Management of competition among sellers and its performance implications for business-to-business electronic platforms: Dynamic analysis by VAR model

Abstract

Purpose

This paper aimed to analyze the short- and long-term effects of the breadth and depth of seller competition on the performance of platform companies, and investigated the underlying mechanisms of customers’ two-sided marketing tactics on the structure of the competition between sellers.

Design/methodology/approach

A longitudinal research design was adopted by gathering daily market objective data on e-commerce platforms for 250 days, and the dynamic evolution effects was analyzed by using a vector autoregression model which compared the differences between the short- and long-term effectiveness of different customer relationship management (CRM) strategies.

Findings

The breadth of competition amongst sellers improves the performance of platforms, whilst the depth of competition among sellers has a positive effect on the short-term performance. However, it has a negative effect on the long-term performance of their platforms. In both the short and long terms, advertising tactics that attract new buyers contribute more to increases in the breadth of seller competition than those that attract existing buyers do. Subsidies for new sellers decrease the depth of seller competition more than those for old sellers.

Research limitations/implications

Further research could be undertaken to investigate the validity of marketing tactics other than advertising tactics, and thus expand the time windows of the available data.

Practical implications

It is imperative for platform companies to implement effective control over seller competition to balance the interests of the sellers and of themselves.

Originality/value

The dyadic paradigm of CRM research has been extended by considering the perspective of the electronic platform company, how the tactics of exploitation and exploration of two-sided customers impact upon seller competitive structures have been delved into and why new customers have a unique value to platform companies has been identified.

Citation

Li, X., Ren, X. and Zheng, X. (2015), "Management of competition among sellers and its performance implications for business-to-business electronic platforms: Dynamic analysis by VAR model", Nankai Business Review International, Vol. 6 No. 2, pp. 199-222. https://doi.org/10.1108/NBRI-02-2015-0006