Supply Chain Channel Configuration with Power Imbalance and Spillovers Under Platform Retailing

Abstract

This study examines how the channel selection power and the brand spillover affect firms' channel configuration strategies in a platform retail market. We consider four modes (mode rr, ar, ra, and aa) according to different sales models, in which manufacturers have the channel selection power, while the weak-brand manufacturer will consider whether to implement the brand spillover strategy or not. Some intriguing findings are derived. First, the equilibrium channel structures mainly depend on channel selection power, the degree of complementarity, the commission rate, and the brand spillover effect. Second, to avoid horizontal externalities, manufacturers will only choose mode rr when the degree of complementarity is high, even if the commission rate is zero. Third, when both manufacturers have the channel selection power, modes rr, ar and aa are the optimal channel configurations, while mode ra will be excluded, and brand spillover effect will motivate manufacturers to choose agency channel. Finally, empowering manufacturers with channel selection power may result in a triple-win area for the three firms, whereas it does not always benefit consumers. Moreover, endowing the weak-brand manufacturer with channel selection power always favors the strong-brand manufacturer in a complementary market, but the opposite is true in a substitute market.

Keywords: Supply Chain Management, channel configuration, platform retailing, spillovers