The Strategic Adoption of Platform Schemes and Its Impacts on Traditional Distributors: A Case Study of Gree

This article is motivated by the challenge of the increasing power of e-commerce compared to traditional commerce. An online retail platform can provide both agency selling and reselling schemes, while the supplier can adopt one scheme or both. For a case study of Gree, we formulate four cases based on the channel structures to investigate the adoption strategies of platform schemes and their impacts on a traditional distributor, Jinghai. Firstly, we discuss the impacts of the slotting fee, the revenue-sharing proportion earned by the supplier, and the market competition intensity on the profits and decisions of members. A more intense market and a higher revenue-sharing proportion for the supplier will lead to a lower price in the traditional distribution channel. Secondly, we study how a supplier should employ the platform schemes with a traditional distributor. Particularly, the extremely low extra market demand driven by the online platform and the sufficiently low market intensity may not lead to a motivation for suppliers to adopt the agency scheme. Finally, Gree’s introduction of an agency scheme does not always spell disaster for traditional distributors, and it may not be such a bad thing for Jinghai to agree to Gree adding the online reselling scheme.