Self-reliant shipping to mitigate disruption risk in the direct-delivery channel: will the e-tailer’s bonded-warehouse channel also benefit?

Abstract

ABSTRACT Cross-border e-commerce, in particular direct-delivery trade, has been severely impacted by turbulent events like the COVID-19 epidemic. E-tailers operating both bonded-warehouse and direct-delivery channels could mitigate disruption risks by self-reliant shipping to maintain control over logistics processes. The question is whether the e-tailer’s bonded-warehouse channel will also benefit from self-reliant shipping. We analyse a typical situation in which an e-tailer imports products from overseas suppliers and resells them through dual-sales channels. Our findings reveal that the demand potential difference between these two channels and the common carrier’s pricing power are critical factors in the e-tailer’s decision-making process. If the bonded-warehouse channel has moderate demand potential, the e-tailer is less likely to choose self-reliant shipping. Therefore, the imbalance in demand potentials between the two channels serves as a significant driver for the e-tailer to favor self-reliant shipping. Interestingly, we find the common carrier’s pricing power can either motivate or deter the e-tailer from self-reliant shipping. If the direct-delivery channel/bonded-warehouse channel has a large demand potential, a higher service price for this channel will be charged by the carrier, thus incentivizing the e-tailer to prefer self-reliant shipping. Our study also demonstrates that both self-reliant shipping and common carrier strategies can achieve a Pareto improvement in the e-tailer profit and the social welfare.