Logistics service strategies under different selling modes

Abstract

Logistics services are becoming increasingly important for customers, and so such services now play a key role in shaping a company’s competitive advantage. In tandem with this, the practice of logistics service sharing has emerged. Logistics services can be provided by a third-party firm or by an online platform under a reselling mode or a marketplace mode. In this study, we considered a setting in which an online platform and a manufacturer sell substitutable products in the online market to investigate how competition intensity and demand sensitivity to the logistics service affect the firms’ decisions and profits. By comparing equilibrium solutions, we found that the level of logistics service provided by the online platform is always higher. We also found that the online platform is always willing to share its logistics services with manufacturers under the marketplace mode. Further, in the reselling mode, using the online platform’s logistics service is the preferred choice for the manufacturer. In the marketplace mode, a higher logistics service level and more room for pricing are two forces that steer the manufacturer’s logistics service choice. Interestingly, as the proportional fee increases, the manufacturer is more inclined to use the online platform’s service.