How to choose online sales formats for competitive e-tailers

Currently, many e-tailers can sell manufacturers' products on their online platforms through reselling or agency selling formats. However, how to choose the optimal online sales formats has puzzled competitive e-tailers with different channel roles. This paper uses stylized theoretical models to study this problem by considering the combined effects of e-tailers' channel roles, each e-tailer's referral fees, and the difference in e-tailers' market shares. Our results show that if two e-tailers sell the common manufacturer's products on their online platforms, no matter what sales format one e-tailer adopts, the other e-tailer's best choice depends on the two e-tailers' referral fees and the difference in the two e-tailers' market shares, whereas the manufacturer's best action is always to let the other e-tailer adopt agency selling format regardless of the two e-tailers' referral fees and channel roles and the difference in the two e-tailers' market shares. Moreover, if two e-tailers sell the common manufacturer's products on their online platforms, it is most profitable for the manufacturer when both e-tailers adopt agency selling format and charge equal referral fees to the manufacturer, and the same is true for the whole supply chain, which is independent of the two e-tailers' channel roles and the difference in the two e-tailers' market shares.

Automated summary

This paper investigates the optimal online sales formats for multiple e-tailers, finding that it is most profitable for the manufacturer to have e-tailers adopt agency selling format, especially when both e-tailers charge equal referral fees.