Monopoly or competition: strategic analysis of a retailing technology service provision

Abstract

To improve the consumer shopping experience and to remain competitive, an increasing number of retailers continue to increase their investment in technology services and actively seek help from technology service providers to transform and upgrade their retail business. Technology service providers deliver new technological solutions for retailers by providing professional retailing technology services (e.g., building omnichannel retailing modes). Considering this context, we seek to understand whether retailers expect to use technology services and service providers’ expectations of providing retailing services. In this paper, we build a two-tier supply chain with one upstream technology service provider and one downstream retailer (or two competitive retailers) to analyse the strategic choice of the retailer(s) and the service provider. We find that the retailer(s) can purchase a professional retailing technology from the technology service provider and that the service provider is willing to provide technology to two competing retailers, which can increase market demand and yield higher profits. Furthermore, we find the impact of the technological contribution level, retail competition intensity, the power structure, and the technology marketing effect on decision outcomes is significant. Therefore, retailers should consider the influence of these factors when service providers deliver a retailing technology service.