Retail Strategies for E-Tailers in Live Streaming Commerce: When Does Influencer Marketing Work?

Retailers are increasingly embracing influencer marketing channels and live broadcast services to boost product sales. While influencer marketing channels offer the potential to attract a large consumer base, they also present challenges such as demand cannibalization and high costs associated with influencers. This paper develops a stylized model to investigate how the introduction of an influencer marketing channel can enhance a retailer’s profits and social welfare by considering two scenarios: one where the retailer does not provide live streaming services through its own online channel, and one where it does. We find that, in both scenarios, the retailer can benefit from the influencer marketing channel when the channel’s information value is high or when product complexity is relatively low. Additionally, under certain conditions, the retailer’s own live broadcast service can either substitute or complement the influencer marketing channel to improve profits. Furthermore, the retailer might be willing to sacrifice short-term profits from introducing the influencer marketing channel in the initial sales period to achieve higher long-term profits. Finally, there is significant consistency in the impact of the influencer marketing channel on the retailer’s profits and social welfare if consumers are not involved in product return. On the contrary, if product return caused by impulsive consumption is considered, the introduction of the influencer marketing channel may cause a decline in consumer surplus and social welfare.