In-Depth Cooperation or Not? The Choice of Retailer and E-Commerce Platform Based on the Consumer Membership System

Abstract

With the rise of the sharing economy, more and more retailers have begun to join the e-commerce platform to expand sales channels. As an important means to improve consumer retention, the membership system is widely used in major e-commerce platforms. In this paper, we develop a research framework to discuss the different cooperation strategies between the e-commerce platform who has a membership system and the retailer in the face of consumers with different demands. We find that under the simple cooperation contract, the retail price and the commission fee decrease as the member service quality improves, while the membership fee increases. And commission fee rises with the proportion of high-demand consumers increasing, but the membership fee falls. Under the in-depth cooperation contract, the retail price and commission fee increase with the improvement of the member service quality, but the logistics price and membership fee decrease. Besides, price, membership fee and commission fee all rise as the proportion of high-demand consumers increases, but logistics fee declines. As an interesting result, when the price of third-party logistics service is relatively low, the simple cooperation contract becomes a win-win strategy, and the social welfare is higher than the in-depth cooperation contract, while the consumer surplus is lower. In addition, we further discuss the results when the retailer launches self-delivery rather and find that the win-win situation still exists under the simple cooperation contract.With the rise of the sharing economy, more and more retailers have begun to join the e-commerce platform to expand sales channels. As an important means to improve consumer retention, the membership system is widely used in major e-commerce platforms. In this paper, we develop a research framework to discuss the different cooperation strategies between the e-commerce platform who has a membership system and the retailer in the face of consumers with different demands. We find that under the simple cooperation contract, the retail price and the commission fee decrease as the member service quality improves, while the membership fee increases. And commission fee rises with the proportion of high-demand consumers increasing, but the membership fee falls. Under the in-depth cooperation contract, the retail price and commission fee increase with the improvement of the member service quality, but the logistics price and membership fee decrease. Besides, price, membership fee and commission fee all rise as the proportion of high-demand consumers increases, but logistics fee declines. As an interesting result, when the price of third-party logistics service is relatively low, the simple cooperation contract becomes a win-win strategy, and the social welfare is higher than the in-depth cooperation contract, while the consumer surplus is lower. In addition, we further discuss the results when the retailer launches self-delivery rather and find that the win-win situation still exists under the simple cooperation contract.

Keywords: Membership system, Cooperation, Logistics service sharing, E-commerce platform