The impacts of e-tailer's private label on the sales mode selection: From the perspectives of economic and environmental sustainability

Abstract

In recent years, some e-tailers have introduced private labels to compete with manufacturers’ products in end markets. With this in mind, manufacturers who sell products through e-tailers should consider carefully when choosing the online sales mode. In this paper, we examine two prevalent sales modes and find that the manufacturer should adopt agency selling (reselling) when the percentage fee is low (high). When the percentage fee is moderate, with a high brand advantage, the manufacturer prefers reselling due to the high effective price. However, the e-tailer prefers agency selling because the percentage fee is more attractive than the decision right of sales quantities. Interestingly, though the manufacturer's and the e-tailer's preferences over the sales modes seem opposite, they may both prefer agency selling if the percentage fee and the brand advantage are moderate. Besides, we compare the sales modes from the environmental sustainability perspective and identify two influence factors, i.e., total sales quantities and the manufacturer's market share. The simultaneous improvement of the manufacturer's profits, the e-tailer's profits and the environmental performance is achievable under agency selling. Moreover, it is insightful to find that if the manufacturer's production technology is enough environmentally friendly, the optimal sales mode in terms of economic sustainability certainly outperforms in environmental sustainability. In the extension, we discuss how asymmetric production and sales costs influence our results. We find that our main findings still hold and further if the manufacturer's sales costs are high, the “win-win-win” situation can be reached under either reselling or agency selling.