E-commerce platform finance with dual channels

In the platform economy era, e-commerce platforms function as distribution channels for sellers and offer online loans to sellers as financing providers. This study focuses on platform finance, where the platform sets a credit line or interest rate to offer either a limited or unlimited loan to capital-constrained sellers. The sellers may have sufficient initial capital or be capital-constrained but have access to limited or unlimited loans. We found that the optimal sellers' channel strategy, choosing either a single channel or online-dominant or offline-dominant dual channels, depends on the platform's credit line, consumers' channel preferences, and their switching behavior between online and offline channels. Given an unlimited (or limited) loan, the seller's dominated channel's quantity decreases (or increases) with her initial capital. The seller's and platform's preference for the unlimited loan or limited loan depends on the dominant channel and the seller's capital constraint. Loan offerings result in Pareto improvements for both participants, which reveals the value platform finance brings. We compare platform finance with bank finance and find that platform finance increases the sellers' threshold quantity without stockout in each channel and encourages the seller to place a higher quantity in both channels. We also examine the channel substitution effect on the sellers' quantity decisions. Findings provide insights for platforms and sellers to implement optimal financing and channel structures to increase their profits.