Online Market Entry and Channel Sharing Strategy with Direct Selling Diseconomies in the Sharing Economy Era

dc.contributor.authorLi, G.
dc.contributor.authorZhang, X.
dc.contributor.authorChiu, S. -M
dc.contributor.authorLiu, M.
dc.contributor.authorSethi, Suresh P.
dc.contributor.utdAuthorSethi, Suresh P.
dc.descriptionDue to copyright restrictions and/or publisher's policy full text access from Treasures at UT Dallas is limited to current UTD affiliates (use the provided Link to Article).
dc.description.abstractChannel sharing is an important marketing strategy for giant retailers who sell their own store brands and resell national brands for cooperative manufacturers simultaneously. To expand their market and increase profitability, national brand manufacturers may consider entering the online market through direct selling. To counter such threats, retailers may adopt a channel sharing strategy on whether to terminate the national brand product-reselling business. We analyze three scenarios, namely, the base scenario (the retailer sells both brands), the dual channel scenario (the manufacturer enters the online market while the retailer sells both brands), and the termination scenario (each firm sells their own brand because of the retailer's termination of the reselling business) to investigate the strategic interactions between the retailer and the manufacturer. We find that the termination of channel sharing by the retailer is an ineffective threat to prevent the manufacturer from entering the online market when the direct selling diseconomy is relatively low; otherwise, the effectiveness of the retailer's threat hinges on the store brand's quality. Specifically, the retailer's threat is valid if the store brand products' quality is low, whereas such threat is invalid if the store brand's quality is high. Interestingly, our results also reveal that the retailer's profit suffers “a cliff-like drop” in the store brand's quality level. This finding suggests that selling a higher quality store brand may hurt the retailer's profit once the store brand's quality exceeds a certain threshold. ©2019 Elsevier B.V.
dc.description.departmentNaveen Jindal School of Management
dc.description.sponsorshipNational Natural Science Foundation of China under the Grant nos. 91746110, 71372019, 71871091, 71471057, and 71521002
dc.identifier.bibliographicCitationLi, G., X. Zhang, S. -M Chiu, M. Liu, et al. 2019. "Online market entry and channel sharing strategy with direct selling diseconomies in the sharing economy era." International Journal of Production Economics 218: 135-147, doi: 10.1016/j.ijpe.2019.05.006
dc.publisherElsevier B.V.
dc.rights©2019 Elsevier B.V.
dc.source.journalInternational Journal of Production Economics
dc.subjectDirect selling
dc.subjectGame theory
dc.subjectElectronic commerce
dc.subjectInternet marketing
dc.titleOnline Market Entry and Channel Sharing Strategy with Direct Selling Diseconomies in the Sharing Economy Era


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