When Does Platform Private-Label Advertising Work? The Role of Quality and Supply Chain Structure

Advertising is often viewed as an effective strategy for platforms to boost the sales of their private-label (PL) products. Nevertheless, not all platforms adopt PL advertising strategies, and the drivers of these heterogeneous advertising practices across platforms, which differ in PL product quality and supply chain structures (agency (A) vs. reselling (R) modes), remain unclear. Our analysis shows that, without advertising, an increase in PL quality does not necessarily deter the manufacturer from competition under mode A. When advertising is introduced, however, increasing PL quality may sometimes amplify the negative effect of advertising on the manufacturer-branded products’ price under mode A. Moreover, contrary to common belief that advertising always benefits the platform, we identify conditions under which PL advertising leads to a lose–lose outcome for both the manufacturer and the platform, regardless of PL quality. Finally, we find that an appropriately designed advertising effort allows the platform to align the manufacturer’s channel preference with its own—toward either Mode A or Mode R structure. Overall, our findings uncover the strategic interplay between PL advertising, product quality, and supply chain structure, thereby explaining the diversity of platform advertising behaviors in practice, such as JD.com and Taobao.