Platform's premium store brand introduction and sales mode selection strategies with the cost-advantageous manufacturer

Abstract

The rapid growth of the platform economy has prompted e-commerce giants to introduce store brands (SBs), which can significantly affect supply chain participants. This study examines a market where a dominant platform must decide whether to introduce its SB and which sales mode to offer to the upstream national brand (NB) manufacturer. We analyze the interplay between these two strategic decisions, taking into account the platform's production inefficiency. First, the platform is inclined to introduce an SB if it is cost-efficient, and is more likely to do so when the NB is sold through the agency mode. Counterintuitively, the SB does not necessarily undermine the NB manufacturer in the reselling mode, particularly when the product substitutability degree is low and the production cost is moderate. Second, the platform consistently favors the reselling mode when no SB is present; however, in the presence of an SB, it prefers the agency mode if the commission fee is moderate. Third, we characterize the overall equilibrium strategy combinations and analyze how they change with key market parameters. Finally, we investigate two model extensions to assess the robustness of our primary results.