How to choose online sales formats for competitive e‐tailers

Abstract Currently, many e‐tailers can sell manufacturers' products on their online platforms through reselling or agency selling formats. However, how to choose the optimal online sales formats has puzzled competitive e‐tailers with different channel roles. This paper uses stylized theoretical models to study this problem by considering the combined effects of e‐tailers' channel roles, each e‐tailer's referral fees, and the difference in e‐tailers' market shares. Our results show that if two e‐tailers sell the common manufacturer's products on their online platforms, no matter what sales format one e‐tailer adopts, the other e‐tailer's best choice depends on the two e‐tailers' referral fees and the difference in the two e‐tailers' market shares, whereas the manufacturer's best action is always to let the other e‐tailer adopt agency selling format regardless of the two e‐tailers' referral fees and channel roles and the difference in the two e‐tailers' market shares. Moreover, if two e‐tailers sell the common manufacturer's products on their online platforms, it is most profitable for the manufacturer when both e‐tailers adopt agency selling format and charge equal referral fees to the manufacturer, and the same is true for the whole supply chain, which is independent of the two e‐tailers' channel roles and the difference in the two e‐tailers' market shares.