The Strategic Interplay Between the Platform’s Store Brand Positioning and the Manufacturer’s Core Category Innovation

In practice, platforms are likely to target popular or niche product markets to introduce store brands (SBs). However, existing studies on horizontal SB positioning mainly focus on product similarity or attribute differentiation and do not clarify how such positioning should be chosen when national brand manufacturers (NBMs) strategically respond through innovation. Motivated by the conflict between the NBs and SBs, as well as the upstream–downstream co-opetition induced by the platform’s dual role, we develop a game-theoretic model to analyze the interplay between the platform’s SB positioning strategy and the NBM’s core category innovation decisions to provide new insights for promoting supply chain coordination. We find that first, when consumers prefer the SB product intended for the popular market, the platform should introduce an SB targeting the popular market if the NBM is expected to either refrain from innovation or allocate innovation efforts to the popular NB product. However, this decision may change if the NBM directs innovation efforts toward the niche NB product instead. Second, when confronting the invasion of SB, the NBM should reduce the wholesale price of the affected NB product and increase innovation efforts for that product. Additionally, under the reselling mode, a “win-win” outcome can only be achieved when the NBM directs innovation efforts to the product categories affected by SB invasion. In contrast, under the agency mode, Pareto optimality can be achieved regardless of whether the NBM allocates innovation efforts to affected or unaffected product categories.