Interaction Between Online Retailers'Platform Openness And Third Parties'Strategic Selling

Since the 21st century,the global e-commerce has experienced unprecedented development,and online retailers are still exploring new business models.In recent years,giant online retailers,such as JD.com,open their platforms to allow third-party sellers to sell on their platforms directly,from an online retailer to a platform retailer.In this article,a platform retailer refers to an online retailer that considers or has chosen to operate a platform.Although the choice of platform retailers is at the dominant position in the retail-platform model,and the most related literature is also from the perspective of platform retailers'openness strategies,less involving in third-party sellers'join strategies under the complicated and changeable network environment.To build a bridge for this gap,this article studies how the platform effect based on online product reviews and the spillover effect of consumer awareness affect the interaction between online retailers' platform openness strategies and third-party sellers'selling strategies,providing knowledge for the long-term development of retail-platform business.Specifically,wondering the contradictory phenomenon that platform retailers allow third-party sellers to sell alternative goods or even the same goods on their platforms leading the competition between the retailers and the third-party sellers more intense,this article first explores the intrinsic motivation of the platform retailers'open and the third-party sellers'join.Furthermore,considering the consumers'behavior characteristics in e-commerce environment,such as reading&creating reviews,and searching online,this article analyzes how the platform effect and the spillover effect of consumer awareness due to consumers' online searching affect the competition and cooperation between the third-party sellers and the platform retailers,and affect the third parties' selling strategies and the platform retailers'openness strategies.The main contents and results are as follows:(1)To discover the intrinsic motivation of the platform retailers'open and the third-party sellers' join,this article develops sequential game models to explore how online product reviews,consumer awareness,and consumer heterogeneity affect the competition and cooperation between a platform retailer and a third-party seller.Results show that higher credibility reviews intensify(relieve)the competition between the retailer and the third party in the quality-dominates-fit(fit-dominates-quality)case.When the difference between the retailer and the third party is just about the level of consumer awareness,the third party has incentive to sell on the retailer's platform to get more consumer awareness.Under some conditions,the retailer also has incentive to open its platform,losing awareness advantage to earn commission,to form a win-win situation.But the consumers' favor to the platform retailer hurts the third party.However,in general,if the third party sells on the platform to share its revenue with the platform retailer,the whole market profit increases.(2)Using classical Hotelling Model and Signal Theory,this article analyzes how the platform effect based on online product reviews affects the third parties'join decision,confirming that the maintenance of review system is profitable.Results show that the platform effect amplifies the impact of online product reviews on the competition between a third-party seller and a platform retailer,which further intensifies(relieves)the competition in the quality-dominates-fit(fit-dominates-quality)case.Especially under asymmetric reviews,the platform effect may enlarge the product differentiation and alleviate the competition,thus simulating the third party to sell on the platform forming a win-win situation.(3)Considering the spillover effect of consumer awareness caused by consumers' online searching,this article analyzes the price competition mechanism between a third-party seller and a platform retailer under different scenarios,and summarizes the rules of the third party's strategic selling.Results show that the third-party seller's selling strategies depend on three factors-its initial consumer awareness level,the extent of spillover effect,and the commission rate.In general,the spillover effect is beneficial to the third party and makes it has more willingness to sell identical products on the platform.(4)By analyzing the interaction between a third-party seller's strategic selling and a platform retailer's open,this article investigates the platform retailer's openness decision and its reactive strategies,such as the commission rate setting mechanism,the selection on selling product list,and the control on spillover effect.Results show that the adjustment on commission rate and the extent of spillover effect can counteract the impact of the third-party seller's strategic selling to some extent,while the effectiveness of changing on selling product list is dependent on the information of specific product.To sum up,this article focuses on the interaction between platform retailers' openness strategies and third-party sellers' selling strategies while considering the characteristics in e-commerce that consumers reading reviews as reference to assist their purchase decisions and the spillover effect of consumer awareness.Results show that:the platform effect based on online product reviews can promote third-party sellers' join and make a double win situation with the platform retailers.Although the spillover effect is beneficial to a third-party seller and detrimental to a platform retailer generally,the platform retailer can mitigate the harm by adjusting the commission rate or controlling the spillover effect extent.This study enriches the theoretical system of the new onine retail-platform business model,and provides knowledge for platform retailers' openness and third-party sellers' join in next step practice.