Channel Choice in Live Streaming Commerce

Live streaming has significantly altered the landscape for both offline and online retail operations. This paper examines whether and when a firm with a specific product should introduce a live streaming channel, and if so, with what type of live streaming (the third-party, self-run, or both). We demonstrate that no one channel structure is universally superior to the others: the firm’s optimal channel strategy depends on the third-party streamer’s popularity and bargaining power, the initial investment and endeavor cost for the self-run channel, consumers’ channel preference, the cross-channel spillover, as well as the price sensitivity of the product. In general, for a start-up firm, the third-party live streaming channel should be adopted only when the streamer’s popularity is relatively large and bargaining power not overwhelming, while a high initial investment and endeavor cost can be an important deterrent for the adoption of the self-run live streaming channel. Live streaming benefits the firm more when price sensitivity is relatively low and where the traditional pricing tool is less important to entice consumers. An established firm that is considering leveraging two or more channels concurrently to achieve a higher profit should additionally take the cross-channel spillover, the channel encroachment cost and channel competition into consideration. Counterintuitively, we show that product price in the live streaming channel is not necessarily lower than it is in the traditional channel; and a lower revenue sharing ratio offered to the third-party streamer is not always beneficial to the firm. These findings shed light on whether, when and how firms should embrace live streaming commerce.