You are entitled to access the full text of this documentInteracting with the e-tailer’s service investment in the presence of a store brand: Selling model choice

To alleviate the inventory pressure and improve operational performance, the e-tailer that develops a store brand (SB) may make a service investment in her self-operated stores. However, the existing literature rarely considers such a service investment strategy and its impact on national brand (NB) suppliers, especially on their selling model selection. We employ a theoretical model to explore the interactions of the NB supplier’s selling model selection and the service investment strategy of the e-tailer developing an SB. Our findings show that under the reselling model, the e-tailer always benefits from her service investment. Interestingly, however, the e-tailer may suffer from her service investment under the agency model. Meanwhile, the likelihood of the e-tailer adopting service investment decreases as the consumer service sensitivity increases. Furthermore, we find that the service investment increases the scope wherein both firms prefer the reselling model. In addition, we show that the supplier may adopt the agency model rather than the reselling model to counteract the service investment strategy of the e-tailer. These findings provide actionable insights to help suppliers and e-tailers make strategic operational decisions.