The interaction between introduction strategy and commission format in live-streaming e-commerce

Nowadays, an increasing number of manufacturers and retailers have begun partnering with internet celebrities to boost product sales. Furthermore, two primary commission formats have emerged for collaborations between internet celebrities and firms: the commission rate format and the fixed commission format. This paper examines the conditions under which manufacturers or retailers should cooperate with internet celebrities. Moreover, we also investigate the firms’ strategic choices regarding commission format and examine the impacts of internet celebrities on firms’ decisions. Based on the introducer of the live-streaming channel and the commission format, we use game theory to establish five different models in a supply chain comprising a manufacturer, a retailer, and an internet celebrity. Comparing the optimal decisions under different scenarios, we obtain the following results: (i) The retail price in the live-streaming channel is not always lower than that in the traditional channel. Correspondingly, the market demand for the live streaming channel increases even despite a higher retail price for the live streaming room. (ii) Both manufacturers and retailers are incentivized to embrace the live-streaming channel, particularly when the switch effect brought by the internet celebrity is small or large. (iii) Retailers have a broader range of conditions under which they are more likely to introduce the live streaming channel compared to manufacturers. There exists a transfer zone where the manufacturer prefers the retailer to cooperate with the internet celebrity under a fixed commission contract. (iv) Finally, the choice of commission format is influenced not only by the fixed commission, but also by the switch effect and consumers’ preference for the traditional channel. These findings provide insights into the live transformation of firms in a supply chain.