Private label sourcing for an e-tailer with agency selling and service provision

Keywords Supply chain management; Private labels; National brands; e-tailer; Sourcing strategy Highlights * This paper fills a research gap by thoroughly studying whether an e-tailer should introduce a private label (PL) product. * If yes, when should the e-tailer manufacture it in-house or outsource if from a national brand (NB) or another third-party manufacturer? * It shows the e-tailer would charge the highest agency fee and provide the highest service level when sourcing from the NB manufacturer * It shows that there is always a sourcing strategy that can benefit the NB manufacturer and the e-tailer. * It shows the robustness of the analytic findings by considering model extensions. Abstract Many electronic retailers (e-tailers) have introduced private labels (PLs). Although there is a vast literature on modeling pricing and e-tailers' operational issues, research on PL sourcing has been lacking. This paper seeks to fill this gap by investigating an e-tailer (she) who can manufacture her PL in-house or source it from an external third-party manufacturer or a national brand manufacturer (he). The e-tailer simultaneously sells the PL directly and the product of the national brand (NB) manufacturer with agency selling. Furthermore, she provides consumer service for both products. Our analysis leads to the following major results. First, the e-tailer would charge the highest agency fee and provide the highest service level when sourcing from the NB manufacturer. Second, the PL sourcing preference of the e-tailer mainly depends on the production cost and consumer service sensitivity. In contrast, the profit of the NB manufacturer is influenced primarily by the consumer preference for PL and the sourcing strategy of the e-tailer. Third, there is always a PL sourcing strategy that can benefit the NB manufacturer and the e-tailer. Our model extensions explore how price elasticity, product quality, consumer loyalty, and exogenous fees affect our main results, which are shown to be robust. Author Affiliation: (a) School of Economic and Management, University of Electronic Science and Technology of China, China (b) School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, China (c) Lazaridis School of Business and Economics, Wilfrid Laurier University, Canada * Corresponding author. Article History: Received 8 November 2021; Accepted 12 May 2022 Byline: Hengyu Li (a), Huangen Chen (b), Junwu Chai [chaijw@uestc.edu.cn] (a,*), Victor Shi (c)