e-Retail Platform Competition: Heterogeneity in Shopper Experiences and Tailored Offers

Posted: 6 May 2019

See all articles by Hongseok Jang

Hongseok Jang

Warrington College of Business, University of Florida

Young Kwark

Warrington College of Business, University of Florida

Kyung Sung Jung

Warrington College of Business, University of Florida

Date Written: April 1, 2019

Abstract

E-retailing is faced with more stiff competition than ever. With a rising influx of new shoppers into e-marketplaces, e-retailers serve consumers with more diverse needs and heterogeneous levels of e-shopping experiences. Facing the challenges, e-retailers often provide tailor-made information to meet the shoppers' needs and increase their willingness to pay. In this study, we investigate the impacts of shopper heterogeneity in their expertise and e-platform difference in tailoring ability on the profits of e-retailing participants under different contracts. We build a game-theoretic model in which a merchant sells a product via two competing e-retail platforms with different tailoring capabilities. The e-platforms either set retail prices (sell-to contract) or delegate the decision to the merchant (sell-on contract). Shoppers are of two kinds in their e-shopping experiences with the platforms: experienced (H-type) and inexperienced (L-type). We find that both e-platforms can prefer H-type only under the sell-to contract while the seller always prefers L-type. Under the sell-on contract, however, e-platforms' preferences are different from each other and the seller's preference is always aligned with the better tailoring e-platform only. L-type is always more influential to the profits of all participants than H-type. Interestingly, when tailored offers are effective only for H-type, however, the preferences of all participants can switch. This switch is more evident under the sell-on contract where two platforms never show common preferences. Under the sell-to contract, the preference can also switch as the tailoring difference increases. The preference difference between contracts tends to vanish as tailoring difference becomes significant.

Keywords: e-retail platforms, e-shopping experience, e-marketplaces, tailored offers

Suggested Citation

Jang, Hongseok and Kwark, Young and Jung, Kyung Sung, e-Retail Platform Competition: Heterogeneity in Shopper Experiences and Tailored Offers (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=3363389

Hongseok Jang (Contact Author)

Warrington College of Business, University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Young Kwark

Warrington College of Business, University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Kyung Sung Jung

Warrington College of Business, University of Florida ( email )

Gainesville, FL 32611
United States

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