Sourcing store brand from the national brand manufacturer or the outside contract manufacturer: Roles of different logistics modes of national brand

In addition to providing a sales channel for national brands, many e-tailers also sell their store brands, which can be sourced from brand manufacturers or outside contract manufacturers. E-tailers use self-run logistics to deliver store brands. Brand manufacturers use e-tailer logistics or third-party logistics to deliver their national brands. Logistics modes affect the competition between national brands and store brands, which inevitably affects the e-tailer's profit and source decision on store brand. This paper investigates how logistics mode affects the e-tailer's source decision on store brand. We find that when a national brand is delivered through e-tailer logistics, the e-tailer's source decision on store brand depends on the logistics fee and the unit production cost of the outside contract manufacturer. When the logistics fee is low and the unit production cost is high, sourcing the store brand from the brand manufacturer is beneficial to the e-tailer. When a national brand is delivered through third-party logistics, the e-tailer's source decision on store brand depends on the logistics service level difference, the logistics fee charged by the third-party logistics provider, and the unit production cost of the outside contract manufacturer. When the logistics service level difference is low, the logistics fee and the unit production cost are high, or when the logistics service level difference and the unit production cost are high, sourcing the store brand from the brand manufacturer is beneficial to the e-tailer. Furthermore, compared with the 3PL mode, if the logistics fee under SRL mode is low, then under the SRL mode, the e-tailer may be more inclined to source the SB from the brand manufacturer.