Private-brand introduction and investment effect on online platform-based supply chains

Abstract

This paper investigates the effect of a platform’s private-brand introduction on a manufacturer that sells products through that platform by considering the investment effect and selling mode. We first analyze the role of the private brand and the investment effect on the manufacturer under the reselling mode and the agency mode, respectively. We then examine how the private brand introduction and the investment effect impact the manufacturer’s optimal selling mode choice. The introduction of a private brand is believed to threaten manufacturers that sell goods through the platform. However, we find that, in the reselling mode, a manufacturer can benefit from private-brand introduction through the increased demand and wholesale price generated by the platform’s increased marketing investment, as long as the competition intensity remains relatively low. In the agency mode, the manufacturer benefits more with a higher proportional fee after private-brand introduction. Further, the investment effect can act as a buffer, making the manufacturer more robust when facing threats. Also, after private-brand introduction, the manufacturer prefers the agency mode, but when it comes to investment and high investment efficiency, it is wiser for the manufacturer to keep reselling when facing private-brand introduction.