The impacts of e-tailer's private label on the sales mode selection: From the perspectives of economic and environmental sustainability

• Published in: European journal of operational research Vol. 296; no. 2; pp. 601 - 614
• Main Authors: Zhang, Xiuyi, Hou, Wenhua
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.01.2022
• Subjects: Agency selling; E-commerce; Environmental sustainability; Private labels; Sales modes; E-commerce; Environmental sustainability; Sales modes; Agency selling; Private labels
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2021.04.009

•A manufacturer sells products through an e-tailer who owns private label products.•The manufacturer can choose between agency selling and reselling as the sales mode.•We compare two sales modes from economic and environmental perspectives.•Both firms prefer agency selling if percentage fee and brand advantage are medium.•There exists a “win-win-win” zone for two firms and the environment. In recent years, some e-tailers have introduced private labels to compete with manufacturers’ products in end markets. With this in mind, manufacturers who sell products through e-tailers should consider carefully when choosing the online sales mode. In this paper, we examine two prevalent sales modes and find that the manufacturer should adopt agency selling (reselling) when the percentage fee is low (high). When the percentage fee is moderate, with a high brand advantage, the manufacturer prefers reselling due to the high effective price. However, the e-tailer prefers agency selling because the percentage fee is more attractive than the decision right of sales quantities. Interestingly, though the manufacturer's and the e-tailer's preferences over the sales modes seem opposite, they may both prefer agency selling if the percentage fee and the brand advantage are moderate. Besides, we compare the sales modes from the environmental sustainability perspective and identify two influence factors, i.e., total sales quantities and the manufacturer's market share. The simultaneous improvement of the manufacturer's profits, the e-tailer's profits and the environmental performance is achievable under agency selling. Moreover, it is insightful to find that if the manufacturer's production technology is enough environmentally friendly, the optimal sales mode in terms of economic sustainability certainly outperforms in environmental sustainability. In the extension, we discuss how asymmetric production and sales costs influence our results. We find that our main findings still hold and further if the manufacturer's sales costs are high, the “win-win-win” situation can be reached under either reselling or agency selling.