Agency selling or reselling? Channel selection of green products with consumer environmental awareness

Recently, environmental awareness has gradually increased, which calls for green products on the market (Geng, Mansouri, and Aktas 2017). Green products are environmentally friendly throughout their production, use, and treatment and are harmless or minimally harmful to the environment (Du, Liu, and Li 2017). Therefore, an increasing number of firms have begun to produce green products to satisfy growing demand. For example, hybrid electric vehicles can be regarded as a representative green product. It is well known that the exhaust gas coming from automobiles driven by internal combustion engines is a significant source of greenhouse gases and pollutants that severely pollute the environment (Baran and Legey 2013). However, new energy vehicles, such as electric automobiles, have virtually zero exhaust emissions (Casals et al. 2016). In addition to the car industry, other firms have also entered the market for green products.

Purpose of the research

Motivated by the growing consumer interest in green products, this paper studies a manufacturer’s pricing and channel selection issues when selling green products to environmentally conscious consumers. Three channel structures are examined: (1) a single agency selling channel, (2) a single reselling channel, and (3) dual channels of agency selling and reselling. Agency selling refers to the case in which the manufacturer directly sells products to consumers on the platform by paying a fixed fee. Reselling refers to when the manufacturer wholesales products to the platform, which is then responsible for selling to end consumers.

An increase in consumers’ green awareness has a positive impact on green technology levels, retail prices, and the profits of the manufacturer, platform, and retailer.

We find that an increase in consumers’ green awareness has a positive impact on green technology levels, retail prices, and the profits of the manufacturer, platform, and retailer. When consumers’ green awareness and the revenue-sharing rate are relatively low, the manufacturer will choose the single reselling channel, which is beneficial for both the manufacturer and retailer. When consumers’ green awareness is moderate, the manufacturer will choose the hybrid channel in which the manufacturer and platform will reach a win-win situation. When consumers’ green awareness is high, the dual channel is simultaneously beneficial for the manufacturer, platform, and retailer, which reveals that Pareto optimization occurs.

Methodology

We adopt a game theoretical method and assume that a manufacturer produces green products and sells the products via channels to end consumers who are green aware. We consider two types of selling channels: the agency selling channel (when the manufacturer sells products through an online platform by paying a fixed slotting fee and sharing the revenue with the platform), and the reselling channel (when the manufacturer wholesales green products to a retailer who resells them to consumers).

Applications and beneficiaries

1. Green product manufacturers and sellers: Choosing channel structures for green products has become the focus of many manufacturers. Inspired by the above examples, our study provides implications to the following questions: How does the green-product manufacturer choose channel structures? Under different channel structures, how will the product’s green technology level change? Will the manufacturer’s channel structure selection be consistent with the platform or the retailer’s preferences?
2. Agency selling and platforms: the manufacturer directly sells the products to consumers via a platform that will charge a fixed slotting fee and share a proportion of the revenue with the manufacturer. For example, Tesla, NIO, Ideal, and other new energy vehicles exhibited their latest vehicles in shopping malls to attract demand. Green air conditioners or refrigerators produced by companies such as Gree and Haier, which are mostly sold on e-tailers such as Tmall and JD.com, are also a case of agency selling with advantage of sales network.

Reference to the research

Tao, F., Zhou, Y., Bian, J., & Lai, K. K. (2024). Agency selling or reselling? Channel selection of green products with consumer environmental awareness. International Journal of Logistics Research and Applications, 27:2, 326-345.

Consult the research paper