Kinshuk Jerath and Z. John Zhang
Platform retailing, also known as agency selling, is an arrangement in which an upstream seller, typically a manufacturer, is enabled by the retailer to interact directly with consumers and given control of activities such as pricing, merchandising, service provision, and so on. The platform retailing arrangement is becoming increasingly popular in offline retailing, in the form of “stores within a store” that are found in department stores such as Macy’s and Nordstrom, as well as in online retailing, in the form of online “marketplaces” such as Amazon Marketplace and Etsy. In this chapter, the authors analyze the platform retailing arrangement in its different contexts to understand its advantages (and shortcomings) for upstream sellers, retailers, and consumers. The key insight of the chapter is that platform retailing makes the distribution channel more efficient than the standard reselling arrangement but this happens at the cost of the retailer giving up control of pricing. Under different conditions, one force dominates the other and the choice of channel arrangement is based on this tradeoff. The analysis provides guidelines to both retailers and manufacturers to navigate this arrangement.
Tony Haitao Cui, Paola Mallucci, Jagmohan Raju and Z. John Zhang
In this chapter the authors examine the effect on channel decisions and profitability of a class of preferences known as social preferences. They concentrate on fairness and provide results for analytical models of channel relationships in which the retailer cares for fairness. They show that such social preferences can coordinate the channel when the retailer is sufficiently adverse to inequity. The authors investigate how fairness affects the most popular channel-coordinating mechanisms (i.e., two-part tariffs and quantity discounts), and show that introducing these contracts in the presence of fairness leads to very different results in terms of profit distribution among channel members. They explore how different concepts of fairness impact the efficiency of the channel and extend the model to allow for fairness concerns on the manufacturer to confirm the channel-coordinating ability of fairness. The authors conclude with empirical predictions to be tested on field data in future research.