Manufacturer's choice of online selling format in a dual-channel supply chain with green products

Abstract

When selling green products on online platforms, manufacturers often have to choose their selling format between agency selling and reselling. This paper focuses on a green manufacturer selling substitutable products through an e-commerce platform (also known as an e-tailer) and an independent offline retailer. Our research makes a major contribution by examining how the manufacturer makes joint decisions on green product development, pricing, and the online selling format. Our analytical results show that, first, in the case of a low agency fee, agency selling leads to a greener product on the online channel, which benefits the manufacturer. Otherwise, reselling improves the product greenness on both channels, which benefits the manufacturer. More notably, higher consumer green awareness incentivizes the manufacturer to prefer agency selling. Second, counterintuitively, it is found that agency selling can be more profitable for the e-tailer when the agency fee is low and moderate, and vice versa. This is because a high agency fee will depress the manufacturer's online sales of green products, hurting the e-tailer. Finally, we extend our model to the cases with different marginal demand expansion parameters, different greenness-enhancing cost factors, a leading e-tailer, the simultaneous use of both formats, and different channel competition coefficients on the price and product greenness. We demonstrate the robustness of our main analytical results and obtain more managerial insights.