Hybrid Platform Operation Decision of Retail Enterprises

Abstract

The development of e-commerce has formulated the hybrid platform mode for retail enterprises. We studied how the differences in product distribution cost, unit retail price, and competition conflict affect the business model decision making. The theoretical model shows the following results: (1) When the hybrid platform sells complementary products with third-party sellers, the profit of choosing the hybrid mode is always the best. (2) When the hybrid platform competes with third-party sellers, if the unit retail price is in a higher range, the merchant mode is the best choice; when the unit retail price is in the lower range, the hybrid platform mode is the best choice. (3) Competition between the hybrid platform and third-party sellers determines the profit level of the operating enterprise. The excessive price competition between the self-operated business and the third-party sellers is magnified by the existence of cross-network externalities, resulting in a strong anti-competitive effect, and affecting the profits of the hybrid platform’s two businesses. These findings guide retail enterprises to design their business model as well as address competition conflict.