Research on competition and mode selection of suppliers based on e-commerce platform

Considering a hybrid-mode e-commerce platform that is self-operated and open to third parties, such as JD.com or Amazon.com, its suppliers can either choose to open official flagship store on the platform (consignment mode) or wholesale products to the e-commerce platform (wholesale mode). This paper studies the mode selection and price and service competition strategies of two suppliers based on the hybrid e-commerce platform. Firstly, we develop four Stackelberg game models, in which the platform acts as a leader, to study the price and service competition under four possible suppliers' strategy combinations; then, we research on the Nash equilibrium of the two-supplier strategy combination; next, we analyze the influence of market factors on suppliers' equilibrium strategy and the platform's mode selection. The results show that: When the supplier's service efficiency is relatively high, service elastic coefficient is high or price elastic coefficient is low, the equilibrium strategy is to select the consignment mode for both suppliers; when these market factors are appropriate, one supplier chooses the consignment mode while another supplier chooses the wholesale mode; otherwise, the equilibrium strategy is to select the wholesale mode for both suppliers. Finally, we analyze how product features influence the decision of the platform on opening to third parties, we find that only when the platform has a large service efficiency advantage and the product is characterized by intense price competitiveness and weak service competitiveness, the platform can benefit from self-operation, otherwise it'd better partly or fully open to third parties. These results provide significant guidance for value for e-commerce companies on the decision-making of sales channels and platform modes. © 2019, Editorial Board of Journal of Systems Engineering Society of China. All right reserved.