Optimal online channel structure for multinational firms considering live streaming shopping

Abstract

We build game theoretical models to investigate whether a multinational firm should open a live streaming shopping sales channel on an overseas e-commerce platform, where the multinational firm’s overseas online retail division and third-party e-retailer exist, and if so, how to adjust its online channel structure to maximize its post-tax profit. We assume the headquarter of the multinational firm and e-commerce platform are located in countries with different corporate income tax rates. The multinational firm could sell products through its overseas online retail division (channel D), the third-party e-retailer (channel R) and live streaming shopping sales channel (channel L). We consider four possible channel structures on the e-commerce platform based on the three sales channels: Scenarios DR, DRL, DL and RL. We incorporate channel substitutability and tax difference into our models, and analyze the impact of opening a live streaming shopping sales channel on the operating decisions of supply chain members and supply chain performance, and derive the optimal online channel structure for the multinational firm. We show that, opening a live streaming shopping sales channel could benefit the multinational firm in both post-tax profit and sum of order/sales quantity, but it will hurt the profit of the multinational firm’s overseas online retail division and third-party e-retailer. We further show that, the optimal online channel structure on the e-commerce platform for the multinational firm is Scenario DRL or Scenario DL, depending on the interaction of channel substitutability and tax difference. In addition, we analyze the impact of extra average operating cost of opening a new sales channel on the multinational firm’s online channel structure. These insights may help multinational firms configure their online channel structures on e-commerce platforms when engaging in live streaming shopping.