Resale or agency sale? Equilibrium analysis on the role of live streaming selling

Abstract

The rise of live streaming selling has brought a revolution to the retail industry. The supply chain with platform-based retailing is faced with choice of sales formats and marketing decisions. We establish live streaming selling models with two sales formats of resale and agency sale, and three pricing strategies of same high, same low and differential strategies (HH, LL and D). We further explore the impacts of consumer returns, as they are typically higher in live streaming selling. Conventional wisdom believes that agency sale format can reduce double marginalization and benefit both the platform and the supplier, which cannot be achieved in resale format. Interestingly, our study shows that resale format may become a better choice for both the platform and the supplier when considering the impacts of consumer returns. This result holds in pricing strategies HH and D, where the key driver of sales format choice in strategy HH is commission rate while it is consumer's low valuation in strategy D. In strategy LL, resale is the supplier's preferred format and agency sale is better for the platform. Furthermore, we find with agency sale format, equilibrium pricing strategies HH and LL always exist; while with the resale format, equilibrium strategy HH exists only when considering consumer returns. Finally, we discuss the hybrid sales formats with and without price competition, and extend our models to encompass more scenarios.