Selecting online distribution modes for differentiated products in a platform supply chain

Abstract

E-commerce platforms can either serve as product resellers or provide online marketplaces. Selecting the better of these two online distribution modes or applying the combination of them has always been a critical issue for a supplier. The present work aims to assist a dominant supplier manufacturing differentiated products in determining the best online mode under different distribution strategies. Starting from the selective marketing strategy, three models matching products with individual modes are respectively formulated and studied for equilibria. The research is then extended to the intensive marketing strategy, where the combination of modes for each product is addressed. Our analytical results reveal that the mode selection highly relies on a product's inherent attribute, defined as the Cost-Market-Substitution (CMS) factor. Both the commission rate and slotting fee can be functioned as important moderators for relieving the conflict of distribution modes. The optimal commission rate to maximize the win-win region is shown to be highly dependent upon the substitution intensity across the differentiated products, and hence can be attained accordingly.