Manufacturer’s online selling strategies under spillovers from online to offline sales

Abstract

In this paper, we investigate a manufacturer’s online selling strategy choice between wholesale selling and agency selling, and discuss its impact in the presence of spillovers from online to offline sales. We find that the manufacturer’s optimal online selling strategies vary with consumers’ online channel acceptance and the extent of the spillover effect. In particular, when the online channel acceptance is high, the manufacturer prefers the agency selling strategy. When the online channel acceptance is moderate, if the sale in the online channel leads to a negative spillover effect on demand in the offline channel, the manufacturer has an incentive to adopt the wholesale selling strategy; otherwise, the agency selling strategy is a preferred choice for the manufacturer. When the online channel acceptance is low, if the sale in the online channel leads to a significant negative or a positive spillover effect on demand in the offline channel, the manufacturer should adopt the agency selling strategy; otherwise, reselling the products to an e-tailer is an optimal choice. Moreover, under certain conditions, we find a “win-win-win” result for the manufacturer, the offline retailer, and the online platform by adopting the agency selling strategy. Finally, we show that two types of spillover (i.e., stimulation effect and cannibalization effect) have different influences on supply chain participants.

Keywords:

• Supply chain management
• e-commerce
• agency selling
• wholesale selling
• cross-channel spillover
• game theory

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Going offline: Xiaomi eyes 10,000 stores to expand its retail footprint. Accessed on April 2, 2021, https://www.financialexpress.com/industry/technology/going-offline-xiaomi-eyes-10000-stores-to-expand-retailfootprint/1557632/.

2 All the experiments in this paper are performed on a personal computer using MATLAB R2014a and running on a personal computer with 4GB RAM and 3.20 GHz.

3 We can also use other values of the online channel acceptance to get similar figures. Those figures are available upon request.

4 Due to page limitations, we omit the numerical figures here.

5 Due to page limitations, we omit the numerical figures here.

Additional information

Funding

This research was supported by research grant from the National Natural Science Foundation of China (Nos. 72102171 and 72171163), the Humanities and Social Sciences Youth Foundation, Ministry of Education of the People’s Republic of China (No. 21YJC630006), the Key Program of National Natural Science Foundation of China (No. 71631003), and the 2021 Internal Scientific Research Fund Project of Wuhan Institute of Technology (Nos. K2021049 and K2021050). The first author greatly appreciated the financial support from China Scholarship Council (No. 201906250043).