Reselling or hosting? Examining platform’s co-opetition strategy with third-party sellers

Abstract

E-commerce retailers (etailers) often run the self-operated storefronts while hosting stores from third-party sellers (3PSs), which potentially causes the price competition in between. Besides, the etailer may be better off because of the commission contributed by these 3PSs’ stores. Motivated by the real-world practice, our paper studies the cooperation and competition strategy with 3PSs from the perspective of an etailer. Specifically, our paper extends the prior literature from two aspects: (1) we look into the scenario where the 3PS serves as the supplier such that a co-opetition case emerges; (2) we compare the cases with exogenous and endogenous wholesale prices. Benchmarked by a standard two-channel structure, we find that, when the 3PS plays a dual role (i.e., a supplier and a marketplace seller), co-opetition is more preferred as the 3PS is better off when the etailer opens a competing, self-operated store, suggesting a more nuanced relationship between the etailer’s platform and 3PSs. What is more, a powerful etailer can capitalize its advantage of consumer reach by inducing the supplier to choose a particular channel structure.