Interplay between Reselling/Agency Selling and Online Intermediaries’ Information Sharing with Manufacturers and Resellers

Abstract

Manufacturers, as well as their resellers, generally employ online intermediaries, e.g., Tmall and Amazon, to sell their products. In practice, these intermediaries can employ two selling formats, namely the RA and AA configurations. In the first format, i.e., RA, the intermediaries and resellers procure products from the manufacturers, after which the intermediaries sell such products to customers; however, the resellers can also sell through the intermediaries by paying a proportional fee. In the second format, i.e., AA, the resellers procure products from the manufacturers, after which the manufacturers and resellers sell them through intermediaries by paying a proportional fee. Motivated by practical examples in which intermediaries possess superior demand information and decide whether to share it with their sellers, we develop a game-theoretic model to investigate an e-commerce supply chain (comprising an intermediary, a manufacturer, and a reseller) in which the intermediary first decides to select the RA or AA format before deciding whether to share information with only one member, both members, or none. Under the RA format, we propose that the intermediary must share information with the reseller (manufacturer) if the competition is weak while the demand fluctuation is large (otherwise). Conversely, under the AA format, we recommend that the intermediary must always share information with the manufacturer. Moreover, when the intermediary discloses information to the manufacturer under the RA configuration, it is better for the intermediary to adopt the RA (AA) format if the proportional fee is relatively small (large). Nevertheless, when the intermediary discloses information to the reseller under the RA configuration, selecting the RA (AA) format favors the intermediary only if the fee is small while the demand fluctuation is sufficiently large (otherwise). Finally, regardless of the information-sharing strategy under the RA format, we confirm that it is impossible (possible) for the intermediary’s selection of the RA (AA) format to simultaneously increase the ex-ante profits of the manufacturer and reseller, consumer surplus, and social welfare.

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Reselling or Agency Selling? Impact of Online Intermediaries’ Information Sharing with Manufacturers and Retailers

Recently, manufacturers have not only sold through retailers, but also started to directly access customers via online intermediaries by paying a proportional fee. This paper studies the incentive for the intermediaries’ vertical demand information sharing with the manufacturers and retailers under the reselling and agency selling formats, and examines the impact of information sharing on selling format selection. We consider an e-commerce supply chain consisting of an online intermediary, a manufacturer, and an online retailer. The online retailer purchases products from the manufacturer and directly sells through the intermediary, whereas the manufacturer can sell through the online retailer and the intermediary (i.e., reselling), or only through the retailer and directly through the intermediary (i.e., agency selling). Our analysis shows that under no information sharing, a win-win outcome for the manufacturer and the intermediary might be reached (i.e., both their ex ante profits increase) when they simultaneously adopt the reselling or agency selling format. However, we find that sharing information with both the manufacturer and the retailer would make the reselling format detrimental to the manufacturer or the intermediary. Moreover, when the proportional fee is low (the proportional fee is intermediate), both the selling formats might not (might) lead to a win-win outcome if sharing demand information with only the manufacturer. Finally, we confirm that regardless of the reselling or agency selling format, sharing information with only one member is more beneficial for the intermediary rather than with both or no members. Specifically, the intermediary prefers to share information with the manufacturer or the retailer (only the manufacturer) under the reselling (agency selling) format. Only the agency selling format can lead to a win-win outcome in this case if the intermediary discloses information to the retailer under the reselling format.

Keywords: E-commerce supply chain, information sharing, reselling, agency selling, selling format