Agency Selling or Reselling? Strategy Analysis of Selling Mode Choice Under ESG Cost‐Sharing Contract

ABSTRACT Governments and enterprises have increasingly prioritized ESG (Environmental, Social, and Governance) practices. This study investigates the conditions under which ESG practices enhance profits for supply chain members within an e‐commerce platform supply chain by developing a benchmark model without ESG practices as well as a sales model with an ESG cost‐sharing contract. Additionally, by comparing the equilibrium solutions between different selling modes (the agency selling mode and the reselling mode), this study examines how ESG effort affects equilibrium selling modes and analyzes the reasons behind supply chain members' strategic shifts in mode choice. The key findings are drawn from optimal decision‐making and comparative analysis. First, in the benchmark model, the platform's preferences for selling modes are affected by its commission rate and unit return processing cost. Higher return processing costs incentivize the platform to select a selling mode that bears its own return costs. Second, supply chain members' ESG practices inevitably raise retail prices but do not increase retail quantities in response. Whether they obtain higher profits through ESG practices hinges on the trade‐off between demand expansion effect and cost input. Third, when introducing an ESG cost‐sharing contract, supply chain members' preferences for different selling modes are simultaneously influenced by platform's commission rate, ESG cost‐sharing ratio, and the demand sensitivity coefficient of ESG effort. Interestingly, when ESG cost‐sharing ratio and platform's commission rate fall within a certain threshold range, a change in demand sensitivity coefficient may prompt supply chain members to switch their preferences for selling modes. Unlike conventional wisdom, reselling mode can also become an equilibrium choice under specific conditions.