The manufacturer’s encroachment strategy in the presence of the retailer’s in-store service

AbstractWe examine the manufacturer’s encroachment strategy in the supply chain in the presence of the retailer’s in-store service. The manufacturer has the option of encroachment with a direct channel, and the retailer has the option of providing in-store service. If the retailer decides to offer service, it sets the service level. We show that in the presence of in-store service, the manufacturer is less likely to encroach on the retail market than in the absence of in-store service. The retailer always prefers to provide in-store service. If the manufacturer decides to encroach, it will strategically use its direct channel with no sales as a threat to the retailer, independent of whether or not the retailer provides in-store service. The retailer can be better off with manufacturer encroachment, but it can be worse off when consumer sensitivity to in-store service is very low. We show that the retailer can strategically employ in-store service to deter the manufacturer’s encroachment when the consumer sensitivity to in-store service is sufficiently high.KEYWORDS: Manufacturer’s encroachmentgame theoryin-store serviceconsumer sensitivitydual channel AcknowledgementsThe authors gratefully acknowledge financial support from the Natural Sciences and Engineering Research Council of Canada. Disclosure statementNo potential conflict of interest was reported by the author(s).Data Availability StatementData sharing is not applicable to this article as no new data were created or analyzed in this study.Additional informationFundingThis work was supported by Natural Sciences and Engineering Research Council of Canada (No. RGPIN-2022-03957), the National Social Science Foundation of China (No. 21BGL033), Principal Scholar/Excellent Team of Instructors of Qinglan Project of Universities in Jiangsu, and Coordinated Innovation Base of Jiangsu Grass-root Social Governance Research.Notes on contributorsXing WanXing Wan is a Professor of School of Business Administration at Nanjing University of Finance and Economics, China. His research focuses on the economics and management of digital platforms. His work puts a strong emphasis on how digital platforms influence strategies and operations of firms on platforms. Specifically, he applies the perspective of platform ecosystems to investigate the structural and strategic transformation of firms. He has published papers in journals like California Management Review, International Journal of Production Economics, Internet Research, Electronic Markets and Telecommunications Policy.Jing ChenJing Chen is a Professor and William A. Black Chair in Commerce at the Rowe School of Business, Dalhousie University. She received her PhD in Management Science from the Richard Ivey School of Business, Western University. Her research interests focus on supply chain management, competitive channels, and interface between operations management and marketing.Bintong ChenBintong Chen is a Professor of Business Administration at the Lerner College of Business and Economics, and the Director of Institute of Financial Services Analytics, University of Delaware. He received his Ph.D. in operations management/research from the Wharton School, University of Pennsylvania. His research interests include optimization theory, data-driven analytics, and applied business modeling.