Does blockchain-enabled quality inspection work better in hybrid retailing?

Abstract

The development of e-commerce platforms has driven brand owners to expand their markets through hybrid retailing, i.e., the cooperation of an incumbent seller and an agent seller to sell products. However, achieving effective quality control remains a significant challenge for brand owners. Compared with conventional quality inspection (CQI), blockchain-enabled quality inspection (BQI) is a promising solution to address quality control issues such as inspection errors and the invisibility of production processes. The main objective of this paper is to investigate how to make an optimal strategy choice between BQI and CQI. We consider a supply chain involving a supplier and a brand owner and take a game-theoretic approach to analyze the two players’ preferences for quality control strategies and the impact of hybrid retailing on their strategy preferences. The results suggest that when the quality cost coefficient is small, the quality of the components will be high or even perfect. In this case, the brand owner should implement the no-inspection policy under the CQI strategy. When the quality cost coefficient is at a medium level, the brand owner can choose the BQI strategy to avoid, to a certain extent, the supplier’s strategic input quality decision-making behavior. Moreover, as the quality cost coefficient rises, the external failure cost increases, or the blockchain adoption cost decreases, the BQI strategy is more favorable to the supplier and the brand owner than the CQI strategy. Furthermore, introducing hybrid retailing benefits the supplier and the brand owner when the market size of the external sales platform is large. However, introducing hybrid retailing increases the supplier’s and brand owner’s preference for the no-inspection policy and reduces their preference for the full-inspection policy and the BQI strategy. Our research findings provide guidance for brand owners and suppliers to choose appropriate quality control strategies and offer a theoretical basis for them to make quality and pricing decisions in actual operations.