Quality and distribution channel selection on a hybrid platform

We consider a supply chain with a manufacturer selling a product to consumers through a hybridonline platform. The platform offers the manufacturer (she) two channels (agency and resellingchannels) to sell her product. The literature assumes that the manufacturer can choose to sellher product through either the agency channel or the reselling channel, whereas this studyexpands the literature by allowing the manufacturer to sell her product through two channels,which is common in practice. Specifically, we study the manufacturer's distribution channeldecision on a hybrid platform and explore the impact of product quality on this decision. Wereveal that it is not optimal for the manufacturer to sell solely through the agency channel inquantity competition. In the short run, she chooses to sell through the two channels if productquality is low and solely through the reselling channel otherwise. The manufacturer's channeldecision may benefit the platform and consumers, leading to a win-win-win outcome if thequality level is intermediate or sufficiently high. In the long run, the manufacturer can flexiblyadjust product quality. Our analysis shows that if the commission rate is low, the manufacturerchooses a low-quality level and sells via both channels. Otherwise, the manufacturer choosesa high level of quality and sells solely via the reselling channel. Compared with the short-runmodel, if the manufacturer is efficient in manufacturing a high-quality product, the qualitydecision enlarges the region where she sells solely through the reselling channel and the regionwhere the platform benefits from the channel decision. Although the quality decision narrowsthe region where consumers benefit from the manufacturer's channel decision, it nonethelessenlarges the region where the win-win-win outcome occurs.

Automated summary

This study explores the manufacturer's distribution channel decision on a hybrid platform and the impact of product quality on this decision. The findings suggest that in the short run, the manufacturer sells low-quality products through both channels, but in the long run, the decision depends on the commission rate and product quality.