The optimal logistics service strategy choices between the platform and e-retailers

Liu Tianzhuo，Huang Rong，Yang Feng*，Wang Manman

1. School of Management,University of Science and Technology of China,Hefei 230026,China;2. International Institute of Finance,University of Science and Technology of China,Hefei 230601,China

Abstract:In the e-commerce market,the success of the hybrid online platform is well proven.The platform is not only an e-retailer but also provides online logistics services for other e-retailers in the platform.Logistics service is an indispensable link in e-commerce,and it also plays a vital role in promoting the online shopping.In our research,we analyze the impacts of logistics service sharing between the platform and the e-retailer and investigate the optimal strategy in two models.The study found that when the third-party logistics provider’s logistics service level coordinates with logistics service fees and both are in the middle range,the platform and the e-retailer can achieve a logistics service sharing agreement,forming a win-win scenario.When the logistics service fee charged by the third-party logistics provider is too low,or the third-party logistics provider’s logistics service is too high,both the platform and the e-retailer will choose the strategic mode of not sharing logistics service.Simultaneously,the third-party logistics provider’s logistics service level promotes the logistics service level of the platform.Finally,numerical analysis is carried out to verify the equilibrium model and analyze the impacts of the equilibrium model’s main parameters.Our study contributes to the growing body of research on the platform operation and provides management insights on firms’logistic service strategy choices.

Keywords:platform;e-commerce;logistics service;coopetition

1 Introduction

With the development of mobile technology,online retailing has become more critical to people’s daily lives.The total retail sales of consumer goods is $ 6024.75 billion,a year-on-year decrease of 3.9% in 2020.Meanwhile,the online retail sales of physical goods is $ 1499.95 billion,a year-on-year increase of 14.8% in 2020(1)http://www.stats.gov.cn/tjsj/zxfb/202102/t20210227_1814154.html.There are mainly two business mode in the online retail market.One is a pure platform,such as Taobao.com and Pinduoduo.com[1,2];the other is a hybrid platform,such as JD.com,Suning.com,Amazon.cn[3,4].In 2020,the revenue of JD.com logistics service increased by 47.2% year on year,and the revenue from external customers of JD.com logistics service accounted for 46.6%(2)https://baijiahao.baidu.com/s?id=1698645787987107221&wfr=spider&for=pc.The survey data shows that the hybrid platform’s transaction volume has accounted for more than 30%of the e-commerce sales in China(3)http://www.100ec.cn/detail-6559821.html,and its scale is still expanding.

For the e-commerce industry,the logistics service becomes a critical factor in increasing the market demand[5-7].The hybrid platforms such as JD.com,Suning.com,and Amazon.cn have established their own logistics and have a self-sufficient logistics service system to deliver products[2,8].For the platforms,the self-running logistics service system achieves the improvement of logistics service efficiency and levels but usually leads to a capital shortage[9].For the e-retailers,the third-party logistics service providers’(TPLs)poor service levels usually lead to no undesirable factors such as delivery delays,damaged goods,and poor service attitudes[10].

The TPLs’logistics service level is usually low.However,the service level of platform’s self-running logistics service system is high but needs a lot of financial supports.Under this circumstance,the e-commerce market has recently emerged a new trend of logistics service sharing;that is,the online platforms share self-operated logistics service systems with e-retailers in the marketplace.One example is from Amazon’s logistics service which known as fulfillment by Amazon (FBA).Amazon shares its warehousing system and offers delivery services to e-retailers in its marketplace,and charges the corresponding service fee[11,12].Moreover,JD.com also launched a logistics service sharing strategy to help retailers improve logistics efficiency,enhance consumer experience and improve customer satisfaction[4,13].

We think intuitively that logistics service sharing is a win-win strategy because it allows the platform to earn an extra logistics income and also improves the e-retailer’s logistics service level.However,we note that this strategy will also affect the product sales competition between the platform and the e-retailers.Specifically,the platform is popular with consumers due to its high-quality logistics services.If the platform shares logistics service with e-retailers,the product sales revenue of the platform may decrease because it no longer has the advantage of high-quality logistics service.For e-retailers,the product sales revenue may increase but higher logistics service fees are possibly required.

Based on the analysis of the above phenomena,our study aims to discuss the following research questions:How does logistics service sharing affect the platforms and e-retailer’s pricing and service decisions?Can the platform and the seller reach a logistics service sharing agreement?To solve above issues,we consider an online e-commerce service supply chain consisting of a platform,an e-retailer,and a third-party logistics provider (TPL).The platform acts as a e-retailer to sell products.The platform can also serve as a logistics service provider to provide logistics services for e-retailers,such as JD.com and Amazon.cn.The platform and the e-retailer sell the same types of products,forming competition in the end-consumer market.Moreover,the platform has a self-built logistics system,and the goods it sells are delivered to consumers through the platform’s own logistics services.The e-retailer can choose the platform’s logistics services or entrust other logistics companies to complete the order delivery.Our research discusses two alternative logistics service models:①No sharing logistics service model (NL Model).The platform’s logistics service only serves itself,and the e-retailer purchases logistics services from the TPL.②Sharing logistics service model (UL Model).The platform shares its logistics service with the e-retailer;that is to say,the e-retailer purchases logistics services from the platform.Furthermore,our findings reveal some interesting insights.

Our analysis shows that logistics service sharing is mainly affected by the TPL’s logistics service level and fees.When the TPL’s logistics service level coordinates with logistics service fees and both are in the middle range,both the platform and the e-retailer will benefit from sharing logistics services,which can achieve a win-win situation.Second,when the TPL’s single logistics service fee is high or the TPL’s logistics service level is low,no sharing logistics service is optimal for the platform and e-retailers.Finally,as TPL’s logistics service level increases,the platform’s logistics service level will also increase,and the equilibrium model will evolve from no sharing logistics service to service sharing.

Our study mainly has three contributions as follows.Firstly,our research contributes to the competition and platform strategy literature and fills a significant gap in the literature stream about logistics service strategy for platform and e-retailer.This problem differs from conventional supply chain cooperation problems,our research explores how interaction of horizontal product retailing competition and vertical logistics service cooperation affects players’performance.Secondly,our study simultaneously determines the logistics service level and product retail price,which is unprecedented in previous studies.In the previous researches,the logistics service level is often regarded as an exogenous variable[14-17].Thirdly,the notable results of our research are new and we conclude some new management insights.We find that the optimal strategy for both e-retailer and platform not only depends on the size of market potential[18,19],but also depends on the joint effect of external market characteristics.We conclude the optimal logistics service strategy for platform and e-retailer by examining the competition effect on two players’retail prices and individual and collective profits.

2 Literature review

In addition to the literature cited in the introduction,we draw on a rich body of studies on the e-commerce market and logistics service strategy.Specifically,there are three streams of research that closely relate to our work.The first stream focuses on coopetition research.The second stream is related to e-commerce platform business strategy.The last stream concentrates on service channel design.

Most previous researches concentrate on competition or cooperation,but little researches related to competition.Research on competition usually appeared in technological study and R&D.Gnyawali and Park[20]found that competition helps enterprises deal with significant technical challenges.It creates more profits for cooperative enterprises and promotes technological progress.In the research related to supply chain management,Wilhelm[21]took the automotive industry in Japan and Germany as the research object.He found that the fierce competition in the supply chain can be managed by actively establishing and maintaining competition.In terms of multichannel distribution,Yang et al[15]found that limited capacity may bring win-win-win results to suppliers,buyers,and consumers under the dual-channel strategy.Some studies also focused on the competition of strategic enterprise alliance[14],international trade,and marketing[22-24].Previous research on competition primarily focuses on manufacturers and marketing,but few involving service supply chain strategy,especially in logistics services.We introduce competition into e-commerce services management and analyze the two modes of logistics service sharing and non-sharing to make the best strategic choices.It is different from the previous literature is that our study contributes the research on the logistics service supply chain’s competition strategy,and analyze the influence of logistics service sharing mode on the product sales competition between the platform and the e-retailers.

In the study of platform strategy,Abhishek et al[25]found that if online channel sales negatively affect the supplier’s traditional channel demand,the platform is more inclined to use the market pricing model.Qing et al[26]investigated the platform’s business model and compared the platform performance under three strategies:the platform only as a e-retailer,or merely as a trading market,or using a mixed operation model.Other researches on e-commerce platform strategy involve the privacy and security study[27],the product information search and ranking study[28],and the discussion of online product sales reviews study[29].Our research is very similar to the study[17],which explores the competition’s optimal strategies between OEM and e-retailers.Our study emphasizes the choice of logistics strategies in the e-commerce market.He et al[16]examined that the manufacturer or e-retailer can provide the extended warranty service.The research found that no matter which party provides the extended warranty,the supply chain will obtain high profits,but customers’corresponding service quality is not necessarily maximized.However,these researches don’t consider the impact of logistics services on operation decisions.Since logistics service is a very important link in e-commerce,the decision-making of platform logistics services will have an important impact on the revenue of platform and e-retailers.Our research focuses on the impact of platform logistics service sharing in the e-commerce market and the choice of equilibrium models between platforms and e-retailers.And then our research mainly analyzes the logistics service level and pricing in the platform operation decision.

Finally,our study is also related to the service channel design of the supply chain.Li et al[30]investigated four service channels’performance,including the manufacturer providing services,the e-retailer providing services,the manufacturer hiring the third-party to provide services,and the e-retailer hiring the third-party to provide services.In addition,some researchers have also studied service channel design issues that don’t directly affect product demand.Hong et al[31]discussed how to choose the optimal reverse channel to collect second-hand products from customers.In the dual supply chain,Zhang[32]analyzed the difference between the manufacturer’s service and the e-retailer’s service under demand uncertainty.Zhang et al[33]studied the strategic decision-making about after-sales service and information sharing.Furthermore,some scholars also explored some new service modes of logistics service sharing in the competitive supply chain[13,34].Different from the above studies,our research explores how the interaction of horizontal product retailing competition and vertical logistics service cooperation affects the platform’s and e-retailer’performance.Most of the previous researches conducted research and analysis in a specific service model.However,the logistics service is rarely involved in the study of the e-commerce and platforms.Our study concentrates on the strategic impact of the logistics service on service strategy and pricing decisions of platforms and e-retailers to improve the research on platform logistics service decisions.

The studies closest to our study are those of Chen et al[17]and Niu et al[35].Chen et al[17]adopted the Cournot competition model and also discussed the effects of cooperation and non-cooperation in product sales strategies.Different from their focus on two e-retailer in the e-commerce marketplace with the same or different service-investment efficiencies,our research concentrates on the relationship between platforms and e-retailers,and analyzes the effects of cooperation and non-cooperation in logistics service strategies.Niu et al[35]also employed the Cournot competition model to analyze the logistics service sharing strategies for two firms with guaranteeing customers a promised delivery time.The Reference [35] considered a promised delivery time for customers and examine how the promised delivery time for customer affects the two players’relationship and performances.Our research is different from it,we consider the case of logistics service sharing between platform and e-retailer and examine how logistics service sharing affects e-commerce marketplace competition and consequential firm decisions and performance.In our research,we examine the implications of logistics service sharing between platform and e-retailer when the platform not only offers marketplace services to e-retailers,but also competes with e-retailers in the retail market.

3 Model setup

We investigate an e-commerce service supply chain consisting of a platform,an e-retailer,and a third-party logistics provider.The platform in our study refers to hybrid online platforms such as JD.com,Suning.com,Amazon.cn,which sell products and have a self-built logistics system to provide logistics services.Online shopping services mentioned above include two parts:product sales and logistics services.In terms of product sales,platforms and the individual e-retailer sell the same types of product,forming competition in the end-consumer market.In terms of logistics services,platforms have self-built logistics systems.The product they sell is delivered to consumers through its own logistics services.The e-retailer can choose to adopt the logistics services offering by platforms or the TPLs.Therefore,there is a competition relationship between the platform and the e-retailer on the e-commerce market.

Table 1.Notation of the model.

Figure 1.Parameter decision sequence.

Figure 2.No using logistics sharing strategy (NL Model).

Assumption 3.1Customers will perceive the difference in the level of logistics services when they are shopping online.The logistics service level will affect the market demand for online shopping products because it changes the customers’purchase behavior.

E-commerce and platform-related literature generally assume that the level of logistics services does not affect the market demand for products[36,37].However,recent empirical studies have shown that the logistics service level is an essential factor affecting market demand and customer satisfaction and pointed out that logistics service is the foundation of the logistics system[38].

The platform’s logistics have self-built warehouses and a series of supporting logistics infrastructure including transportation,warehousing,distribution,and after-sales service,efficiently managing and solving problems.Therefore,the platform’s logistics service level is higher than TPLs[4,39].

Assumption 3.3The capability of the platform’s logistics service is not limited,the demand for the product is specific,and the market is perfectly competitive.The information between the platform and the e-retailer is entirely symmetrical,and there is no moral hazard between each other.

The researches on logistics services generally do not consider the situation of limited capacity,such as the References [40,41].We assume that the platform’s logistics service capacity is not limited.Moreover,similar to previous literature[15,42],we also assume that the demand is specific and the market is perfectly competitive.

Assumption 3.4The cost of products sold online is standardized to zero to explore further the impact of logistics service level and product pricing in e-commerce.

Similar to traditional offline product sales channels,we standardize the sale cost of products to zero.We analyze the impact of logistics service costs on market demand and profits.This assumption about cost is quite common in the previous literature[41,43].

4 Models and analysis

Figure 3.Using logistics sharing strategy (UL Model).

Figure 4.Equilibrium profit comparison.

Consistent with previous studies[44,45],we assume that the e-retailer’s market demand is a linear function of the price and logistics service level.The demand functions are as follows:

(1)

(2)

Equations (1)and (2)describe the impact of price and logistics service level on market demand.As a market leader,the platform has a larger market size than the e-retailer.Therefore,we suppose that the market size of the platform is 1,the market size of the e-retailer isα.This form of hypothesis has been adopted in many literature[46,47].As a platform (e-retailer),its product retail price hurts its market demand.The logistics service level of the platform (e-retailer)has a positive impact on its demand.In contrast,the e-retailer’s logistics service level (platform)as its opponent hurts the platform’s demand (e-retailer).

4.1 Scenario 1:No sharing logistics strategy (NL)

To quantify the impact and economic benefits of the two logistics strategies for the platform and e-retailers,we start our research with no sharing logistics strategy.The market demand function of the platform and e-retailers can be expressed as follows:

(3)

(4)

(5)

(6)

Proposition 4.1Under the NL model,the optimal logistic service level,equilibrium prices,and player’s profits are as follows:

Corollary 4.1 indicates that for the NL model,the TPL’s logistics serviceSthas a positive impact on the platform’s logistics service level and hurts the platform’s price of the product.It is not difficult to understand for us that product sales competition in the e-commerce market is a competition in logistics service quality.If the logistics service level of the competitor improves,it will reduce the demand for its own products.When the TPL’s service quality improves,the platform will inevitably improve its own logistics service level and lower the price of products.The effect of TPL’s logistics service on the optimal profit of platform and e-retailer is more complicated.This effect depends upon the relationship ofStwith a critical thresholdStkandStlas shown in Corollary 4.1.This dependency exists because the platform has the advantage of a higher logistics service quality.A larger logistics service advantage can offset the platform’s pressure to engage in fierce competition with its rival competitor.For instance,JD’s self-operated stores are much more popular than other e-retailers on the platform.So JD.com is always in a favorable position in a product sales competition.

4.2 Scenario 2:Sharing logistics service strategy (UL)

(7)

(8)

Since the platform provides logistics services for the e-retailer,the corresponding logistics feesωmust be charged.The profit function of platforms and e-retailers can be expressed as follows:

(9)

(10)

Proposition 4.2Under the UL model,the equilibrium logistics service fee,the optimal logistic service level,equilibrium prices,and player’s profits are as follows:

Corollary 4.2 indicates that the logistics service fee charged by platform and the platform’s service quality are increasing functions of the e-retailer’s market potential (α)for the UL model.Like the classic economic theory,as the e-retailer’s potential market increases,the competition between the e-retailer and the platform will become more intense.Therefore,the platform must improve the service level,and the single logistics fees charged by the platform will also increase.The effect of the market potential of the e-retailer,and the optimal profit of the platform and thee-retailer is more complex.Depending upon the relationship betweenαandα0.The platform’s optimal profit can be a decreasing or increasing function ofαbecause the high market potential will drive both prices of the platform and the e-retailer up.At the same time,the platform can set a higher logistics service price due to its possessing a greater quality of logistics service.It implies that the platform must consider the market competition factor when deciding the logistics service price.The revenue generated from logistics service must be incorporated by the platform in setting its optimal retail price.

5 Comparison analysis

In this section,we first compare the equilibrium prices of the platform and e-retailers under two models.Next,we analyze the logistics service level decision of the platform in two scenarios.Furthermore,we explore the platform and the e-retailer’s optimal profits when sharing logistics services or not sharing.Then,we have the following propositions.

5.1 Comparison of equilibrium results

Proposition 5.1 implies that the logistics service sharing can drive up or down the prices of the platform and the e-retailer,which depends upon the differences in the TPL’s logistics service quality (St).More specifically,the sharing logistics service leads to an increase of the optimal retail price of platform but a decrease of the e-retailer’s optimal retail price with a large value ofSt.Therefore,customers benefit from buying the product at a lower price.With a small value ofSt,the effect of sharing logistics services on optimal retail prices is opposite to the above.It leads to a decrease in the platform’s optimal retail price and an increase in the e-retailer’s optimal retail price.It is also beneficial for customers.

Proposition 5.2 suggests that the logistics service level of the TPL (St)has significant effects on the platform’s logistics service level,and the impact is not monotonous.The platform’s logistics service level increases with the increase of the TPL’s and decreases with the decrease of the TPL’s.Consistent with our intuition,when the TPL’s logistics service is low,the platform’s revenue from sharing the logistics service with the e-retailer mitigates the pressure of decreasing product demand from the intense market competition.The platform benefits from a low logistics service.However,The situation is opposite to the previous situation when the TPL’s logistics services level is high.The platform must improve the level of logistics services to cope with more fierce logistics service competition.Our findings suggest that platform logistics and the TPLs complement each other and make progress together to continuously improve society’s overall logistics service level.This relationship is similar to the logistics of JD with other logistics service providers,such as YTO Express,STO Express,and SF Express.

Proposition 5.3 illustrates that when both the TPLP’s logistics service level and logistics service fee are relatively low or relatively high,sharing logistics services will benefit the platform.However,when the TPLP’s logistics service level is not coordinated with the logistics service,sharing logistics services will hurt the platform.And the impact of sharing logistics service on the platform’s profitability is not monotonous.On the one hand,when the platform shares its logistics service with the e-retailer,it will assuredly lose its competitive dominance in logistics service.On the other hand,the platform can earn more profit from sharing logistics services with the e-retailer.Therefore,the platform benefits from when the TPLP’s logistics service level coordinates with the logistics service.Because the platform can influence the e-retailer’s pricing decision by strategically transforming its logistics service feeω.If the TPL has a high level of logistics service and charges low fees,sharing logistics service will only be detrimental for the platform.At this time,the platform can only encourage e-retailers to participate in sharing logistics services by reducing the price of logistics services.Still,the platform will reduce not only sales revenue but also logistics services revenue.Our research provides actionable management insights for e-commerce platforms,such as JD.com and Suning.com in China.If TPL’s logistics service fee is not too high or too low,e-commerce platforms should share their logistics services with e-retailers.

Proposition 5.4 states that only if the TPL’s logistics service level is low and the logistics service fee is high,or the TPL’s logistics service level is high and logistics service fee is low,sharing logistics service will be beneficial for the e-retailer.Interestingly,the impact on the e-retailer’s profit is completely different from the platform’s.From the e-retailer’s perspective,even if the sharing logistics service will improve its logistics service quality,it will limit its pricing flexibility and give the platform more pricing power.What’s more,the lower the TPL’s logistics service level is,the more the e-retailer will benefit from sharing logistics service.Simultaneously,the higher the TPL’s logistics service fee is,the more the seller will benefit due to the limited pricing flexibility.Therefore,when the TPL’s logistics service level is relatively low and the TPL’s logistics service fee is high.The e-retailer is willing to share logistics services,and it will benefit from this situation.Our findings show that only when the TPLs with poor logistics service and charging a higher fee will the sellers have an incentive to purchase logistics services from the platform.

5.2 Logistic service strategy selection

In this subsection,we discuss the optimal logistics service strategy choices between platforms and e-retailers.From the above propositions,we know that the TPL’s logistics service level and fees has essential impacts on the platform and e-retailer’s equilibrium profits.In this section,we will use numerical analysis to show the impact on the UL model and NL model visually.Based on previous literature research[6,26],our research assumesα=0.5,β=0.5,φ=0.1 in this section to investigate the impacts on the equilibrium strategy.

Proposition 5.5We explore the effects of sharing logistics services on the maximum profits of the platform and the e-retailer.

Proposition 5.5 illustrates that whether sharing logistics service increases or decreases the platform’s optimal profits compared with no sharing logistics service model is mainly decided by the TPL’s logistics service level (St)and charged fees (f).It is divided into four decision regions showing in Figure 4.We now explain the relationship of parameters on each area in detail.

The blue region in Figure 4 suggests that the platform’s optimal profits and the e-retailer under the UL model are greater than those under the NL model.This implies that the platform sharing logistics service with the e-retailer can lead to Pareto’s optimal solution.Therefore,a cooperative relationship in logistics service will be embraced by both parties.From Proposition 5.1 and Proposition 5.2 above,we know that in the win-win region,the platform’s logistics service level and price are higher than this under the NL model.At the same time,the e-retailer’s retail price is lower than this under the UL model.Both the two results are beneficial to consumers.Therefore,we can conclude that sharing logistics services affects the e-commerce platforms,e-retailers,and consumers in this situation.And the optimal logistics service strategy choice between the platform and the e-retailer is the UL model.

The green region in Figure 4 suggests the platform will earn more profit in the UL model than the NL model,but the e-retailer will earn less profit in the UL model.And the total profit between the two is greater in the UL model than in the NL model (πU>πN).In this situation,the sharing logistics service hurts the e-retailer’s profit.As a leader in the e-commerce market,only if the platform is willing to allocate a portion of the increased profit to the e-retailer by the profit distribution contract can the agreement of sharing logistics services be realized.The optimal logistics service strategy choices between the platform and the e-retailer are also the UL model.

The red region in Figure 4 suggests the e-retailer will earn more profit in the UL model than the NL model,but the sharing logistics service will hurt the platform,even though the total profit between the two is greater in the UL model than in the NL model (πU>πN).In this situation,the sharing logistics service hurts the platform’s profit.Similar to the green region,Pareto improvement can only be realized by a further cooperation mechanism such as a profit-sharing contract.Then,the optimal logistics service strategy choices between the platform and the e-retailer are also the UL model.

Figure 5.The selection of strategy model.

Proposition 5.6We conclude the optimal logistics service strategies of the platform and e-retailers as follows.

Proposition 5.6 illustrates that logistics service sharing can achieve equilibrium strategy choices on the condition that both the TPL’s logistics service level (St)and charged fees (f)are moderate.Moreover,when both TPL’s logistics services and charged fees are increased or decreased,the possibility of choosing UL mode will increase.For both e-retailers and platforms,when TPL’s logistics services is moderate and logistics service fees charged by TPL is also moderate,UL mode is the best logistics service strategy for both players.Otherwise,NL mode is the best logistics service strategy for both players.For e-retailer,when TPL’s logistics services is moderate and logistics service fees charged by TPL is smaller than the threshold valuef0,the UL mode is the best logistics service strategy.And when TPL’s logistics services is moderate and logistics service fees charged by TPL is greater than the threshold valuef0,NL mode is the best logistics service strategy.For platform,when TPL’s logistics services is moderate and logistics service fees charged by TPL is greater than the maximum offcandfh,the UL mode is the best logistics service strategy.Otherwise,the UL mode is the best logistics service strategy.Moreover,the optimal logistics service strategy choices between the platform and the e-retailer are shown in Figure 5.The blue area represents the UL mode as the optimal choice of the logistics service strategy,and the gray area represents the NL mode as the optimal choice of the logistics service strategy.

Figure 6.The impacts of parameters for ω*.

6 Sensitivity analysis

We have analyzed the impacts of logistics service level of the TPL (St)the logistics service fee charged by the TPL (f)on the equilibrium price and profit profoundly by investigating the above equilibrium strategy.In this section,we will analyze the sensitivity of the other parameters,including the market potential of e-retailer (α),the commission rates charged by the platform (φ),and consumers’sensitivity to the level of logistics services (β).

Figure 7.The impacts of parameters for

From Figure 6 (b),we know thatαhas a positive impact onω*,that is,as the market potential increases,the single logistics service fee charged by the platform will also increase.The more enormous the market potential,the more intense competition between the e-retailer and the platform.Therefore,the platform must increase profits by increasing the price of logistics services.

We can see from Figure 6 (c)thatβhurtsω*,and the largerβhas smaller impacts onω*.When the platform shares logistics services with e-retailers,the platform no longer has the advantage of high logistics service level.The larger consumer’s sensitivity to the logistics service level,the small it has an impact on demand,and the lower price of logistics services on the platform.

7 Conclusions

We consider an e-commerce service system composed of a platform,an e-retailer,and a third-party logistics provider.The platform not only sells products online but is also a logistics provider.The platform has its logistics network systems.And the platform’s logistics service has the advantages of a fast speed and the excellent service quality.Platform’s logistics network transports the products sold by platform and provides logistics services for the e-retailer’s sales to obtain more profit.The logistics service e-retailer can be TPL or platform after he sells the product.

Our research contributes to the competition and platform strategy literature and fills a significant gap in literature stream about logistics service strategy for platform and e-retailer.Our study provides a broader set of decision outcomes that have not been reported by other studies concerning competition.By examining the competition effect on two player’retail prices and individual and collective profits,we find that the optimal strategy for both e-retailer and platform not only depends on the size of the market potential[18,19],but also depends on the joint effect of external market characteristics.We find that the TPL’s logistics service level and the logistics service fee charged by the platform have significant impacts on the logistics service strategy between the platform and the e-retailer.Specifically,the platform will benefit from TPLP’s logistics service level is coordinated with the logistics service.In contrast,the e-retailer will benefit from logistics service sharing when the TPL’s logistics service level is low or the TPL’s single logistics service fee is low.And there is a win-win situation that can achieve agreement of sharing logistics service when the TPL’s logistics service levels and fees are in middle regions.According to the analysis of the equilibrium results,our research obtains some management applications.Specifically,our research finds three new management insights as follows.

Our findings provide executable managerial insights for the platforms and the e-retailers in the e-commerce market.First,the platform should share its logistics service with the e-retailer when the TPL’s logistics service level is not too low,and the TPL’s logistics service fee is not too high (i.e.,when the platform does not have a great advantage in logistics service).Moreover,the improvement of TPL’s logistics service will promote the platform’s logistics service level and improve the overall logistics service level of society (i.e.,The high level of TPL’s will intensify competition between the platform and the e-retailer).Furthermore,suppose the e-retailer is not willing to engage in logistics service sharing.In that case,the platform can provide a certain discount (e.g.,reducing the platform’s logistics service price)to encourage the e-retailer to cooperate in logistics service.

Although our work helps understand how the platform and the e-retailer should determine the optimal retail price,the optimal logistics service price,and level of the platform,and choose optimal e-commerce marketing strategy between the UL model and the NL model.However,several possible extensions worth pursuing can further deepen our understanding of the logistics service strategy in the e-commerce market.First,our research assumes that the TPL’s logistics service level is less than that of the platform.If considering that the TPL’s logistics service level can be greater than that of the platform,more interesting results can be obtained.Second,we only consider the logistics service strategy of the platform and the e-retailer.The logistics service strategy of the TPLs in the e-commerce market is equally significant and worthy of future research.Finally,different types of e-retailers have different impacts on the logistics service strategies,such as fresh products,electronic products,and clothing.Exploring the optimal logistics service strategies that consider the characteristics of products value is also promising.Hence,a promising direction for future research is to collect real-world data and modify these analysis models in our study to guide further the practice of logistics service strategy in the e-commerce market.

Acknowledgments

This work is supported by the National Natural Science Foundation of China (71991464/71991460,71631006 and 71921001).

Conflictofinterest

The authors declare no conflict of interest.

Authorinformation

LiuTianzhuoreceived his Ph.D.degree from the University of Science and Technology of China.He is an associate professor of business management at the School of Management,University of Science and Technology of China.His research interests focus on strategy and entrepreneurship.

HuangRongis a 2018 master student at the School of Management,University of Science and Technology of China.Her research interests include supply chain management.

YangFengreceived his PhD degree from the University of Science and Technology of China.He is currently a professor of operation management at the School of Management,University of Science and Technology of China.His research interests focus on decision analysis and operation management.

WangManmanis a 2018 doctoral student at the School of Management,University of Science and Technology of China.Her research interests include supply chain management and sustainable operations.