Bundled With Logistics or Not? ‘Two-Channel-for-Two-Revenue’ Interactions and Profit Focus Conflicts in the Hybrid E-Commerce Operations

Abstract

Hybrid e-commerce companies, such as Amazon and JD.com, have become increasingly popular, enabling both direct sales and retail models to coexist. This has created a “two-channel-for-two-revenue” co-opetition relationship between the supplier and the e-commerce company, where each channel represents a source of revenue for both parties. The e-commerce company collects commission and logistics service fee from the direct channel, and earns a profit from the retail channel. The supplier earns profit from selling to customers directly and the wholesale business with the marketplace. However, this complex interaction can lead to a profit focus conflict between the supplier and the e-commerce company, particularly when the latter leverages its pricing weapon (logistics service fee) to favor its sought-after channel over the supplier. We investigate whether the e-commerce company’s logistics service can benefit the supplier, and surprisingly find that it can actually deepen the conflict between the two parties. Our analysis suggests that the supplier will only prefer to use the e-commerce company’s logistics when the commission rate is moderate (i.e., the supplier’s preferences for logistics service will switch twice as the commission rate increases) and the third-party logistics service provider has a steady quality variance.

Keywords: Hybrid online marketplace; logistics bundling; channel co-opetition; profit focus conflict

JEL Classification: M11; M31