The impact of manufacturer encroachment strategy on platform's store brand introduction

Besides the existing traditional reselling channel, the manufacturer is increasingly adding the direct self-build channel (i.e., direct encroachment) or agency channel (i.e., agency encroachment) to reap more profits in an e-commerce supply chain. In response to such manufacturer encroachment, platforms may introduce their store brand products. However, the existing literature ignores the impacts of manufacturer encroachment mode choices on store brand introduction. In this article, we develop a game model to investigate the interaction between manufacturer encroachment channel selection and the platform's store brand introduction. The results show that the decision to introduce store brands is quite different under different encroachment modes. More specifically, when the manufacturer does not encroach or adopts direct encroachment, the platform always introduces her store brand. However, the adoption of agency encroachment may prevent the platform from introducing the store brand when the agency fee and the cost of direct encroachment are moderate and the perceived value of the store brand is sufficiently large. Furthermore, we show that the manufacturer could always choose a suitable method of encroachment to raise his profit. Specifically, when the direct encroachment's cost is low, the manufacturer is more inclined to use direct encroachment, whereas when this cost is medium, the manufacturer prefers to adopt agency encroachment. In addition, we show that both manufacturer encroachment and store brand introduction could increase social welfare and consumer surplus. These findings have important practical significance and can provide certain guidance for the government and enterprises.