The influence of manufacturer encroachment on the supply chain: the conditional role of traditional retailer retail service investment

Abstract

Purpose

This paper investigates the dual interactive effects of manufacturer encroachment on the supply chain and retailer provision of retail services.

Design/methodology/approach

Consider a supply chain dominated by manufacturers, retailers, and e-commerce platforms, with the manufacturers selling the same product online and offline. Utilizing Stackelberg’s game theory, examples of wholesale and retail prices and profits of participants in the supply chain under different channels are analyzed. An effective encroachment strategy for manufacturers facing different retail service investment strategies of traditional retailers is given.

Findings

When traditional retailers do not invest in retail services, they will lose more profit due to competition with the manufacturer. At this time, the retailer does not want the manufacturer to encroach. The traditional retailer’s investment in retail services will enhance its and the manufacturer’s profits, incentivizing the manufacturer to pursue an aggressive expansion strategy.

Originality/value

(1) Considers a situation where the selling efficiency of the manufacturer is lower than that of the traditional retailer. (2) The interaction between traditional retailers’ retail service investment strategies and manufacturers’ encroachment strategies is investigated where the manufacturer is the dominant player. The three modes of online direct sales, resale, and third-party platform agency are compared to provide a basis for decision-making on different types of manufacturers’ encroachment. (3) Offline retail services not only directly increase sales in the offline market but also indirectly have a negative effect on the online market.

Citation

Zhang, Z., Xu, Y., Meng, L., Luo, R. and Huang, J. (2024), "The influence of manufacturer encroachment on the supply chain: the conditional role of traditional retailer retail service investment", Asia Pacific Journal of Marketing and Logistics, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/APJML-01-2024-0109