Virtual or Live? Choosing the Optimal Live-Streaming Mode in a Dual-Channel Supply Chain

With the emergence of virtual AI streamers, choosing between a virtual streamer and a live streamer is a crucial decision for the brand manufacturer when launching a live-streaming business. This paper examines a dual-channel supply chain model consisting of a brand manufacturer, a store retailer, and either an artificial intelligence (AI) streamer or a key opinion leader (KOL) streamer. KOL streamers possess significant advantages over AI streamers due to their ability to interact effectively with consumers and their large fan bases. However, participating in pre-arranged KOL live-streaming events can incur a hassle cost for consumers, which is not required for AI streamers. Additionally, when collaborating with a KOL, the brand manufacturer must pay a fixed payment and a commission rate on revenues generated from live-streaming e-commerce, which can be ignored for AI streamers. Our research indicates that the costs associating with KOLs are a key factor in mode selection. We identify cost thresholds under which the brand manufacturer may prefer the KOL live-streaming mode over the AI mode. We also find that the hassle cost is a double-edged sword for the brand manufacturer. When the hassle cost is high, the KOL mode may still be preferred over AI mode. We then derive the retailer's mode preference and identify the conditions for achieving a common preference for the brand manufacturer and the retailer in both live-streaming scenarios. Finally, we conduct three extensions: considering product returns, exploring an alternative in-house live-streaming mode to the KOL mode, and examining the implications of an existing online channel. Results show that the findings of the main model remain robust.