Effects of e-commerce channel entry in a two-echelon supply chain: A comparative analysis of single- and dual-channel distribution systems

Qihui Lu and Nan Liu

International Journal of Production Economics, 2015, vol. 165, issue C, 100-111

Abstract: In this paper, we examine the effects of electronic commerce (e-commerce) channel entry on the profitability and behavior of manufacturers and physical retailers within a distribution system. We compare two distribution structures, namely, single and dual channel. In our dual-channel model, the new e-commerce channel is independent of the manufacturer and the physical retailer. Our findings indicate that for these kinds of channel structures, the dual-distribution channel may be unprofitable to the manufacturer, and that the physical retailer may benefit from e-commerce channel entry. We show that if e-channel efficiency is adequately low or the acceptance of the conventional channel is low, the e-commerce channel may dominate the distribution system; otherwise, the conventional channel may dominate. If the channel acceptance of a conventional channel is below a certain threshold, the manufacturer may benefit from e-channel entry; otherwise, the manufacturer is placed at a disadvantage. If the e-channel is sufficiently competitive, then using the e-channel becomes a useful strategy for the manufacturer. Finally, we show that the manufacturer may be worse off selling in a dual-channel distribution structure if e-channel efficiency is low. This observation is important because in adopting a less efficient new channel is disadvantageous to the manufacturer.

Keywords: Dual-channels; E-commerce; Supply chain management; Multi-channel marketing (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:165:y:2015:i:c:p:100-111

DOI: 10.1016/j.ijpe.2015.03.001

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