rate and the retailer’s initial capital on the equilibrium results. The results show that the interest rates of the bank and the e-commerce platform decrease with the commission rate. In contrast to the bank, the e-commerce platform generally charges a lower interest rate. In particular, when the commission rate exceeds a certain threshold, the e-commerce platform will provide free financing services to the retailer.