Channel structure of E-platform encroachment

International Institute of Finance, School of Management, University of Science and Technology of China, No. 96, Jinzhai Road, Hefei 230026, P.R. China

^* Corresponding author: bgbwhl@ustc.edu.cn

Received: 27 March 2022
Accepted: 8 December 2022

Abstract

This paper focuses on the supply chain consisting of a manufacturer, a third-party (3P) seller, and an e-platform, while the 3P seller sells products through the e-platform. If the e-platform not only provides a sales channel for the 3P seller, but also determines the retail price and then sells products directly, we call it e-platform encroachment, which creates price competition between the 3P seller and e-platform. We find that the encroachment benefits the manufacturer and e-platform but hurts the 3P seller. And both the manufacturer and 3P seller prefer the price discrimination strategy to the uniform pricing strategy, while the e-platform does not necessarily. The price discrimination strategy encourages the manufacturer to offer the 3P seller a preferential wholesale price as the compensation and to curb the competitive advantage of the e-platform. The two pricing strategies have the same total sales quantity but different allocations across channels. Moreover, we propose a new coordination mechanism to reduce the double marginalization effect and improve supply chain performance. In extensions, we demonstrate numerically how the e-platform should decide the commission rate and compare the e-platform encroachment model with the manufacturer encroachment model to reveal the impact of different encroachment roles on all parties in the supply chain.