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Articles

Decision Analysis of Substitute Product's Competition under the Indirect Internet Channel

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  • School of Economics and Commerce, South China University of Technology, Guangzhou 510006, China

Received date: 2015-07-21

  Revised date: 2016-06-10

  Online published: 2017-06-29

Abstract

Research source of the problem: With the rapid development of E-commerce, many enterprises adopt the Internet channel to sell their products based on some purpose. And a growing number of large e-commerce companies have surged. These e-commerce companies provide a better option of indirect Internet channel to manufactures. Thus, the products of manufactures which are sold on the Internet platform of Amazon will substitute with the products of Amazon in some extent.
Description of the problem: In this paper, the operation mode of Amazon is referred to construct an Internet channel model which consists with a manufacture and Amazon. Manufacture enters Amazon and sell its product, and decide the price p1. Amazon will sell its own products which is substitute with the product of manufacture in some extent α, and decide the price p2 of its own products. Manufacture will provide a certain percentage of sales revenue as commission and a fixed amount of the initial fee to Amazon. Amazon will exact logistics fee y of per unit product from manufacture for providing undifferentiated logistics services with Amazon's products.
Methods Model of Research: The relationship between demand and price in economics is extended to the relationship between demand and logistics services and introduce the substitutability of products. The cross decision mode that Amazon will provide undifferentiated logistics services for manufacture's product is introduced into the model. Considering the difference between Amazon and manufacture in indirect Internet channel, these problems are studied in a Stackelberg game.
Problem-solving ideas: Firstly, the situation of decentralized decision is studied,which Amazon decide the price of its own product and the undifferentiated logistics services firstly and manufacture will decide the price of its product according to Amazon's decision above between two participants in indirect Internet channel. Secondly, the situation of centralized decision is analyzed. Then, the total profits of two situations are contrasted. At last, the revenue sharing contract is used to coordinate the indirect Internet channel and Nash bargaining model is used to determine the final allocation scheme.
Research results: Centralized decision can get more total channel profit than decentralized decision only when the product substitute rate is large, and the range of the rate will influenced by the logistics sensitive coefficient; the prices and logistics under centralized decision are larger than that of decentralized decision, but the difference of demands is influenced by the coefficient; no matter what decision situation, the coefficient will not change the diversification trend of related decisions, but change the value only.
The introduction of case data: The data in the article is referenced with former related papers in a portion and provided in the official website of Amazon in a portion, such as commission, initial fee and logistics service fee. Thus, the results of numerical analysis in this paper can reflect the reality better.
Contributions: The cross decision model which is constructed in this paper not only broadens the study related to indirect Internet channel, but also provided reference for the dual-channel in some extent. In addition, this paper dose not focuses on the competition between the same products, but on the substitute problem between two different products, it will provide reference to the research of supply chain.

Cite this article

WANG Tao, YAN Bo, LI Hong-yuan . Decision Analysis of Substitute Product's Competition under the Indirect Internet Channel[J]. Chinese Journal of Management Science, 2017 , 25(4) : 42 -51 . DOI: 10.16381/j.cnki.issn1003-207x.2017.04.006

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