Asoo J. Vakharia

Title: Marketplace, Reseller, or Hybrid: A Strategic Analysis

Abstract:

    Traditionally, online retailers have primarily been resellers who purchase products from manufacturers and resell them to consumers. Recently, online retailers are also chosen to operate as a platform to connect manufacturers/suppliers and buyers directly.  Conventional wisdom suggests that this new format will mitigate the double-marginalization effect and benefit both the intermediary and suppliers due to the revenue sharing scheme. However, we find that the upstream competition between suppliers will alter this result. Essentially, in the reseller mode, the intermediary can function as the moderator to alleviate price competition in the online marketplace. Further, we also identify that the order-fulfillment cost will interplay with the intensity of the upstream competition governing the mode choice. Specifically, when the order-fulfillment cost is relatively small and the product differentiation is high, the pure platform mode will become the equilibrium mode; when the order-fulfillment cost is relatively high or the degree of product differentiation is low, then the pure reseller mode will arise as the equilibrium mode. Further, when the order-fulfillment cost and degree of product differentiation are both at moderate levels, the hybrid mode will evolve as the equilibrium mode. The intuition hinges on the trade-off between transfer of the pricing rights and the responsibility for order fulfillment accompanied by the mode change. Our findings not only complement the emerging online marketplace literature but also provide testable empirical questions on the relationship and magnitude of different factors steering the mode choice.

Brief Introduction:

    Asoo J. Vakharia is the McClatchy Professor and Director of the Center for Supply Chain Management in the Warrington College of Business Administration at the University of Florida. Dr. Vakharia has taught in Warrington’s Department of Information Systems and Operations Management since 1994, and has a Ph.D. from the School of Business at the University of Wisconsin-Madison. Vakharia is a POMS and DSI Fellow and serves as Department Editor (POM-IS Interface Track) for the Production and Operations Management Journal. Having published extensively in the leading journals in the field, Vakharia’s current research examines issues in SCM with an emphasis on Green/Sustainable Product Development, Waste Management, and Reverse Supply Chains. His consulting work includes projects with AT&T Solutions Customer Care, Golden Eagle Distributors, Garrett Air Research, Motorola, Sweetheart Cups, Inc., and the University of Arizona Medical Center. Asoo's teaching interests are in Operations Management, Manufacturing Planning and Control, Design of Manufacturing Systems, Management of Service Operations, Operations Strategy, Management Science, International Logistics, Transportation and Logistics Systems, and MPC/ERP Systems Integration. He has also been involved in extensive Executive Teaching and has taught industry specific executive development courses for Tucson Electric Power Company, Citibank Universal Card Services, and AT&T Solutions Customer Care.