Reselling or agency selling? The strategic role of live streaming commerce in distribution contract selection

Abstract

The booming live streaming business has increased the number of consumer options for purchase channels, which has had a significant impact on firm sales models and management practices. This paper considers a multiechelon supply chain in which an upstream supplier can sell products through an online platform and a live streaming sales channel, and the online platform can choose to sign a reselling agreement or an agency selling agreement with the supplier. By constructing a Stackelberg game, we theoretically derive the equilibrium strategies of the supply chain members under different selling agreements in the presence of a live streaming sales channel. Specifically, we find that under the reselling agreement, the optimal retail price for the platform decreases with an increase in the commission rate, while the retail price for the live streaming channel always increases with an increase in the commission rate, and the relationship between the wholesale price and the commission rate depends on the ratio of the coefficient on the internet celebrity’s effort for the live streaming channel to that for the online platform. Under the agency selling agreement, there is a threshold in the agency fee. The impact of the commission rate on pricing strategy on one side of the threshold is opposite that on the other side. Furthermore, we numerically explore the impacts of the system parameters on the selection of the sales model, profit, and the decision-making of the supply chain members and identify the conditions under which agency selling and reselling are chosen when there is a live streaming sales channel. Interestingly, we find that the internet celebrity should not charge a commission rate that is too large; otherwise, it harms others without benefiting the celebrity. Moreover, when the supplier chooses to hire an internet celebrity to sell goods via live streaming, the supplier should choose a celebrity with either an extremely large following or with little influence but should not choose a celebrity with only moderate influence.