Strategic channel decisions for the supplier and specialized e-retailer in the presence of a third-party marketplace

Abstract

With the advancement of e-commerce and the intensification of market competition, many suppliers have leveraged third-party online marketplaces to expand their sales channels and bolster competitiveness. This poses potential threats to e-retailers specializing in the core business of certain categories. This study examines a specialized e-retailer's selling mode choice (reselling, in-marketplace selling, or agency selling mode) and how this choice interacts with a supplier's channel strategy (marketplace, e-retailer, or both/dual channels) in the presence of a third-party marketplace. Our findings indicate that (1) the e-retailer's optimal selling mode is contingent on the supplier's sales service quality and efficiency, and the e-retailer's market occupation. Generally, when initially occupying a small market, the e-retailer prefers selling in a third-party marketplace, whereas when the initial market is relatively large, the e-retailer is more inclined to opt for the reselling (agency selling) mode if the supplier's sales efficiency is low (high). Additionally, if the supplier's sales service quality is low, the e-retailer will never choose the agency selling mode. (2) Exclusively introducing the marketplace channel is not the optimal choice for the supplier. Instead, adopting a dual channel is better when the direct selling cost is not too high. (3) Under certain scenarios, the supplier can manipulate the e-retailer's channel by introducing the marketplace channel and offering a reference price without actually selling any products.