C2M strategies on an e-commerce platform under brand competition

Abstract

With the growing diversity of consumer preferences, an emerging mode of supply chain innovation, the consumer-to-manufacturer (C2M) model, is being adopted by e-commerce platforms. The C2M model directly connects end consumers to upstream factories digitally, shortens the information pipeline, and helps factories better understand consumer needs. Given the presence in the market of a national brand produced by a manufacturer, whether to incur the costs of introducing C2M store brand products is a key issue for the platform. Specifically, we consider two C2M modes that depend on whether the e-commerce platform has pricing power: (1) TC2M, which involves the factory selling to consumers directly, and (2) JC2M, which involves the e-commerce platform reselling the C2M product. We show that a relatively high mismatch level of the national brand product and a low introduction cost might induce adoption of the C2M model, which is in the interest of both the e-commerce platform and the factory. Furthermore, when the national brand’s mismatch level is not too high, the e-commerce platform prefers the JC2M mode to alleviate intensified brand competition. Interestingly, under certain circumstances, the C2M model can also be beneficial for the national brand producer (i.e., manufacturer) due to more precise targeting of its market segment. Our study extends the literature by modeling the competition between the national brand and C2M store brand, discussing supply chain members’ preference for the C2M model and providing intriguing managerial insights for the platform on the adoption of different C2M modes.