In multitier supply chains, brand-owners often form exclusive deals with downstream retailers or upstream suppliers. Therefore, the selection of exclusive channel strategies becomes a critical decision for brand owners, resulting in three typical structures: a flexible structure, an exclusive retailing-channel structure, and an exclusive purchasing-channel structure.
1. Introduction
In practice, exclusive channel strategies are commonly observed in a variety of goods and service markets. In the vaccine market, some overseas vaccine suppliers select exclusive retailers [
1]. For instance, Sanofi Pasteur received exclusive worldwide marketing rights for infectious disease vaccines from Translate Bio [
2]. In the mobile phone market, some brand-owners’ mobile phones were sold only through exclusive telecom service providers when their mobile phones were first launched [
3]. For instance, Apple and AT&T originally signed a 5 year exclusive deal for iPhone when the iPhone was first launched in 2007 [
4]. In addition, it is common knowledge that some film and television programs are available through exclusive channels in the TV market. Similarly, numerous books were only released through exclusive reading platforms in the e-book market.
In a multitier supply chain, brand-owners may form exclusive deals with downstream retailers or upstream suppliers, resulting in two typical exclusive channel strategies: exclusive retailing-channel and exclusive purchasing-channel strategies. The exclusive retailing-channel strategy involves brand-owners forming exclusive deals with downstream retailers to distribute goods or services. For instance, in 2018, OnePlus, a mobile phone brand-owner, signed a contract with e-retailer JD.com to exclusively sell its products in China [
5]. On the other hand, the exclusive purchasing-channel strategy entails brand-owners forming exclusive deals with upstream suppliers to procure goods or services. For example, IKEA, a renowned furniture brand-owner, signed an exclusive agreement with Caesarstone, a leading manufacturer of high-quality engineered quartz surfaces, in 2013 [
6]. Obviously, the exclusive retailing channel can help brand-owners enhance pricing power, thus increasing efficiency and competitiveness [
7]. In contrast, the exclusive purchasing channel may reduce supply resilience, but it helps brand-owners control the quality of supply and improve the competitiveness of goods or services. Therefore, a crucial question arises: which strategy is more beneficial to brand-owners when forming exclusive deals, the exclusive retailing channel or exclusive purchasing channel?
2. Channel Distribution in Supply Chains
The first and most related stream is the literature on channel distribution, which has been extensively studied in recent years. Cattani et al. [
13] and Tsay and Agrawal [
14] provided a comprehensive and insightful discussion on channel distribution in supply chains. Most existing studies on channel distribution focused on a two-tier supply chain. Among them, some studies investigated channel distribution from the perspective of an upstream manufacturer. They studied a manufacturer’s choice of direct and indirect sales channels, such as He et al. [
11], Wang et al. [
15], Chen et al. [
16], Pun et al. [
17], and Zhang et al. [
18]. On the contrary, some studies investigated channel distribution from the perspective of a downstream retailer. They mainly focused on the retailer’s choice of agency selling and reselling channel strategy (e.g., Abhishek et al. [
19] and Zhang and Zhang [
20]), and the retailer’s choice of an online-and-offline channel strategy (e.g., Zhang et al. [
21] and Nie et al. [
22]) by modeling different channel structures. The abovementioned studies all built several different channel structures, in order to investigate which channel structure (channel strategy) is more beneficial.
Unlike the above literature on channel distribution in a two-tier supply chain, some previous studies investigated channel distribution in a three-tier supply chain, such as Giri et al. [
23], Islam et al. [
24], Lan et al. [
25], and Li and Chen [
26]. However, Giri et al. [
23] focused on a single-channel supply chain to study the channel coordination/Pareto improvement. They did not investigate the horizontal competition, such as competition among retailers. Furthermore, Islam et al. [
24] considered the competition among multiple retailers to investigate a manufacturer managed consignment policy in a three-tier supply chain involving a single supplier, a single manufacturer, and multiple retailers. Both Lan et al. [
25] and Li and Chen [
26] modeled a three-tier dual-channel supply channel from the perspective of supply-chain coordination.
3. Exclusive Channel Strategies
Numerous studies have focused on exclusive channel strategies in supply chains. Among them, some studies investigated the impact of product substitutability in a dual-exclusive-channel system. For example, McGuire and Staelin [
27] investigated the impact of product substitutability on Nash equilibrium distribution structures. Zhang et al. [
28] and Li et al. [
29] investigated the effect of product substitutability and relative channel status on pricing decisions. However, we investigate the effect of channel substitutability in three typical channel systems, including two exclusive channel structures. The abovementioned studies did not compare different exclusive channel structures (strategies) or analyzed which channel structure (strategy) is better. However, several studies mainly focused on the comparison of different exclusive strategies. For example, Niu et al. [
1] built game-theoretical models to compare exclusive retailing and competitive retailing in vaccine supply chains and found that the overseas vaccine supplier would prefer competitive retailing when the overseas vaccine and the local vaccine are deeply substitutable. Cai et al. [
3] investigated the efficacy of a combination of exclusive channels and revenue sharing by modeling a hybrid multichannel supply chain in a bilateral duopoly setting with complementary goods. Our study is more relevant to that of Cai et al. [
3], in which four different exclusive channel structures in a two-tier supply chain were investigated. Unlike them, we consider three typical channel structures in a three-tier supply chain to investigate the brand-owners’ exclusive retailing-channel and exclusive purchasing-channel strategies. Furthermore, we investigate the brand-owners’ exclusive channel strategies under contract observability and unobservability.
4. Contract Unobservability
Most existing studies assumed that contract terms between suppliers and retailers are common knowledge (e.g., [
30]). However, unobservable contracts can better reflect channel competition in business-to-business transactions. Our work is related to the study of unobservable contracts between suppliers and retailers, which generally assumes that contract terms are unobservable to the rivals. Most previous studies with unobservable contracts considered the following supply chain structures: (1) supply chains with one upstream supplier and multiple downstream retailers (e.g., [
9,
31,
32]), (2) supply chains with multiple upstream suppliers and one downstream retailer (e.g., [
10]), and (3) supply chains with chain-to-chain competition (e.g., [
7,
33,
34]). Our study contributes to the existing literature by modeling chain-to-chain competition in a three-tier supply chain system with contract unobservability. These studies with contract unobservability mainly focused on the impact of contract unobservability on vertical integration and supply-chain contracting. For example, O’Brien and Shaffer [
31] showed that nonlinear contracts fail to obtain the vertically integrated outcome when retailers cannot observe their rivals’ contracts. Our study is more relevant to the study of the impact of contract unobservability on supply-chain contracting. Typical studies include Li and Liu [
9] and Liu et al. [
10]. Both studies compared wholesale-price contract and two-part contract under contract unobservability. The former considered a supply chain consisting of one manufacturer and two retailers, while the latter considered a supply chain consisting of two manufacturers and one retailer.
This entry is adapted from the peer-reviewed paper 10.3390/su15087004