Reselling, consignment or In-Marketplace selling Mode? Competitive strategy for E-tailers to counteract online third-party marketplaces

Abstract

The increasing prevalence of online marketplaces has induced many suppliers to sell directly on them, which causes potential threats to small- and medium-sized e-tailers. Considering e-tailers’ broader question of how best to counteract these marketplaces, we consider three of online sales modes, namely, the traditional, consignment, and in-marketplace selling modes. In particular, we investigate the interaction between a supplier’s strategy for introducing a marketplace channel and an e-tailer’s choice of selling mode. Our analysis reveals that the e-tailer’s selling mode choice depends not only on the performance of both the supplier and the marketplace but also channel competition. In general, the e-tailer prefers the in-marketplace selling mode with a higher marketplace service level and the consignment mode with higher supplier selling efficiency. If a marketplace channel exists, traditional reselling is a better choice when both the marketplace service level and the supplier selling efficiency are restricted to the middle range. The underlying mechanism is that traditional reselling is less negatively affected by the competition effect. Finally, we find that the supplier wants to eschew the marketplace channel and strategically induce the e-tailer to sell through it even though the marketplace service level is relatively high. This research provides guidance not only for the supplier’s channel choice but also for the small- and medium-sized e-tailers’ choice of selling mode when encountering the online marketplace.