Strategic Contract Offering and Channel Choices in Live Streaming E-Commerce

The emergence of live streaming has revolutionized retail, altering how e-tailers engage with their customers. However, incorporating a live streaming channel may intensify channel competition and profit-sharing losses, potentially eroding the e-tailer's overall profitability. A streamer faces a trade-off in contract provision: it must balance maximizing its profits with expanding its market. This paper investigates a streamer's contract offering decisions and an e-tailer's channel selection strategy. We analyze two types of contracts that a streamer can offer—agency and reselling contracts—and three channel strategies for an e-tailer: not adopting live streaming, self-streaming, and third-party streaming. Our findings reveal that the streamer offers contracts aligned with its profit preferences only when the network effect is strong and the hassle cost is low. Otherwise, the streamer may deviate from its preferred contract and choose a suboptimal strategy. From the e-tailer's perspective, no single strategy dominates all scenarios. The e-tailer should avoid opening a live-streaming channel when the hassle cost is very high. If the network effect is low and the hassle cost is moderately high, the e-tailer should choose self-streaming; otherwise, it should opt for third-party streaming. Interestingly, our research also shows that neither the e-tailer nor the streamer necessarily has to lower the live streaming channel price. Furthermore, implementing live-streaming does not always cannibalize the traditional channel demand or lead to an expansion of total market demand. This paper provides practical guidance for both streamers and e-tailers in making strategic contract and channel decisions in the live-streaming retail landscape.