The Choice Of Operation Model Among B2C Retailers Based On The Theory Of Two-sided Markets

With fierce competition among B2C retailers in China, retailers take effort to different promotions. At the same time, more and more B2C retailers also change from merchant model to two-sided platform model. However, there are essential difference between merchant model and two-sided platform model. The profitability of these two models is also completely different. What causes this shift? Was this change an expedient or an inevitable choice? These issues must be resolved. To make this problem clearly can not only be beneficial for the development of B2C retailers, but also enrich the two-sided market theory.Firstly, we define the operation model type of B2C retailer based on the theory of two-sided markets and focus on differences of service, operation cost, which set up a theoretical basis for the quantitative model. Secondly, we construct a monopoly and an oligopoly model which takes into account differences in pricing mechanism, service and operation cost to analyze the choice of operation model among B2C retailers. Thirdly, the results show the dominant retailers need to make a trade-off between the level of service and operating costs when facing the choice. For example, the merchant model also is preferred when the commodity is of high degree of standardization and of high per ticket sales. The two-sided platform model is more profitable when the commodity is differentiated demand goods. For the dominated retailers, they also need to make a trade-off between the level of service and operating costs, and also need to consider the dominant retailers’operation model. In particular, if they want to narrow the gap with the dominant retailers, merchant model is more appropriate. In other words, the shift of B2C retailers’mode is only temporary, because the merchant mode is beneficial to enhancing the consumer experience and expanding market shares.