Strategic waiting in cross-border e-commerce when there exists future disruption in direct-shipping channel

Posted: 24 Oct 2019 Last revised: 27 Apr 2020

See all articles by Baozhuang Niu

Baozhuang Niu

School of Business Administration, South China University of Technology

Lei Chen

affiliation not provided to SSRN

Chao Ding

The University of Hong Kong - School of Business

Xiaohang Yue

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Date Written: October 15, 2019

Abstract

The burgeoning business of cross-border e-commerce has brought about new opportunities as well as new challenges. For example, decision makers have to be frequently confronted with extreme weather events such as typhoon, which has become a major threat to the direct-shipping channel. Fortunately, weather service agencies start to alert the public of an incoming weather event and forecast the impact way before it makes landfall. It is thus a critical decision whether to respond to the forecast: The typhoon might eventually have no impact because of sudden recurvature. In this paper, we study a cross-border e-tailer (he) who operates two sales channels: a bonded-warehouse channel and a direct-shipping channel. In light of an extreme weather event that potentially disrupts the direct-shipping channel, the e-tailer can be risk averse by observing the forecast and balancing demand in two channels. Alternatively, he can disregard the forecast. We show that, if the e-tailer has a relatively small or a large market potential in the direct-shipping channel, he should always be serious by observing weather forecast and responding accordingly. Otherwise, he is suggested to disregard the forecast and not respond. We identify three important effects that contribute to the e-tailer’s decisions, namely, unit-cost effect, channel-cooperation effect, and marginal-profit effect. That is, under responding strategy, when the market potential in the direct-shipping channel increases, the overseas supplier’s wholesale prices will increase more quickly (referred to as “unit-cost effect”), the channel cooperation via demand reallocation will be strengthened (referred to as “channel-cooperation effect”), and the e-tailer’s marginal profit will increase more slowly (referred to as “marginal-profit effect”). We also study the impact of the e-tailer’s promised delivery time and channel substitutability to check the robustness of the main findings.

Suggested Citation

Niu, Baozhuang and Chen, Lei and Ding, Chao and Yue, Xiaohang, Strategic waiting in cross-border e-commerce when there exists future disruption in direct-shipping channel (October 15, 2019). Available at SSRN: https://ssrn.com/abstract=3470088

Baozhuang Niu (Contact Author)

School of Business Administration, South China University of Technology ( email )

Wushan
Guangzhou, AR Guangdong 510640
China

Lei Chen

affiliation not provided to SSRN

Chao Ding

The University of Hong Kong - School of Business ( email )

Pok Fu Lam
Hong Kong

Xiaohang Yue

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

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