Customer Shopping Network on a Multi-Sided Platform

Abstract

Multi-sided platforms (MSPs) e.g., Alibaba and Google Express, are an emerging business model that is growing rapidly. MSPs in retail are partnership networks that use the internet to bring multiple stakeholders together. One of the benefits of retail MSPs is the network effect, where customers can buy from various retailers on an MSP creating a customer shopping network. However, very few studies have explored what types of retailers benefit more from network effects. Using network theories of centrality and structural holes, we examine network positions that are advantageous or disadvantageous for retailers in the MSP. Using panel data from one such MSP, our results show that retailers who have higher customer reciprocity, structural centrality or the ability to bridge structural holes have higher sales as compared to other retailers. This has implications for an MSP as it decides which retailer to court and promote and also with whom to renegotiate terms of contract. Theoretical contributions are also discussed.