Direct Sales Channel Research Articles

What is the role of product services in the dual-channel closed-loop supply chain?

With the continuous development of internet technology and increasing awareness of environmental protection among consumers, the dual-channel closed-loop supply chain management combining online direct sales channel and retail channel has received more and more attention, however, the existing research has neglected the service research, so this paper focuses on the service strategy in the dual-channel closed-loop supply chain. In this paper, we propose three service strategy models for dual-channel closed-loop supply chains, including when there is no service provision, after-sales service and recycling service provided by retailers and after-sales service provided by manufacturers and recycling service provided by retailers, compare and analyze the optimal decisions of supply chain members under the three service strategy models, discuss the role of service generated in dual-channel closed-loop supply chains, and propose a service cost-sharing strategy to achieve a Pareto improvement in the effectiveness of a dual-channel closed-loop supply chain. The study finds that service plays a positive role in the dual-channel closed-loop supply chain; the model of manufacturer providing after-sales service and retailer providing recycling service is the best service strategy choice in terms of economic and social benefits; the service cooperation mechanism of service cost sharing can achieve Pareto improvement of the supply chain within a reasonable range.

Pricing Decision and Cancellation Strategy Selection of ''Hotel+Online Platform''

Based on the consumer's cancellation behavior, a “Hotel + online platform” dual-channel supply chain model consisting of a single hotel and a single online platform is constructed, based on the theory of consumer utility, this paper constructs the demand for rooms in the supply chain, and analyzes the profit of the hotel side, room pricing and cancellation strategy under the competition-cooperation relationship by using the Stackelberg game model. The research shows that in the hotel's dual-channel supply chain, the selection of unsubscribing strategy for official direct sales channels and online agency platforms and the pricing of rooms are affected by the probability of unsubscribe, the cost of unsubscribing, consumers' preference level for online platforms and commission rates; when both direct sales channels and online platforms adopt non-unsubscribe strategies, the profits and pricing of both parties are independent of the cost of unsubscribing. When the hotel direct sales channel adopts the unsubscribed strategy, then the room price increases with the increase of the cost of unsubscribing; at the same time, when the online platform chooses the unsubscribed strategy, the preferential amount is decreases with the increase of the cost of unsubscribing; on the contrary, it increases with the increase of the cost of unsubscribing. When consumers have a high preference level on the online platform, the strategy is the optimal strategy.

Contract preference of an online intermediary in the presence of online reviews and cross‐channel spillover

AbstractIn e‐commerce, online intermediaries give suppliers ready access to consumers and have thereby become an important distribution channel. They can operate as resellers (under a reselling contract) or marketplaces (under an agency contract) for suppliers. This study analyzes the most effective contract arrangement between an online intermediary and two competing suppliers. The suppliers receive online reviews of their products and also be affected by the spillover effect of the intermediary's channel on their own direct sales channels. The intermediary can offer a reselling contract to one supplier and an agency contract to the other or offer the same contract type to both suppliers. We find that when the cross‐channel spillover is positive or only moderately negative, the intermediary offers different contract types if the difference in the review ratings of the two suppliers' products is considerable; otherwise, a reselling contract is offered to both. However, when the cross‐channel spillover is highly negative, the intermediary may offer an agency contract to both suppliers. Our research provides practical guidance for intermediaries on the most effective contract strategies to use when collaborating with suppliers who receive varied online reviews, depending on the cross‐channel spillover scenarios.

Impact of Capital Position and Financing Strategies on Encroachment in Supply Chain Dynamics

Channel encroachment and financing decisions are prevalent in practice. Utilizing the Stackelberg game framework, we investigate the impact of a retailer’s capital position and financing strategies on supply chain dynamics in which a supplier considers establishing a direct sales channel. We find that the retailer’s equilibrium financing strategy is impacted by demand volatility and the initial working capital. The supplier’s encroachment decision hinges on the entry cost when neither trade credit financing nor bank credit financing is available. When both types of credit are available, the choice of financing is a complex interplay involving initial working capital, entry cost, and demand volatility. Notably, the supplier’s decision to encroach may shift from a binary stance of either encroaching or not encroaching, or it may oscillate from encroachment to non-encroachment and back to encroachment, particularly with an increase in demand volatility when the entry cost is moderate. The novelty of this study lies in its integration of supplier channel decisions with retailer operational decisions and financing strategies, examining how the capital position and financing strategies impact channel decisions. This study provides managerial insights into the interplay between supplier’s channel dynamics and retailer’s financial considerations, shedding light on unexplored aspects of channel management. In future studies, some assumptions in this study can be modified to obtain more managerial insights.

Manufacturer vs. Retailer: A Comparative Analysis of Different Government Subsidy Strategies in a Dual-Channel Supply Chain Considering Green Quality and Channel Preferences

As escalating environmental pollution results from economic development, the green supply chain is vital in enhancing ecological quality. In light of the rapid growth of online shopping, the dual-channel supply chain has gained significant popularity. Governments have implemented policies to achieve carbon peaks and neutrality worldwide. Considering green quality and channel preferences, this study constructs a Stackelberg model led by the manufacturer within a dual-channel supply chain to compare the effects under two government subsidy strategies. A Stackelberg game-theoretic approach is applied to analyze the model. The findings indicate the following: (1) Increases in the subsidy coefficient can increase product greenness and the overall profit in both subsidy strategies, which makes sense; (2) When direct sales channels become dominant, subsidizing the manufacturer proves superior to subsidizing the retailer in terms of promoting green quality and overall profit, which extends existing studies of government subsidy decisions. Furthermore, subsidizing the retailer may negatively affect the total supply chain profit; (3) Consistent with previous literature, intense competition between manufacturers and retailers is expected to enhance the overall profit of the supply chain; (4) Interestingly, customer preference for online channels does not influence product green quality under manufacturer subsidization strategies but exhibits a negative impact under retailer subsidization strategies. Finally, this research provides managerial implications for decision-makers and potential issues for future research.

Economic rationale for the development of small vertically diversified pork production enterprises in Ukraine

Implementing the vertical diversification strategy for pig-breeding enterprises in Ukraine is one of the factors in increasing their economic efficiency and competitiveness. Mastering the following interrelated links of production and sale in animal husbandry increases enterprises' financial stability and economic security. The article economically substantiates the expediency of capital investments in developing vertically diversified pork production enterprises in Ukraine. The need for investments for the formation of fixed and working capital for the implementation of the project has been determined. The main operating costs for the organization of pig breeding, slaughter, and the sale of meat through the direct sales channel in the amount of 200 tons per year have been calculated. Planning of workforce needs for project implementation has been carried out. The leading indicators of the economic efficiency of capital investments for the production and sale of pork in the newly established enterprise have been determined. According to the study results, the relatively high investment attractiveness of developing small vertically diversified pork production enterprises in Ukraine with an orientation to local markets is substantiated. It has been established that for the implementation of the proposed project, about 1.1 million euros of advanced capital is needed, which is expected to pay off in 3.5 years. The project's five-year net present value has been determined to reach 690,000 euros at a discount rate of 2%. Accordingly, the projected internal rate of return will exceed 26%. The average annual net profit during the project implementation period will be 268 thousand euros, with an average operating cost of 457 thousand euros, allowing us to achieve 65% profitability of production and 32% profitability of pork sales. The projected average net return on capital for the project implementation period is expected to be 35%. The development of vertical diversification in small pork production enterprises in Ukraine will increase the added value and productivity of the involved financial, labor, material, and technical resources.

СТВОРЕННЯ ПЛАТФОРМИ ВЛАСНОГО БРЕНДУ

The article explores how some branded product companies are moving away from traditional digital aggregators and instead creating their own brand flagship platforms. These platforms serve as more than just direct sales channels, they offer a blend of specialized products, services, and content while involving consumers and third-party businesses in the value creation process. In this article, the authors present four types of flagship brand platforms: the platform as instrument, as guide, as canvas, and as companion. They describe the relationship style, risks and opportunities associated with each. Actually, traditional retail chains and brand aggregators dominate the market, but digital platforms are disrupting these models by offering a broad scope of products across categories and encouraging consumers to start their purchase journeys on their platforms. For branded goods manufacturers, the threat from brand aggregators is also significant. These platforms standardize product presentation, limiting brand differentiation and encouraging consumers to compare products primarily based on price and customer rating. However, some manufacturers are turning this digital threat into an opportunity by creating their own brand flagship platforms. Big brands companies are leveraging platform structures to establish direct connections with consumers and integrate third-party businesses into the value creation process. By doing so, they offer a more holistic range of products, services, and content, transcending traditional product-centric perspectives. These brand flagship platforms allow companies to expand their core value offering and provide consumers with a comprehensive solution that goes beyond a mere sales channel. In conclusion, the article highlights the shift towards brand flagship platforms as a strategic move for branded product companies to bypass traditional digital aggregators and establish direct relationships with consumers. By embracing digital platforms and involving consumers and third-party businesses in the value creation process, companies can offer a more compelling and differentiated experience to meet consumer needs in today's competitive market landscape.

Comercialização nas feiras da agricultura familiar: um estudo de caso sobre a estrutura desses canais

Abstract Fairs of family farming on agroecological bases are direct sales channels of great importance for local supply. Thus, it is essential to devise ways to evaluate and monitor their evolution. In the present case study, a methodology was applied to analyze commercialization at the Family Agriculture Fair (FAF) held at the Seropédica Campus of the Federal Rural University of Rio de Janeiro (UFRRJ). The objective of this study was to analyze gross sales and the seasonality of the supply and demand of products in the FAF, relate these factors to agroecological production in the Baixada Fluminense, and both demonstrate and understand the relationships among the supply, prices and sales of products. A literature review was conducted on the short circuit and commercialization forms of family farming, and data from 1,664 marketing reports, self-completed by market traders from 2017 to 2019, were analyzed. The results allow us to conclude that (i) the stallholders farmers at FAF are not mere price takers; (ii) gross sales are influenced by the seasonality of demand and supply; (iii) the effects of seasonality have an impact on supply and sales but are reduced with low price volatility; and (iv) the offers are diversified, and the items have close substitutes within the same product category.

Information sharing strategy and channel selection with substitutable products

In this paper, we develop a supply chain game model consisting of one supplier producing two substitutable products and one e-retailer, in which the e-retailer's demand information sharing strategy and the supplier's encroachment strategy for one of his products will be examined. We find that when demand is sizable, the supplier prefers to encroaching by opening a direct channel, and that the e-retailer is not willing to share the real demand information with the supplier. On the contrary, when demand is small, the supplier prefers to using the e-retail channel due to the high cost of maintaining a direct channel, while the e-retailer is inclined to share information with the supplier. Next, we show that the information sharing strategy of the e-retailer and the channel selection strategy of the supplier are interrelated. The e-retailer's sharing strategy is mainly used to dispel the supplier's expectation of encroachment in the high demand situation. In some cases, this strategy depends on the range of product substitution rates. Moreover, we also examine the impact of the supplier channel selection on the product that has not entered the direct sales channel. We find that the retail price of the product that does not use channel encroachment increases, which can lead to a higher profit for the e-retailer under certain conditions. Furthermore, we study the effect of the product substitution on the channel members' profits and show that the fierce competition between the two products can reduce the e-retailer's profit. Finally, we extend our model to various cases to show the robustness of the main results.

Optimal financing and sales channel strategies for a capital-constrained supply chain with different risk preferences

In a volatile market environment, it is an important issue whether a manufacturer with capital constraints should establish an online direct sales channel to encroach the retail market. In addition to loans from financial institutions, third-party logistics (3PL) financing provides an alternative way for the manufacturer to solve its capital difficulties. Considering that the manufacturer exhibits diversified risk preferences for uncertain demand, we build an analytical model to examine the financing and sales channel decisions of the manufacturer, retailer and 3PL. Further, the impacts of differentiated freight rates and portfolio financing on key decisions are explored. Our results mainly contribute to the literature in two aspects: In terms of financing strategies, the 3PL tends to conduct financial business at a lower interest rate under a single-channel strategy, but a reduction in the 3PL interest rate prevents the manufacturer from adopting 3PL financing. In contrast, a larger financing need promotes the 3PL to offer a loan with a higher interest rate under a dual-channel strategy, which in turn drives the manufacturer to enhance its preference for bank financing. 3PL financing is always more conducive to improving the retailer’s profit. In terms of sales strategies, a smaller establishment cost of the online channel or greater risk tolerance encourages the manufacturer to implement the dual-channel strategy, while lower price competition and online channel preference prevent the manufacturer from encroaching so that it only employs a single offline channel for sales. An increase in price competition between channels encourages the manufacturer to establish the online channel, and manufacturer encroachment weakens the retailer’s profit. Furthermore, differentiated freight rates reduces the participants’ propensity for 3PL financing, while portfolio financing enhances the manufacturer’s motivation to develop the online sales channel.

Economic substantiation of the production of sheep breeding products in the farms of Ukraine

Activation of the development of sheep breeding in Ukraine is possible based on the spread of specialized farms for breeding and growing sheep for meat, which will contribute to the economy of rural areas, employment, and welfare of the population. The article presents the main results of the research on planning the economic efficiency of the production of sheep products in farms, taking into account the market conditions of Ukraine. The optimal structure for the organization of production and sale of sheep products is proposed and substantiated, which includes breeding, growing, slaughtering sheep, and entering the market through direct sales channels with sheep meat, wool, sheepskin, and main by-products, which will significantly increase the profitability of the farm compared to traditional business models in sheep breeding, which are focused on breeding and rearing with the sale of animals in live weight. The planning of the need for fixed and working capital, which is necessary for the organization of production of sheep products in a family-type farm with several 200 ewes, has been carried out. The cost of production of sheep breeding products by main species was calculated, which at the beginning of the project was 2.8 euros for 1 kg of lamb, 1.4 euros for 1 kg of wool, and about 10 euros for one sheepskin. It was determined that the required amount of advanced capital for the organization of the farm would be 88 thousand euros, which will be compensated by net cash flow in 3 years. The farm is predicted to produce and sell products in the market for a total of 54,000 euros in the first year, which will potentially increase to 80,200 euros by the end of the project, which will fully compensate for costs and ensure a net profit of up to 20,000 euros EUR per year at the end of the project implementation period. The estimated amount of net cash flow for five years is EUR 77,000, with an internal rate of return of 26.3 %. The ratio of net cash flow to the cost of capital will be from 33 to 63 %, which justifies the relatively high level of investment efficiency in the production of sheep products in family farm farms following the technical and economic features of the business described in the article. The influence of the production volume of sheep breeding products on indicators of investment effectiveness is also determined. It has been established that an increase in the number of ewes from 200 to 500 will increase the net cash flow by an average of 15-16 thousand euros per year for every 100 head of increase in the number of sheep with a simultaneous decrease in capital costs per head.

Emission Reduction and Channel Decisions in a Two-Echelon Supply Chain Considering Service Spillovers

The development of e-commerce and the green economy has prompted suppliers of green products to introduce internet channels by which products are directly sold to consumers. However, the emergence of “price wars” and “free riding” between the two channels after the introduction of online channels may affect the stability of the green supply chain. This paper uses optimization theory to investigate the impact of service spillover effects and different channel structures on the optimal decision of supply chain members in a Stackelberg game. By comparing the equilibrium outcomes of the single-channel and dual-channel supply chain in a setting with and without retail services, we observe that the supplier prefers to encroach on the market when services that retail locations provide largely spillover to and benefit the direct sales channel. Contrary to popular belief, a higher degree of service spillovers is beneficial for the retailer to achieve more returns under the dual-channel structure, whereas supplier encroachment will lead to a decline in the service level if the spillover degree is relatively low. In addition, the emission reduction level of products under supplier encroachment is always higher than that employed in the single-channel structure if consumers have both low-carbon preference and a high degree of service sensitivity. Finally, we expand our discussion by introducing the carbon cap-and-trade (CCT) mechanism to compare the conditions for achieving Pareto improvement under supplier encroachment. These results can provide helpful insights for decision-makers in supply chain management to implement effective channel selection and achieve sustainable development.

The Analysis Of E-Commerce Logistics Efficiency Of The Ukrainian Construction Enterprises

An important component of successful economic activity of industrial enterprises is the optimal sales model combined with e-commerce opportunities. The article analyzed two construction materials manufacturing enterprises categories: those using exclusively a sales network for the promotion of their products, and those developing a direct sales system to the final consumer via electronic commerce. These are basically two different logistical approaches to the process of selling their own products. The efficiency of using e-commerce logistics means is determined by the correlation of sales expenses index with an indicator of enterprises' net income. It was proved sales expenses' indicator affects the dynamics of the net income indicator positively only for the enterprises using e-commerce logistics as a means of setting up a direct sales channel for their products. The article provides recommendations for creating an optimal logistics e-commerce system for construction materials manufacturing enterprises.

Promoting end‐of‐season low‐carbon product through online retailing channel under different cooperation strategies

AbstractThis paper considers the cooperation strategies in an online selling low‐carbon supply chain (OSLCSC). To promote the end‐of‐season low‐carbon product, the manufacturer in OSLCSC establishes a promotional online retailing channel based on a co‐operative agency sales format. Three possible collaboration strategies are considered. We examine the final cooperative equilibrium and find that from an environmental perspective, cooperation between the retailer and manufacturer can always promote ecological benefits. But from an economic perspective, the retailer and manufacturer will cooperate when the revenue‐sharing rate is high. In contrast, the retailer and manufacturer are always an incentive to partner with the platform. Furthermore, all the OSLCSC players could achieve a Pareto optimal in the three cooperation strategies under certain conditions. Additionally, we reveal that a high revenue‐sharing rate makes the retailer more beneficial when OSLCSC players do not cooperate. Lastly, we obtain that each cooperative strategy may be the ultimate equilibrium, depending mainly on the revenue‐sharing rate and customers' evaluation ratio of the online direct sales channel over online retailing channel.

Pricing and Coordination of the Extended Warranty Service Supply Chain that Considers Fairness Concerns

For the product dual-channel supply chain composed of one manufacturer and one retailer with fairness concerns, considering that the decision of products and extended warranty services in the supply chain is affected by the fairness concern behavior of retailers, the Stackelberg game method was used to establish the profit decision model of manufacturers and retailers, solved the product price, extended warranty service price and profit of each member of the supply chain during centralized and decentralized decision-making, and discussed the impact of retailer fairness concern on the optimal decision and profit of supply chain members. The results showed that with the increase of retailers' fairness concern coefficient, the wholesale price of products and the price of extended warranty service decrease, and the price of direct sales channel and retail channel price of products increase. Retailers' profits increase, manufacturers' profits, and the total profits of supply chain systems decrease.

Pricing Decision and Cancellation Strategy Selection of ‘Hotel+OTA’ Based on Customer Cancellation Behavior

This paper is based on customer cancellation behavior and combines the Hotelling model framework to construct the demand for hotel direct sales channels and online travel agency (OTA) online channels. Then, the Stackelberg game model is used to analyze the optimal pricing problem between hotels and OTA with competitive relationships, and the optimal cancellation strategy for hotel direct channel is analyzed. We demonstrate that the hotel’s most profitable cancellation strategy depend on the loss cost of customer cancellation to the hotel，the cost of channel transfer for customers, and the OTA’s monopoly market segment. When the cost of loss to the hotel due to customer cancellation is relatively small, the hotel chooses a strategy where customers can cancel their reservations (i.e. Y strategy), and the pricing of hotel rooms increases as the cost of cancellation loss increases; otherwise, the hotel chooses a strategy where the customer cannot cancel the reservation (i.e. N strategy), and the pricing of hotel rooms decreases as the cost of cancellation loss increases. When the cost of channel transfer for customers is low, the hotel chooses N strategy; otherwise, the hotel chooses Y strategy. When the OTA’s monopoly market segment (i.e., the customers attracted solely to the OTA channel) is large, the hotel chooses N strategy; otherwise, the hotel chooses Y strategy. These findings can assist hotel managers in improving the design of their pricing and cancellation strategy.

Research on Multi-Channel Supply Chain Decisions Considering Carbon Emission Cost and Consumer Loyalty

Considering carbon emission cost and consumer loyalty, this paper establishes a three-level multi-channel supply chain composed of the leading manufacturer, the retailer, and the consumer and builds a multi-channel supply chain with centralized decision-making and decentralized decision-making modes, and the optimal decision-making under both decision-making modes is solved. The study found that the carbon emission reduction level of multi-channel centralized decision-making is better than that of decentralized decision-making under the same carbon emission cost, and centralized decision-making can improve the carbon emission reduction level. Manufacturers open a direct channel to help reduce carbon emissions and need to consider the cost of emission reduction in their channel decisions. Consumer loyalty also directly impacts channel decisions. Only when carbon emission costs and consumer loyalty are within a reasonable range can new direct sales channels be opened to bring in new profits. Simultaneously, the total profit of the supply chain is greater than that of decentralized decision-making, but the double marginal utility of both parties decreases with the increase in carbon emission costs.

Should competing suppliers with dual-channel supply chains adopt agency selling in an e-commerce platform?

In this paper, we examine which of an agency selling or a wholesale contract offered by an e-commerce platform competing suppliers with typical dual-channel supply chains should adopt, where the products are not differentiated between a direct channel and an indirect platform channel, as in the case of digital goods. Specifically, we consider the situation in which each of two competing suppliers chooses its distribution strategy regarding whether it sells via a direct channel and/or an indirect channel via the platform. In addition, a supplier also chooses an agency selling contract or a wholesale contract if selling via the platform. Constructing and solving a game-theoretic model, we derive the primary result that, in equilibrium, one supplier sells products only via the direct channel, while the other supplier sells via both the direct channel and the platform channel through adopting a wholesale contract, even given the assumption of symmetric suppliers. This finding yields the managerial implication that a supplier selling products of the same quality between direct and platform channels in a competitive environment should not adopt agency selling but instead a regular wholesale contract when selling via a platform. Moreover, this finding reverses the conventional insight from existing models in previous studies that at least one competing supplier always adopts an agency contract when the suppliers are without their own direct sales channels.

Pricing Decision of the Dual-Channel Supply Chain with the Manufacturer’s Extended Warranty

With the rapid development of the internet economy, many manufacturers have opened online direct sales channels and built multi-channel distribution systems. Meanwhile, both consumers and companies are paying more attention to extended warranty services. Considering a dual-channel supply chain with a manufacturer and a retailer, we assume the manufacturer provides an extended warranty in the online direct channel and investigates the decision making of the supply chain players. We develop three game models to study this problem, and they are the basic model without extended warranty (Model B), the decentralized decision model with the manufacturer’s extended warranty (Model M), and the centralized decision model with the manufacturer’s extended warranty (Model C). The Stackelberg game method is used to solve the established model, the influence of relevant parameters on the solution result is analyzed, and different models are compared. Compared with Model B, we find that the whole supply chain always be better, but the retailer would be worse in Model M. Compared with Model M, we find that the entire supply chain always performs better in Model C. Finally, we do some sensitivity analysis.

Manufacturer encroachment with a new product under network externalities

We study manufacturer encroachment in a two-echelon supply chain consisting of a manufacturer (her) and a retailer (him), in which she distributes a classic product through the retailer and endogenously determines whether to launch a new product with network externalities in a new direct sales channel. Analytical results show that the bar for the manufacturer to encroach with the new product is always lower than that for her to encroach with the same product and this bar can be further reduced by offering a more differentiated new product. We further establish that the retailer can be completely driven out of the market by encroaching with the new product, which is impossible under encroachment with the same product. Contrary to the conventional wisdom that the manufacturer should actively promote her new product under new-product encroachment, our research reveals that investing in enhancing the new product's network externalities can be detrimental to her profitability. Moreover, when the manufacturer cannot improve any of the following three factors to the right level, the strength of network externalities, direct sales channel efficiency, or product differentiation level, it is better for her to encroach with the same rather than new product. Counterintuitively, when network externalities are relatively weak and the direct sales channel is less efficient, the retailer prefers the manufacturer to encroach with the same rather than weaker new product.