Encroachment or not? The Effect of Reputation and Commission on Platform’s Selling Format

Platforms often provide not only distribution channels for manufacturers and charge commissions, but also engage in direct sales—a phenomenon known as platform encroachment. This trend raises critical questions: why do platforms encroach? In what way do they encroach? What is the impact on the performance of supply chain? To investigate these issues, this paper considers two distinct encroachment strategies: one is strategy D (dual-channel), where the platform retains agent selling while introducing reselling; the other is strategy R (reselling only), where the platform abandons agent selling channel and only implements reselling. By comparing these strategies with a no-encroachment benchmark, our analyses yield several key insights. First, when commission rate is higher, platforms prefer the dual-channel strategy (strategy D). Conversely, under low commission rate, platforms tend to abandon agent selling and only implement reselling (strategy R). The last interesting conclusion is that, in scenarios characterized by high platform reputation and low commission rate, encroachment through Strategy R does not undermine the manufacturer’s profitability; instead, it creates a win-win situation for both players.