Business Model Selection in Competition with an E-platform’s Store Brand under Various Channel Price Leadership

Abstract

E-commerce platforms have witnessed substantial growth in recent years. Within these platforms, national brand manufacturers (NBMs) face a choice between two distinct business models for selling their products: the wholesale model or the agency model. Additionally, the e-commerce platform itself may introduce a store brand (SB) that competes with the NBM’s national brand (NB). We have delved into the intricate dynamics at play between the NBM’s selection of a business model and the e-platform’s decision to introduce an SB, employing a game-theoretic model. Our investigation has yielded valuable insights: First, when an NBM opts for the wholesale model, the e-platform consistently introduces an SB. Conversely, under the agency model, the e-platform refrains from introducing an SB if both the commission rate for the NB product and the planned quality of the SB are sufficiently high. If the e-platform introduces the SB with low quality, the NBM may switch from an agency model to a wholesale model at a relatively low commission rate for the e-platform. Furthermore, the e-platform tends to favor an intermediate level of quality for the SB. This approach allows the SB to generate substantial revenue without engaging in intense competition with the NB. Both the NBM and the e-platform tend to prefer a moderate commission rate. Finally, our analysis delves into the impact of channel price leadership on the equilibrium outcomes. In a surprising turn, under the agency model, it proves advantageous for both firms to relinquish channel price leadership. Additionally, the NBM is more likely to adopt the wholesale model when it assumes the role of channel price leader. The e-platform is less likely to introduce SBs when it takes on the leadership position.