Strategic Business Mode Choices for E-Commerce Platforms under Brand Competition

Abstract

Relying on the rapid development of information and internet technologies, e-commerce has boomed over the past decade. As a link between manufacturers and consumers, the e-commerce platform has a crucial position in the online retailing market. The e-commerce platform not only provides an online marketplace through which the manufacturers directly sell products to consumers but also purchases and resells manufacturers’ products to consumers. Therefore, when the e-commerce platform provides services to manufacturers, it is faced with the selection of two sales methods: reselling or marketplace. Using a game theoretic model, we focus on the strategic interactions between an e-commerce platform and two brand manufacturers in four different business modes. The results show that the e-commerce platform profits more when both brand manufacturers directly sell products through the online marketplace. From the two brand manufacturers’ points of view, using the e-commerce platform as a reseller is always more profitable than directly selling, no matter which business mode they are in. The above findings have important implications for the selling decisions of the e-commerce platform and brand manufacturers. Furthermore, an interesting and counterintuitive result is that the new brand manufacturer benefits more than the existing brand manufacturer when consumers’ acceptance of the new brand products is becoming lower. When production costs are low, only the two brand manufacturers can achieve a mutually beneficial situation by selling products to the e-commerce platform. Moreover, the competition among brand manufacturers is beneficial to the e-commerce platform. Our research provides a theoretical basis for brand manufacturers and the e-commerce platform to make more rational decisions, and it updates the existing knowledge about brand competition and e-commerce platform’s business mode choices.