Livestream e-commerce in a platform supply chain: A product-fit uncertainty reduction perspective

Abstract

Livestream e-commerce involves broadcasters introducing, demonstrating, and selling goods while interacting with online audiences in real time via digital devices. In recent years, the livestream e-commerce industry has witnessed explosive growth. This paper establishes a stylised model of the livestream e-commerce supply chain and incorporates a salient feature of livestream selling, i.e., the livestream enables a reduction of the product-fit uncertainty for consumers. We obtain the optimal pricing decision for the seller and characterise the supply chain firms' profits when the platform's commission rate is exogenous. Two crucial parameters are identified in this scenario, i.e., the consumers' hassle cost to watch livestream and the seller's effective procurement cost. It is found that both the seller and platform prefer adopting livestream when the consumer's hassle cost is low and the effective procurement cost is high, and the seller has a stronger tendency to adopt livestream than the platform. We also investigate the problem under the endogenous platform's commission rate, revealing that the platform's optimal commission rate with livestreams should be higher than that without livestreams unless the consumer's hassle cost is considerably large and the seller's procurement cost is considerably small. Another result different from the scenario of the exogenous platform's commission rate is that a selling mode choice inconsistency occurs when the product's procurement cost and consumer's hassle cost are both very low, in which case, the platform prefers the seller to use livestream selling, whereas the seller prefers not to do so.