Agency Selling Research Articles

Quality differentiation and channel structure on online platforms

AbstractWe examine how quality differentiation affects a manufacturer's channel strategy when selling through an offline retailer and a platform. The manufacturer can choose to distribute high‐ or low‐quality products online/offline via agency or reselling channels. We demonstrate that agency selling (reselling) is optimal when the commission rate is low (otherwise). Moreover, the manufacturer chooses to sell high‐quality (low‐quality) goods online if the cost difference between the two quality levels is low (high). Interestingly, as the quality difference increases, the manufacturer is more likely to offer high‐quality goods online. The platform and the retailer cannot benefit from the manufacturer's decisions simultaneously.

The Impact of Platform Information Sharing on Manufacturer’s Choice of Online Distribution Mode and Green Investment

In this study, we consider a dual-channel supply chain structure where a manufacturer invests in green products and distributes them to green-conscious consumers through an offline retailer and an online platform. The manufacturer has the flexibility to choose sales via either a wholesale mode or an agency selling mode on the online platform channel. The platform can obtain private information and decide whether to share it with the manufacturer. This study investigates the strategic interaction between the green manufacturer’s decision to use an online sales mode and the online platform’s strategy for information sharing. Our analysis reveals that under the wholesale price mode, the platform is willing to share demand information only when the manufacturer exhibits high investment efficiency. In contrast, under the agency selling mode, the platform always shares demand information regardless of the level of investment efficiency. Nevertheless, the manufacturer is discouraged from opting for the agency selling mode due to the higher commission rate. Interestingly, we observe that when the value of information is sufficiently high, the manufacturer still tends to prefer the agency selling mode, despite the added cost of the higher commission fee. Additionally, the offline retailer always benefits from the information sharing conducted by the online platform. Finally, our extended model indicates that the timing of information-sharing decisions has a significant impact on the manufacturer’s choice of mode.

Agency, reselling, or hybrid mode? Competing with store brand

Platform supply chains are emerging as a new form of global supply chain that encompass reselling, agency selling, and hybrid selling modes. This paper examines the impact of store brand products on the firms’ sales strategies. We consider the selection between three sales modes available to suppliers, both with and without the store brand products: reselling, agency selling, and hybrid selling. Comparing the firms’ optimal strategies shows that the hybrid mode consistently yields greater profits when compared to the agency selling mode. Notably, our findings reveal that firms’ optimal choice of sales mode varies depending on the commission rate. The optimal sales mode differs when the commission rate is lower or higher. In the presence of the store brand products, firms choose the reselling mode only when the commission rate is high and consumers’ perceived value of national brand products is low. Otherwise, equilibrium outcomes are not achieved.

Information and selling mode strategies in a supply chain with an outsourced private label product

AbstractThis paper examines the interplay between the information strategy of an e‐commerce platform and the selling mode strategy of a manufacturer within a co‐opetitive supply chain, as well as the identification of the optimal supply chain strategy. We develop a supply chain model where a platform outsources production of its private label product to a manufacturer, who also sells its national brand product through the platform. The platform must decide whether to acquire consumer quality preference information at a cost and share it with the manufacturer, while the manufacturer needs to choose between the reselling mode or the agency selling mode for its national brand product. The two driving effects (competition‐intensification effect and mode differentiation effect) are identified. Our findings show that the platform will acquire and share information when the acquisition cost is sufficiently low, leading to the “competition‐intensification effect.” Additionally, the manufacturer prefers the agency selling mode when cost‐quality efficiency is low, and the reselling mode otherwise, driven by the “mode differentiation effect.” In cases where information sharing is absent, the manufacturer is more likely to choose the agency selling mode. Interestingly, when the cost‐quality efficiency of the manufacturer's product is moderate and the information acquisition cost is low, the “competition‐intensification effect” and the “mode differentiation effect” offset each other, resulting in the expansion of the region where the manufacturer chooses the reselling mode due to the platform's information‐sharing strategy. As a result, this enhances a cooperative relationship between the manufacturer and the platform. We also derive the optimal supply chain strategy, providing insights into both the manufacturer's selling mode and the platform's information strategies in online retailing.

Developing a store brand or collecting a commission: Amazon's choice and quality decision

AbstractAmazon, as one of the dominant online retailers (platforms), cooperates with manufacturers under wholesale contract to develop its store brands. Simultaneously, Amazon offers manufacturers with a marketplace and serves manufacturers in the agency selling. In this paper, we build a model to investigate the platform's and the manufacturer's choices on the cooperation modes (i.e., wholesale contract or agency selling) and their quality decisions when they serve consumers with heterogeneous willingness to pay for quality and the platform can dictate the quality under the wholesale contract. We find that the platform and the manufacturer are more likely to align their preferences on selling modes when consumers are homogenous enough. Moreover, when the commission rate is relatively low, both of them may prefer the agency selling. In this case, the manufacturer is willing to offer high quality in the agency selling. In contrast, when the commission rate is sufficiently high, they can only align their preferences on selling modes by choosing the wholesale contract. The product quality under the wholesale contract is higher than that in the agency selling. Finally, we provide three extensions: the platform decides the commission rate, the platform decides the wholesale price and competition between manufacturers.

Manufacturer Encroachment Strategic Analysis with Platform Service Inputs: An Agent-Based Scenario

This paper considers the agency selling channel in a supply chain under platform service investment. We construct Stackelberg game models to study the impact of the manufacturer’s encroachment strategy on supply chain members. Research results indicate that the encroachment strategy always has a positive impact at the levels of the manufacturer and platform service, which should dynamically change in response to the manufacturer’s action; the platform may actively implement a service strategy without encroachment, while the platform should be cautious in providing services to avoid backlash when encroachment occurs; the high commission rate may prompt the platform to increase the service effort and hinder manufacturer encroachment; when the channel substitution rate is high, both the manufacturer and platform may suffer from it and hence they should slow down their strategy implementation and consider cooperation; when the elasticity coefficient is large and the service cost is high, it may hinder the platform from providing services and the manufacturer may take the opportunity to encroach and thus seize the market.

Retailer information sharing with green manufacturer encroachment in a hybrid supply chain

AbstractWe consider a hybrid supply chain with a manufacturer and an online retailer with rich demand information. The manufacturer invests in green products and sells them not only through retailers that then sell to customers (reselling) but also directly to consumers via retailers by paying a proportional fee (agency selling). The retailer first decides whether to share demand information with the manufacturer, who then decides whether to encroach. We show that a manufacturer is willing to encroach when the entry cost is small if the retailer chooses not to share information. However, with the increase in the entry cost, the manufacturer could still encroach if the retailer shares information. We also find that a manufacturer that is more efficient at producing green products is more likely to encroach. Moreover, when the entry cost is sufficiently small or large, the retailer prefers to share information with the manufacturer when the greening investment efficiency is high or the efficiency is low but the proportional fee is large. Nevertheless, when the entry cost is moderate and the competition intensity is small, sharing information is better for the retailer even if the efficiency is low and the proportional fee is small. Finally, we observe that consumer sensitivity to the direct channel, differences in agency selling price and direct selling price, and imperfect retailer information do not influence decisions in specific circumstances. Furthermore, adjusting the encroachment order or ex post sharing impacts the decision‐making, with the magnitude of impact depending on certain supply chain parameters.

Channel Expansion Strategies in the Presence of Asymmetric Competitive Retail Platforms

The success of online retail platforms with hybrid reselling and agency selling has been well documented. Recently, manufacturers are expanding channels in competitive retail platforms (such as JingDong and Tmall) on the basis of reselling. Considering two asymmetric competitive retail platforms, we investigate the incentive for channel expansion under various strategies: agency selling in the incumbent platform, agency selling, or reselling in the asymmetric competing platform. Our analysis shows that the manufacturer's channel expansion strategies depend on the market potential ratio, competition intensity, and agency channel costs. Manufacturers prefer channel expansion when agency channel costs are small or the market potential ratio is above a threshold. Interestingly, even the competing platform has a smaller market potential, manufacturers may still prefer to expand the agency selling channel in the competing platform rather than the incumbent platform. When the market potential ratio is large, under low agency channel costs, the impact of competition on channel expansion strategies is nonmonotonic, and moderate competition motivates manufacturers to expand the channel by reselling rather than agency selling in the competing platform. Furthermore, we find moderate slotting fee or commission rate could make manufacturers and the incumbent platform better off when the market potential ratio is small.

Reselling/Agency Selling and Online Intermediaries’ Information Sharing With Manufacturers and Resellers

Manufacturers and their resellers generally employ online intermediaries to sell their products. These intermediaries often possess superior demand information and decide whether to share it with their sellers. In practice, the manufacturers can employ two possible selling formats: reselling ([Formula: see text]), under which they sell the products to the intermediaries who subsequently resell to customers and agency selling ([Formula: see text]), under which they sell the products to customers through the intermediaries by paying a proportional fee. Additionally, the manufacturers can also sell the products to their resellers who subsequently resell to customers through the intermediaries. We develop a game-theoretic model to investigate an e-commerce supply chain in which an online intermediary first decides whether to disclose information option to a manufacturer and/or reseller; thereafter, the manufacturer selects between the [Formula: see text] or [Formula: see text] format. Regardless of the information-sharing decision made by the intermediary, the manufacturer’s selling format selection remains qualitatively unchanged. However, the intermediary can compel the manufacturer to change his selling format by sharing information with only the manufacturer or reseller in certain market environments. When the intensity is small but the proportional fee is intermediate, the intermediary should share information with only the manufacturer to compel him to change his selling format choice from [Formula: see text] to [Formula: see text]. When both the intensity and fee are intermediate, the intermediary should share information exclusively with the manufacturer (or reseller) to prompt a change in the manufacturer’s selling format, switching from [Formula: see text] to [Formula: see text] (or from [Formula: see text] to [Formula: see text]), contingent upon whether the magnitude of demand fluctuation is small or large.

Strategic analysis of manufacturer encroachment in dual-channel supply chains with platform service

This paper considers a dual-channel supply chain with two members, comprising a manufacturer and an online platform. We mainly investigate the influence of various key system variables on manufacturer encroachment strategy and all members’ optimal decisions through Stackelberg game models. Our findings show that, regardless of the size of each parameter, the encroachment strategy is always optimal to the manufacturer; the manufacturer may be motivated to choose the direct selling channel and the platform may opt for the agency selling channel due to a high commission rate. Moreover, when the inter-channel substitution rate is high, the encroachment strategy has a diminishing positive effect on the manufacturer and an increasing negative effect on the platform so that the platform may temporarily benefit from the manufacturer encroachment; in cases where the inter-channel substitution rate is not high, the encroachment strategy always yields advantages for the manufacturer while causing disadvantages for the platform. In addition, if the elasticity coefficient is large, both the manufacturer and the platform are inclined to the reselling channel, that is, if the platform service cost is high, it is advisable for the platform to reduce its investment of service to avoid negative effect.

Optimal financing modes of a capital-constrained manufacturer under different sales strategies

PurposePrevious studies have rarely integrated the financing modes of a capital-constrained manufacturer with the choices of online sales strategies. To address this gap, the authors study how a manufacturer selects optimal financing modes under different sales strategies in three dual-channel supply chains.Design/methodology/approachThis paper considers three sales strategies, namely, combining a traditional retailer channel with one of the direct selling, reselling and agency selling channels, and two common financing modes, namely, bank financing and retailer financing. The authors obtain equilibrium outcomes of the manufacturer and traditional retailer and then provide the conditions for them to select optimal financing modes under three sales strategies.FindingsThe results indicate that the manufacturer’s financing decisions rely on the initial capital and interest rates, and the manufacturer selects retailer financing only if the initial capital is relatively larger. In terms of financing mode options, the retailer financing mode is more beneficial for the manufacturer under the three sales strategies. From the perspective of sales strategies, the direct selling model is more beneficial. In addition, the higher the consumer acceptance of the online channel, the more profits the manufacturer obtains.Practical implicationsThis paper provides suggestions on how the capital-constrained manufacturer chooses financing modes and sales strategies.Originality/valueThis paper integrates the financing mode and different sales strategies to investigate the manufacturer’s optimal operational decisions. These sales strategies allow us to investigate the manufacturer’s optimal financing modes in the presence of both different financing modes and sales strategies.

Sustainable strategies for green supply chain within the platform economy consider subsidies and marketing efforts.

As consumers' green awareness continues to grow, the level of a product's eco-friendliness and the quality of its marketing have become significant factors in shaping consumers' purchasing decisions. The power structures within the supply chain, as well as corresponding government subsidy policies, are also key elements influencing sustainable strategies for the green supply chain. In a green supply chain comprising one manufacturer and one e-commerce platform, two sales models exist within the online e-commerce platforms: reselling and agency selling. This paper establishes and analyzes three distinct Stackelberg game models, namely: manufacturer-led model without subsidy (bm), manufacturer-led model with subsidy (sm), and platform-led model with subsidy (sp). The results are shown as follows, with the rise of consumers' environmental awareness, more consumers opt for green products, inspiring the manufacturer to increase its optimal greenness and platform to enhance its optimal marketing efforts level. Notably, government subsidies provide a significant stimulus. An increase in the green technology cost coefficient leads to a decline in the manufacturer's profits across all three modes. Intriguingly, the manufacturer's profits are always highest in the sp mode. As the marketing efforts cost coefficient increases, the platform's profits decrease in the bm and sm modes. In contrast, in the sp mode, the platform's profits increase rather than a decrease. The choice of mode primarily depends on the platform's marketing efforts cost coefficient. When this coefficient exceeds a threshold, the platform chooses the sp mode. However, due to the relatively low marketing efficiency in this scenario, the manufacturer prefers the sm mode. For the government, the sp mode involves agency selling, serves as an effective mechanism to redistribute subsidies, thereby yielding the maximum social welfare benefits. Management insights are provided for the manufacturer and platform managers to make decisions about the degree of greenness and marketing efforts level, along with insights for governments to optimize subsidy policies.

Implications of Refurbishing Authorization Strategy and Distribution Channel Choice in a Closed-Loop Supply Chain

This study examines the optimal authorization strategy for an original equipment manufacturer (OEM), the optimal distribution channel choice for a platform, and their interactions. We developed four models based on the OEM’s two strategy choices — authorization and non-authorization strategies, and the platform having two distribution channels for refurbished products: reselling and agency selling channels. Our results indicate that the authorization strategy is optimal for the OEM when consumer’s preference for refurbished products is not sufficiently high. Unlike conventional research, an increase in the production cost of a new product leads to different choices for the OEM. Specifically, the OEM prefers a non-authorization strategy in the reselling channel and an authorization strategy in the agency selling channel. Moreover, under the OEM’s authorization strategy, the platform always adopts a reselling channel for refurbished products. However, under the OEM’s non-authorization strategy, the platform’s choice is determined by the commission fee and the production cost of the new product.

Supply chain channel structure with online platform and dual-purpose firms

This study examines the equilibrium channel structure strategy in a supply chain where a manufacturer can sell products to consumers via/on an online platform, and firms may focus on both profit and consumer surplus. We consider three supply chain channel structures: a reselling channel (mode R), wherein the platform acts as the reseller; an agency channel (mode A), wherein the platform acts as the marketplace; and a dual channel (mode D), wherein the platform acts as both the reseller and marketplace. This study explores the strategic effect of the dual-purpose concern on the co-opetition relationship of firms and derives ramifications for the optimal channel structure. First, the platform may abandon mode A when the manufacturer’s consumer surplus concern is high, even if the commission rate is high. This is because the manufacturer’s sales revenue may be harmed by the higher selling quantity and lower price resulting from the increased concern of consumer surplus in mode A. The manufacturer prefers mode D (mode R) only when the commission rate is low (high). However, the supply chain may prefer mode R (mode D) when the platform’s consumer surplus concern is high (low) irrespective of the commission rate. Second, with dual-purpose firms, both the platform and manufacturer may prefer mode R (mode D) when the commission rate is medium and the platform’s consumer surplus concern is high (low). Third, mode A is beneficial to consumer surplus and social welfare as long as agency selling is viable, which occurs when the consumer surplus concern and the commission rate are not too high; otherwise, mode D is the optimal choice, because it enables the supply chain to sell products to consumers in a more flexible way. Finally, the results are robust to a parsimonious dual-purpose platform, an imperfect competitive market, price competition with a dominant platform, multiple competing manufacturers, and a non-zero slotting fee.

Effects of the green manufacturer’s distribution channel selection on green dilemma: Reselling, direct selling, or agency selling?

Due to higher effort cost required for green products, the e-retailer may choose the non-green manufacturer for purchasing products, thus creating a green dilemma. Therefore, this paper discusses how the green manufacturer’s distribution channel selection affects the e-retailer’s manufacturer selection and the green dilemma. Specifically, (1) in the reselling mode, this paper defines the input–output ratio of the green efforts to identify triggering conditions for the occurrence of the green dilemma. (2) When the input–output ratio or the marketing skills difference is relatively high, the green manufacturer is able to adopt direct selling and simultaneously avoid the green dilemma. Further, this paper identifies two types of effects derived from direct selling towards green dilemma. (3) If the green input–output ratio is a middle value, the agency mode rather than direct selling is more effective for the green manufacturer to gain the e-retailer’s cooperation.

Supplier versus platform bundling: Optimal strategies under agency selling

This study explores the bundling decisions in a two-tier supply chain with an upstream supplier and a downstream platform and discusses the consequential implications of bundling on profit distribution between the supplier and the platform. We reveal how the supplier’s marginal cost and the platform’s commission rate determine bundling strategies when they are initiated at the upstream and downstream stages. When the marginal cost is moderate and the commission rate is high, both the supplier and the platform are incentivized to adopt bundling in order to optimize per-unit margins and overall channel demand. However, a high (resp. low or high) marginal cost and a low (resp. high) commission rate prompt only the supplier (resp. platform) to bundle. Furthermore, we highlight the critical role of the initiating party, i.e., supplier or platform, in profit allocation within the supply chain. Bundling, whether initiated by suppliers or platforms, invariably benefits suppliers. Interestingly, platform-initiated bundling yields greater supplier benefits by enabling higher retail prices without compromising demand. However, the platform’s gains from bundling are confined to specific cost configurations; for example, when the supplier’s cost is low, platform bundling can hurt the platform due to the discounted prices to counter the supplier’s high-pricing strategy. Furthermore, we find that both supplier- and platform-initiated bundling often increases the total supply chain profit, especially when the total supplier’s cost is relatively high.

Manufacturer's sales format selection and information sharing strategy of platform with a private brand

PurposeIn recent years, private brands for e-commerce platforms have experienced rapid growth. However, whether these platforms developing private brands should share their demand information with others and how such information sharing affects the sales format selection of national brand manufacturers have puzzled firm managers in practice. This paper aims to investigate the information-sharing strategy for the e-commerce platform and its influence on the sales format selection in the presence of the private brand.Design/methodology/approachThe authors use a game-theoretical model to examine the interaction between the information-sharing strategy and sales format selection in a supply chain consisting of a manufacturer and a platform that operates a private brand.FindingsThe equilibrium results show that when the commission rate is low, the manufacturer favors agency selling, and the platform shares demand information with the manufacturer; when the commission rate is high, the manufacturer prefers reselling, and the platform does not share the information. This preference is affected by information forecasting accuracy; as the information forecasting accuracy increases, the manufacturer prefers to adopt agency selling, and the platform tends to share the information. Interestingly, under agency selling, sharing information with the manufacturer can increase the platform’s profit from selling the private brand and achieve a win-win situation for them. Furthermore, we show that the manufacturer can inspire the platform to share the information with himself by adopting agency selling, whereas the platform sharing the information improves the probability that the manufacturer adopts agency selling. Moreover, the manufacturer may have a first-mover advantage. In particular, the manufacturer moving first increases the likelihood that the manufacturer chooses agency selling and the platform shares the information.Originality/valueThis paper contributes to sales format literature by exploring the effect of information sharing strategy on sales format selection in the presence of the private brand and can help manufacturers and platforms to make suitable decisions regarding information sharing and sales format selection.

The strategic interaction between business mode and store brand introduction in a platform-based supply chain

The phenomenon of store brands introduced by large-scale platforms is becoming common, and manufacturers should carefully choose the business mode of selling national brand (NB) products via platforms. Considering big-data marketing, we examine the sales mode selection in a platform-based supply chain based on the strategic interaction between the business mode decision and store brand decision. By continuous dynamic game theory, the strategies and performance under different modes are solved. We find that given the store brand (SB) decision, the business mode adopted by the manufacturer depends only on the commission rate, which is high for reselling and low for agency selling. Given the business mode, under reselling, whether the platform introduces SB depends only on the brand preference, i.e., SB is introduced when the preference for NB is low. While under agency, he introduces SB in the general or relatively passive situation, depending both on the commission rate and the brand preference. In addition, four equilibrium sales modes are obtained based on the strategic interaction. In order to achieve a win-win-win situation in profitability among the manufacturer, the platform and the platform-based supply chain, the manufacturer should adopt agency selling and the platform forgoes introducing SB when both the commission rates and NB preference are low.

Research on the sales mode selection of smart homing firms considering carbon neutrality and digital privacy

Achieving carbon neutrality is the ultimate goal of the global economy. By leveraging Internet of Things (IoT) technology to gather users' data, smart home devices can effectively achieve energy conservation and reduce carbon emissions. The strategic allocation of investment by smart device producers towards environmentally-friendly functionality and choosing the optimal sales mode have emerged as significant research questions. Addressing consumer concerns regarding data privacy sensitivity, this paper presents a game-theoretical model, involving manufacturers, e-commerce platforms, and consumers, to explore the intricate dynamics among investment in smart environmental functionality, sales mode selection, and pricing strategies. The results indicate that manufacturers consistently benefit from such investments. If the number of data-sensitive consumers is considerable, manufacturers will subsidize the platform to encourage the purchase of smart devices, thereby gaining from cross-selling opportunities. When the commission ratio is low, the equilibrium strategy shifts from the agency selling mode to wholesale pricing one, in response to the advent of investments in smart environmental functionality. Furthermore, the commission ratio, consumer perceived environmental value, and unit carbon emissions collectively impact social welfare. This study offers valuable theoretical insights for manufacturers in making informed decisions regarding pricing strategies and sales mode selection, by analyzing the interplay between profit margin and cross-selling income resulting from demand expansion.

Implications of selling format on product innovation in platform supply chains under asymmetric information

This paper studies the implications of selling format in a platform supply chain where a manufacturer implements product innovation activities and has private information about its innovation effectiveness. Two widely adopted formats are considered: reselling and agency selling, regarding the platform acting as an online reseller or marketplace, respectively. A theoretical model is developed to explore innovation and pricing decisions. In information asymmetry, the manufacturer may signal its effectiveness to the platform in the reselling format. Whether a separating or pooling equilibrium is achieved depends on the signaling cost resulting from the downward distortion of wholesale price and innovation decisions. Our findings reveal that in separating equilibrium innovation may be fully abandoned under certain conditions. In the agency selling format, information asymmetry cannot affect the decision-making. Moreover, a relatively low commission fee leads to a higher innovation level in the agency selling than in the reselling format, and a medium fee yields a win–win outcome in the agency selling for chain members. Comparison of supply chain efficiency shows that only when the commission rate and innovation effectiveness are high enough will the agency selling format be less efficient than the reselling format.