215 / 2024-04-23 14:16:47

Sales Mode Selection and Information Sharing in an E-commerce Supply Chain

Information sharing,Sales mode,Online platform,Upstream competition,Demand uncertainty

Consumers are enthusiastic about online shopping. According to eMarketer's latest forecast, global e-commerce sales will exceed $6 trillion by 2024. Many suppliers choose to sell their products through platforms such as Amazon and JD.com. When entering the platform, suppliers often can choose two common sales modes: reselling mode or marketplace mode. For reselling mode, the platforms wholesale products from suppliers and then sell them to consumers. For marketplace mode, the suppliers sell products directly to consumers via platforms, and pay commission fees for each successful deal. Some platforms only provide a reselling mode (Bestbuy, and VIP.com) or a marketplace mode (Ebay and Taobao). But with the constantly deepening development of the e-commerce, a single sales mode can no longer meet the needs of various suppliers, some platforms provide hybrid sales mode (reselling mode + marketplace mode) at the same time (Amazon and JD.com).

Demand uncertainty and selling price uncertainty are key features of the online marketplace. The platform is an information superior party compared with upstream suppliers, and decides whether to provide information support to upstream suppliers. In practice, the willingness of platform to share information with upstream suppliers is often related to the sales mode of suppliers. For example, Amazon provides its sellers with a data operation tool AMALYZE, which shares demand information with suppliers on Seller Central (marketplace mode), while does not on Vendor Central (reselling mode). And JD.com only provides an operation data tool "JD Business Intelligence" for third-party sellers, while does not provide data service for JD's vendors (reselling mode). 

Upstream suppliers face competitive pressure from other suppliers. Conventional wisdom suggests that the marketplace mode mitigates the double marginalization effect, benefiting both upstream suppliers and downstream retailers. However, upstream competition can weaken this positive effect, meaning that the more intense the upstream competition, the more suppliers prefer the reselling mode. For example, for electronic products categories with higher competition intensity, suppliers sell them on Amazon in reselling mode; while for long-tail goods with less competition intensity, suppliers sell them in marketplace mode. Therefore, the interaction between suppliers' sales mode selections and platform's information sharing strategy becomes more complex, especially under upstream competition.

The sales mode selection and information sharing in the platform supply chain is a hot issue in recent literatures, we aim to address following research questions to enrich this research: What is the platform's optimal information sharing strategy when upstream suppliers choose different sales modes? Considering the platform's information sharing strategy, how should suppliers choose the optimal sales mode when upstream competition exists?

To answer these questions, we consider a supply chain consisting of two competing upstream suppliers and a downstream platform. The platform has private market demand information that may share with suppliers, and suppliers determine the sales mode. The suppliers decide to choose reselling mode or marketplace mode, including three models: both suppliers choose reselling mode (Model R), both suppliers choose marketplace mode (Model M), and one supplier chooses reselling mode while the other chooses marketplace mode (Model H). And the platform decides the information sharing strategy, including three scenarios: full information sharing (FS), no information sharing (NS) and partial information sharing (PS). We focus on the interaction between suppliers' sales mode selections and platform's information sharing strategy under upstream competition and demand uncertainty, and the interactions depend on which key parameters.

Our study finds that in the Model H, when the commission rate is small, no matter how the competition intensity changes, the platform always only shares information with the supplier who chooses marketplace mode. When the commission rate is large, with the increase of competition intensity, the platform changes from sharing information only with the supplier who chooses the marketplace mode to sharing information with both suppliers. Furthermore, conventional wisdom suggests that the platform will not share information with suppliers who chooses reselling mode in order to alleviate the double marginalization. However, in our study, we find that platform prefers to share information with both suppliers simultaneously in the Model H when the commission rate and competition intensity are both large, which is different from previous study.

Second, our study finds that the interaction between supplier's optimal sales mode selection and platform's information sharing strategy relates to the commission rate and competition intensity. When the commission rate is small, both suppliers choose the marketplace mode (Model M), and platform prefers to share information with both suppliers. When the commission rate is large, with the increase of competition intensity, the platform's optimal information sharing strategy from no sharing to only sharing with the supplier who choose marketplace mode and finally to sharing with both suppliers simultaneously: When competition intensity is low, both suppliers choose the reseller mode (Model R), and platform does not share information with both suppliers; When competition intensity is moderate, one supplier chooses the reseller mode while the other chooses the marketplace mode (Model H), and the platform only shares information with the supplier who chooses marketplace mode; When competition intensity is high, both suppliers choose the marketplace mode (Model M), and platform voluntarily shares information with both suppliers.