Operation Strategy Analysis For The Platform And Seller In Online Group-Buying Market

Relative to the wide use and great success in practice, the existing academic work on online group buying (GB) business is rather scarce. This thesis attempts to fill this gap by enriching the literature on GB industry as well as providing managerial guidelines for this business. In the GB model there have been two kinds of independent decision makes, i.e., the platform and seller. Usually, they are bonded by the consignment contract. First, this study examines the tariff settling problem from the perspective of the platform and GB participation issue from the view of the seller. Second, we move to analyze how to manage competitive sellers in pursuit of ideal profit from the platform's perspective. Lastly, we stand on the seller's view and explore two different selling strategies in the GB market. Conclusively, this study is largely motivated by interesting observations in the GB industry and the obtained results are as the follows.First, we observe that some platforms like to settle relatively high tariff, and thus the sellers conduct group buying events only once. In contrast, other platforms tend to settle low tariff rate, and the sellers implement group buying events continuously. To unravel the underlying philosophy of these contradictory observations, this paper proposes a stylized two-period model capturing the inter-temporal endogenous demand. Our analytical results show that, in equilibrium, the platforms tend to settle high (low) tariff when the endogenous effect is strong (weak), and in turn the sellers conduct the group buying events once (continuously). Moreover, to verify the robustness of our main findings, we further consider the extensions of sellers'capacity constraint and endogenous effect uncertainty. Generally, we analyze the operation mechanism between online platforms and sellers under inter-temporal endogenous demand which provides useful managerial implications for the rising agency selling mechanism in the e-commerce.Secondly, we find that the current group buying platforms are providing considerable similar deals in the same department which would inevitably result in the competition among sellers. In this competitive environment the seller endeavors to maximize his own profit, whereas the platform aims to guarantee the overall performance due to the consignment contract with all enlisted sellers. To resolve this tension, our paper proposes two operation strategies to manage competitive sellers differentiated in the cost:matching strategy and randomizing strategy. In the matching strategy the platform arranges sellers of the same type to conduct group buying campaigns. In contrast, the platform schedules sellers without any interference in the randomizing strategy. By characterizing the equilibriums, we first mathematically show that the tariff settling problem for the platform is quasi-concave in both strategies. Then, our analysis remarkably demonstrates that the platform can collect more profit from the matching strategy irrespective of the seller features. On the contrary, the randomizing strategy outperforms the matching strategy as to the total profit of sellers. Specifically, the low-cost seller can profit more from the randomizing strategy but the other way around for the high-cost seller. Taken together, regarding the entire industry we find that the randomizing strategy can create more profit under mild conditions. Our results not only provide implications for the group buying business but also apply to other online marketplaces in the presence of competitive sellers, which is ubiquitous at present.Thirdly, we observe that in the modern group buying (GB) business there have been two distinctive operation strategies widely used to acquire new consumers, i.e., price discrimination (PD) and quality differentiation (QD). In the PD strategy the seller cuts down the product price to benefit new consumers from the GB market and expects them to repurchase in the local market. In contrast, the QD strategy means that the seller provides the product of lower price coupled with reduced quality to serve the GB market in order for better marginal profit. Motivated by this observation, our paper proposes an economic model to explain the causal mechanisms. We show that the optimal strategy depends mainly on two consumer features in the GB market:product valuation and retention rate. In particular, the QD strategy outperforms when the consumers hold arbitrarily low product valuation. On the contrary, if the product valuation is relatively high, then sufficient (unfavorable) retention rate leads to the PD (QD) strategy. What is more, we consider the extensions of low-quality and market-coverage bounds and find low-quality (market-coverage) bound motivates the seller to choose QD (PD) strategy in some conditions. Overall, our results not only provide useful implications for the GB industry but also cater to the age trend that an increasing number of offline sellers are conducting promotion through popular online platforms to expand the market.