Impact of the introduction of marketplace channel on e‐tailer's logistics service strategy

Abstract

AbstractWe recently observe that some giant e‐tailers (e.g., Amazon and JD.com) introduce marketplace channels by allowing third‐party sellers to sell products through their platforms. Logistics service acts as a vital role in the operation of online platforms. In practice, the platform can outsource logistics service to third‐party logistics providers (named as a third‐party logistics strategy) or establish a self‐run logistics network to distribute products (named as a self‐run logistics strategy). This paper investigates the e‐tailer's logistics service strategy in the presence of the marketplace channel's introduction. We reveal that the cost of logistics service plays a major role in determining the optimal logistics strategy. The self‐run logistics strategy provides a low logistics service cost to the platform, which results in a higher consumer surplus in comparison with the third‐party logistics strategy. Further, we find that when the logistics service cost is low, the platform prefers to establish self‐run logistics in the presence of the marketplace channel. Finally, our results show that under the third‐party logistics strategy, the platform benefits from the marketplace channel in the presence of an intermediate commission fee and a low discount factor. Based on game‐theoretic models, some managerial insights are suggested for online retailers to choose the optimal logistics service strategy in the presence of introducing the marketplace channel.