Edited by Charles A. Ingene, James R. Brown and Rajiv P. Dant
Chapter 4: Platform retailing: from offline “stores within a store” to online “marketplaces”
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.
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