Platform‐led or seller‐led? Optimal ex ante information delivery strategy for online retail channels with product match uncertainty

Abstract

AbstractA fundamental weakness for online retail channels is that it is impossible for consumers to perfectly ascertain the match between their preferences and the product value before purchasing. In this paper, based on the investment decision of the ex ante product information delivery measure, we study how to solve this problem for a platform‐based supply chain that consists of an online platform and an online seller. According to which firm is responsible for building the product information delivery measure, two possible cases are considered under a game‐theoretic model: the platform‐led case and the seller‐led case. The basic results reveal that compared with the seller‐led product information delivery, the platform‐led case may lead to a higher matching probability for consumers, a higher profit for the whole supply chain, and a win‐win outcome for the platform and the seller. The basic results can still hold when the platform and the seller cooperate under the format of the proportional commission fee, the two firms have different investment efficiencies in the improvement of product information delivery, or consumers have to incur hassle costs to learn the product match probability. When product return is allowed, it is shown that the return policy can play a positive role in making the seller‐led case become a win‐win choice. When the joint investment of product information delivery between the two firms can be formed, the results show that the joint investment may achieve a higher matching probability and higher profits for both the seller and the platform.