Agency selling or reselling: The impact of logistics service on selling mode choice

Logistics service affects product sales and therefore plays a vital role in influencing the selling mode strategy. We investigate how two types of logistics service, namely third-party service and platform service, impact the selling mode choice between reselling and agency selling. We identify that the platform’s commission rate and product-service efficiency jointly shape the selling mode strategy. Surprisingly, in a market with third-party service, reselling mitigates double marginalization more than agency selling given high commission rates and product-service efficiency. As a result, the platform favors reselling in situations with relatively low or relatively high commission rates and product-service efficiency, and agency selling for other scenarios. However, in a market with platform service, the platform adopts agency selling (reselling) if product-service efficiency is low (high). Furthermore, we explore how the adoption of platform service changes the selling mode for the platform. Interestingly, we discover that, after the service changes from third-party service to platform service, the selling mode may change from reselling to agency selling (or from agency selling to reselling) in situations with both low commission rates and product-service efficiency (or with high commission rates and medium product-service efficiency). In addition, platform service can benefit both the platform and supplier.