Incentives for sales agents after the advent of the internet

E-commerce has siphoned sales away from bricks-and-mortar channels in many industries. Taking a principal-agent perspective, this article analyzes how the increasing volume of e-sales influences offline incentive schemes and firm profitability. According to the proposed model, moderate channel cannibalization can be a blessing in disguise if it decreases incentive intensity and lowers expected wage payments. Whether a larger volume of e-sales is blessing or curse depends (among other things) on the relative magnitude of cannibalization versus market enlargement and the degree to which the increase changes the composition of offline customers’ types with respect to service costs.

Christian M. PfeilEmail: