Manufacturer’s selling mode choice in a platform-oriented dual channel supply chain

Abstract

This paper considers a platform-oriented dual channel supply chain (PDCSC), in which the online retailer resells products in a marketplace provided by the platform and the manufacturer chooses a selling mode to introduce a dual channel. Three possible selling modes for the manufacturer are considered: (1) Reselling mode (Mode R); (2) Agency selling mode (Mode A); and (3) Direct selling mode (Mode D). We examine the manufacturer’s equilibrium strategy and how this choice affects the other supply chain members’ preferences. By comparing equilibrium profits in the three selling modes, we demonstrate that the manufacturer prefers Mode D when the direct operating cost is relatively low. Otherwise, either Mode R or Mode A is optimal, largely depending on the interaction between competition intensity and commission rate. More specifically, if both the competition intensity and commission rate are low, Mode A is the optimal choice; if the competition intensity is low but commission rate is high, Mode R is optimal; if the commission rate is relatively high, the manufacturer should choose Mode R. Finally, we further characterize the influences of the different selling modes on the profits of the online retailer, the platform, and the whole supply chain. We also extend the model by considering the case where the online retailer and platform have equal channel power and set prices simultaneously, the case of Cournot competition, and the case where the platform acts as the channel leader.