Channel integration and profit sharing in the dynamics of multi-channel firms |
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| Authors: | Ruiliang Yan John Wang Bin Zhou |
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| Institution: | 1. Economics and Management School, Wuhan University, China;2. School of Information Management, Wuhan University, China;1. Eindhoven University of Technology, School of Industrial Engineering & Innovation Sciences, The Netherlands;2. Dartmouth College, Tuck School of Business, United States;3. University of Groningen, Faculty of Economics and Business, The Netherlands;1. School of Economics and Management, Tongji University, Shanghai 200092, China;2. School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China;3. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China;4. Sustainable Development Research Institute for Economy and Society of Beijing, Beijing 100081, China;5. Naveen Jindal School of Management, University of Texas at Dallas, Dallas, TX 75080, USA |
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| Abstract: | With the rapid development of e-commerce, many brick and mortar firms are increasingly creating e-commerce channels that operate quite independently from existing physical channels, which lead to intensive channel conflicts. Channel integration with profit sharing can effectively eliminate channel conflicts and improve channel coordination for these multi-channel firms. In this study, we focus on the strategic role played by channel integration with profit sharing in the online-traditional channel competition. We use a game theoretic approach to investigate this issue. We compare non-integrated channel profits with integrated channel profits to show that both the online and traditional channels always benefit from a channel integration strategy by capturing some portion of the incremental profit gains generated by an integrated channel. We utilize a profit bargaining model to implement profit sharing for the online and traditional channels to achieve their channel integration. Based on our results, optimal marketing strategies are derived. |
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