Cooperation strategies with third‐party platform: E‐tailer and manufacturer perspectives

Abstract

AbstractWith the rapid development of e‐commerce, both e‐tailers and manufacturers have actively cooperated with third‐party platforms to expand distribution channels and enhance competitiveness. There are three typical choices for firms to cooperate with a third‐party platform: (i) non‐cooperation, (ii) agency selling cooperation mode, and (iii) reselling cooperation mode. We consider a three‐tier supply chain and establish a stylized theoretical model to explore whether and how the e‐tailer or the manufacturer cooperates with a third‐party platform. We investigate the optimal channel cooperation choices from both the e‐tailer's and the manufacturer's perspectives under various channel structures and cooperation modes, revealing their different roles in cooperating with third‐party platforms. Our results indicate that large potential market size of the third‐party platform motivates the e‐tailer to cooperate with the third‐party platform. On this basis, agency selling cooperation mode is preferred by the e‐tailer at mild channel competition and reasonable commission rate, while reselling cooperation mode dominates at high channel competition or when the commission rate exceeds a threshold. Interestingly, we find that the manufacturer has generally similar mode preference with the e‐tailer, and they have opposite preferences under the condition of low commission rate and moderate channel competition intensity. More importantly, our results reveal that direct channel cooperation between the manufacturer and third‐party platform harms the e‐tailer's interests, whereas the channel cooperation between the e‐tailer and third‐party platform may increase profits for all supply chain participants. Our study provides valuable insights for e‐tailers, manufacturers and third‐party platforms to make better channel cooperation decisions and achieve successful partnership in online retailing.